Do your clients own a beachfront retreat in Hilton Head? A second home with a private dock in Boca Raton? A primary residence filled with art treasures overlooking the ocean on Cape May? If you haven't already, you'd better take another look at how well that investment is protected–particularly if it makes up a substantial portion of their net worth.
According to the National Oceanic and Atmospheric Administration (NOAA), coastal county populations soared by nearly 35% from 1970 to 2000, to 148 million. From 2000 to 2015, that number is expected to grow by another 17 million people.
In the midst of an active hurricane cycle expected to last another 10 to 20 years, Max Mayfield, director of the National Hurricane Center, left the National Weather Service in January convinced that bigger storms await. He warned that casualties could mount by a factor of 10 with another catastrophic storm.
Insurers, or their reinsurers, are listening, and the rules of the insurance game are changing. A requirement late last year in Connecticut for storm shutters on homes within a mile of the water, imposed by the Andover Companies and eight other insurers, has caused an uproar among consumers. The cancellation of homeowner's policies in 23 parishes in Louisiana in July 2006 resulted in a September 2006 order by the Illinois Commissioner of Insurance to Horace Mann Insurance Companies, of Springfield, Illinois, to halt the cancellations and restore coverage.
In December 2006, Allstate Insurance announced it would no longer write new policies anywhere in the state of New Jersey. This follows its retreat from writing new coverage in the states of Delaware, Connecticut, and Florida. In fact, Allstate, the second largest home insurer in the country, now writes only limited coverage in all coastal areas along the Gulf and the Atlantic Seaboard.
After the hurricane seasons of 2005 and 2006, many insurers have cut their exposure to what Michael Trevino, a spokesman for Allstate, calls "catastrophic loss." But it's not just hurricanes that are generating new models and changes in insurance coverage; those living on the earthquake-prone West Coast are in a similar position.
