THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, October 11, 1996 TAG: 9610110475
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: STAFF AND WIRE REPORT
DATELINE: COLUMBUS, OHIO LENGTH: 73 lines
Nationwide Insurance, one of the nation's leading property insurers, plans to curb sales of new policies in coastal areas in Virginia and 16 other states because of heavy claims from natural disasters, the company said Thursday.
Nationwide has been limiting its growth in coastal areas for some time but was forced to step up the move because of losses caused by Hurricane Fran last month, an official of the Columbus-based company said.
Nationwide is the third major insurer this year to limit its coverage in Hampton Roads and other regions susceptible to coastal storm damage.
``Even with Nationwide's financial strength, prudence requires us to diligently manage our exposure to catastrophic losses,'' Richard D. Crabtree, president and chief operating officer, said.
The company promised to continue to service existing customers.
Other insurance companies have scaled back sales in selected regions after disasters, like the 1994 earthquake in Los Angeles or hurricanes battering the Florida and Carolina shores. This year, Allstate Insurance Co. and State Farm Insurance Co. announced plans to roll back their coverage in Hampton Roads and other coastal areas.
But the Nationwide plan - which will affect 17 states from Texas to Maine - is believed to be the largest in terms of area.
``Insurance companies are fearful they can be blown away financially,'' said Sean Mooney, an economist with the Insurance Information Institute in New York. ``They're doing it because when we make a promise to pay, we have to make sure we are able to pay.''
A Nationwide spokesman said he did not know how much market share the insurer has in Hampton Roads or how many local homes would be affected.
In Virginia, Nationwide is the third-largest insurer, with 9.5 percent of the market share, based on premiums written for homeowners insurance, according to the State Corporation Commission.
State Farm, the largest home insurer in Virginia, has a 21.5 percent share, while Allstate Insurance Co. has 14 percent, SCC spokesman Ken Schrad said.
While Virginia's three largest insurers are cutting back, Nationwide has not joined State Farm and Allstate in announcing big rate increases for homes in Virginia's coastal regions. This year, both State Farm and Allstate raised rates across the Hampton Roads area. The most drastic jump was Allstate's 74 percent increase for Virginia Beach homes.
But that doesn't mean Nationwide won't follow in its bigger competitors' footsteps. In Florida, the insurer is battling state regulators over a 27 percent rate increase for homeowners insurance.
Even with these changes, Virginia homeowners shouldn't be alarmed, the SCC's Schrad said.
``There continue to be plenty of companies willing to write homeowners policies in Virginia,'' he said. ``While we've seen some rate increases and some scaling back, so many other companies are writing policies that there doesn't seem to be that much concern at this time.''
People unable to purchase insurance in coastal areas, meanwhile, still will be able to buy it through government-sponsored insurance pools backed by all companies doing business in a state, economist Mooney said. It usually costs more, however, and the coverage is not as comprehensive.
Thursday's move will allow Nationwide to grow in noncoastal areas, Crabtree said.
The company said it has 2.6 million policies to date, an increase of 800,000 since 1990. Company spokesman John Millen would not say how many policies are in force in the affected states.
``Nationwide Insurance possesses great financial strength - and we intend to keep it that way,'' Robert Oakley, chief financial officer, said.
Oakley said the company has a policyholder surplus of more than $5 billion, leaving it well-positioned to deal with catastrophic losses. MEMO: Staff writer Stephanie Stoughton contributed to this report from
The Associated Press.
KEYWORDS: HOMEOWNERS INSURANCE COASTAL AREA by CNB