Allstate’s Creative New Cat Management Strategy

I couldn’t believe it when I first saw this article in Insurance Journal the other day:

Allstate Insurance Co. officials say Louisiana state law allows the company to drop basic hurricane coverage for 30,000 policyholders in 18 coastal parishes - a stand that state Insurance Commission Jim Donelon is challenging. [.]

Allstate wants to drop wind and hail coverage in Ascension, Assumption, Cameron, Iberia, Jefferson, Lafayette, Lafourche, Orleans, Plaquemines, St. Bernard, St. Charles, St. James, St. John the Baptist, St. Martin, St. Mary, St. Tammany, Terrebonne and Vermilion parishes.[.]

Reducing the company’s risk cannot be solved with a “one-item fix” such as raising rates in the storm areas, [an Allstate spokesman] said.

The underlying issue is a Louisiana law that sharply limits canceling or dropping coverage on homeowners coverage after 3 years. This sort of law naturally creates a problem for a company that believes it has an overconcentration of risk in a particular state, a situation Allstate apparently feels it is in.

I suspect that this is something that Allstate won’t win on, barring legislative action. Even if Allstate were within its legal rights under Louisiana law, I can’t believe a Louisiana judge would make a favorable ruling. However, if it fosters debate on alternate ways to provide residents and businesses protection from catastrophes, that would be a good thing, I think.