Insurers Ready to Testify That N.Y. Homeowners Market is Healthy

The New York homeowners insurance market is stable, according to the Property Casualty Insurers Association of America.

Kristina Baldwin, PCI’s regional manager, will testify to that effect Monday before a hearing of the New York Department of Insurance called to examine the health of the state’s homeowners insurance market after a lead insurer, Allstate, announced plan to pull back on writing new business.

“Recent catastrophes have led insurers to take a hard look at their exposure in coastal areas and reevaluate their business plans in some cases,” says Baldwin. “Sometimes these reevaluations can cause public policymakers to overreact and introduce measures which would actually exacerbate temporary market disruptions. We commend the Insurance Department for fully examining this issue before consideration of regulatory proposals that hamper – rather than enhance – a healthy, stable, and competitive homeowners insurance market in New York’s coastal areas.”

Baldwin will tell regulators that despite concern about affordability and availability of homeowners insurance on Long Island and other areas with exposure to catastrophic risk, there are still enough insurers doing business in the state to avert a market crisis.

“All indications are that, despite the tumultuous 2005 hurricane season, insurance is available in New York’s coastal areas. Still, some insurers are concerned about their ability to charge premiums to adequately cover their exposure and consumers may have fewer choices in some areas,” according to Baldwin

Another healthy sign, according to Baldwin, is the relatively small growth of the state’s residual market, the New York Property Insurance Underwriting Association. “Rapid growth of NYPIUA would be a clear indicator of insurance availability problems,” she adds. “Fortunately, while there has been some growth in the program, NYPIUA’s market share remains minor and stable at this time and there is no indication that this is likely to change.”

Baldwin pointed to the department’s development of initiatives such as the Coastal Market Assistance Program (C-MAP) in the wake of Hurricane Andrew in 1992 as reasons for market stability in New York’s coastal area. C-MAP consists of a voluntary network of insurers and producers to assist homeowners residing in coastal areas in obtaining insurance.

Other factors contributing to healthy market conditions in New York include the department’s approval of “wrap around” coverage, allowing homeowners to receive fire and extended coverage through NYPIUA and liability, theft and other coverages from a voluntary insurer; a wide variety of windstorm deductibles that encourage insurers to write homeowners insurance in coastal areas; and the authorization by the Legislature of multi-tier rating programs for homeowners insurance, according to Baldwin.

Looking forward, Baldwin urged the regulators and legislators to rely on these existing tools to avert temporary market dislocations rather than implementing further restrictions that could backfire and actually accelerate such disruptions. “The New York Insurance Department and state legislature have, over the years, crafted well thought out public policy that relies on competitive forces and protects consumers from short-term hiccups in the homeowners insurance market,” said Baldwin. “We hope that they will continue to take a deliberative approach to this issue in the current session.”

PCI member companies insure about one-third of the homes in New York.