Allstate’s Encompass Insurance to Stop Writing New N.C. Home Policies

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December 5, 2008 Friday 02:42 PM EST

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Allstate's Encompass Insurance to Stop Writing New N.C. Home Policies

Chad Hemenway

NORTHBROOK, Ill.

Encompass Insurance, of the Allstate Insurance Group, has informed its agents that the company will no longer write new homeowners and dwelling fire property business in North Carolina.

The Independent Agents of North Carolina has confirmed that several agencies have received letters from Encompass stating that "due to the rapid growth of North Carolina's Beach Plan, and the Beach Plan assessment process, we (Encompass) feel it is not in the best interest of our North Carolina policyholders to continue to add exposures to our book of business," the letter reads.

The company went on to tell agents it "would not be prudent and would expose our business to a significant assessment in the event of catastrophic loss" if homeowners insurance continues to be sold.

Encompass will continue to write condominium and renters insurance, the letter says. The decision to stop homeowners policies is the result of a review of the company's business model to make sure it has the capital to protect policyholders.

Attempts to reach an Allstate spokesperson were not immediately successful.

In August, Farmers Insurance Group said it would stop writing homeowners insurance in North Carolina beginning in September because it risks paying out about double what it collects in premium in the state (BestWire, Aug. 15, 2008).

An examination by actuaries commissioned by the Property Casualty Insurers Association of America came to the conclusion that the Beach Plan is growing at an alarming rate with almost $70 billion worth of property exposure on the coast and the capacity to pay just $1.5 billion in claims if needed. Trade organizations recently testified before state lawmakers and said the Beach Plan must raise rates to reflect the risk exposure it has, and to become less attractive to homeowners, in order for the private market to be able to do business in the state and begin spreading the risk (BestWire, Dec. 3, 2008).

Encompass Insurance Co. currently has a Best's Financial Strength Rating of A+ (Superior).

In 2007, the top five writers of homeowners multiperil insurance in North Carolina, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 19.3% market share; Nationwide Group, with 15.8%; North Carolina FB Insurance Group, with 13.1%; Allstate Insurance Group, with 10.6%; and Travelers Group, with 5.4%.

(By Chad Hemenway, associate editor, BestWeek: [email protected])

December 6, 2008