The options for insuring a home near the coast are dwindling. If you own a home on the coast, you’ve most likely seen your premium increase consistently over the past several years, or have been outright dropped by your carrier. In this article, we set out to determine why.
Coastal Population Growth
Like most eastern seaboard states, the State of Massachusetts is experiencing rapid growth along its coast. A study by AIR Worldwide estimates the value of insured coastal property in Massachusetts to be $772.8 billion, ranking it only behind Florida, New York, and Texas in value. This represents 54 percent of the state’s total insured property values. The combination of this massive coastal insured value and its exposure to significant potential losses make it a risky area for insurance companies. So, many of the carriers cherry pick their “top-tier” policies and deny and/or increase premiums on the rest.
For this reason, the State of Massachusetts requires all companies writing property insurance in the state to participate in the Mass Fair Plan (MPIUA), which writes policies for homes that the carriers deem to risky or unprofitable. The state forces the carriers to share the losses for all Fair Plan policies.
Cost to Insure
The cause of these coastal homeowner rate increases, according to the carriers, is the increase in reinsurance costs they are charged for coastal property exposures. Reinsurance is insurance purchased by primary insurers to transfer their risk to other parties. The past several years have seen unprecedented losses throughout the Unites States, dealing large losses to the reinsurance companies. They are recovering from these losses by charging the insurance carriers more for reinsurance. Though there are over 3,000 property casualty primary insurers active in the US, there are only a handful of reinsurers that control the reinsurance market place.
Options for Homeowners
So now that you know the reasons behind the rate increases for coastal homes, what are your options? There are still a few carriers in Massachusetts who will write property along the coast and islands. The guidelines are strict, but the rates are sensible. If you do not fit the carrier’s guidelines, you can quote your home with the Massachusetts Fair Plan. If your home is of significant value, there are other carriers at your disposal.