Wind coverage changed for storms

Insurers in the Washington area are raising wind-insurance rates or canceling coverage amid predictions of severe storms like the hurricanes that hit the Gulf Coast last year.

Meanwhile, state governments are considering intervening to keep rates affordable.

“We could be one hurricane away from having to rely on the public market to provide backstop,” said Steven Orr, commissioner of the Maryland Insurance Administration. “We see and our legislature sees what is going on in the Gulf Coast.”

Wind insurance refers to any property damage caused by high wind, whereas hurricane insurance covers damage specifically from tropical cyclones.

In Gulf Coast states devastated by hurricanes Katrina and Rita last year, major property insurers are pulling out or raising premiums to the point that consumers are asking state governments to intervene.

Meanwhile, the National Weather Service is predicting another severe storm season this year.

In Virginia, Allstate Insurance Co. and Nationwide Property & Casualty Insurance Co. are raising the minimum deductible for coastal homeowners from 2 percent to 5 percent of the claim amount. Allstate’s new limit takes effect Aug. 1, and Nationwide’s begins July 1.

“The companies explained to the Bureau of Insurance that the reason for the change in the deductibles was so that they could remain in the market,” said Katha Trainor, spokeswoman for the Virginia Bureau of Insurance.

Virginia Mutual Insurance Co. refuses to write homeowners’ insurance within a half-mile of coastal high-tide waters.

In Maryland, Allstate is raising the minimum deductible to 5 percent for property owners in coastal areas, up from as little as 2 percent now. The new minimum deductible takes effect Sept. 15 — the height of this year’s predicted “increased hurricane activity,” said Debbie Pickford, Allstate spokeswoman.

Allstate endured $1.55 billion in hurricane claims in the third quarter of last year.

In the District, the D.C. Department of Insurance, Securities and Banking says insurance companies have notified officials there that they intend to change storm-related insurance rates and coverage.

“They will make some changes, including dropping some wind and hail and storm coverage from their policies,” said Lili Qi, spokeswoman for the Department of Insurance, Securities and Banking.

The department is consulting with its attorneys to determine an appropriate response, she said.

At a National Association of Insurance Commissioners (NAIC) meeting last week in the District, the group of state insurance commissioners urged Congress to consider providing a financial backstop for insurers when major disasters overwhelm their ability to pay claims.

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