Frustration With Mississippi Property Market Spawns Coastal American Insurance Co.

Mississippi Insurance Commissioner Mike Chaney said one of the state's own has stepped up to offer homeowners policies on the Mississippi coast -- a company started by a real estate investor.

Gulfport-based Coastal American Insurance Co, a Mississippi-owned and managed company, will specialize in residential property insurance and begin writing immediately, said Mississippi Insurance Department spokeswoman Donna Cromeans. The company had an initial plan to write up to 1,000 wind policies in the state's six coastal counties, said Ned Dolese, marketing director with and investor in Coastal American.

Dolese owns apartment buildings and houses on the coast and became frustrated with the price of insurance, which offset any rent he was getting from the properties, and the costs also prevented him from selling the real estate, he told BestWire. "Potential buyers would still be interested in buying, but they wanted to give me much less once they found out how much insurance was," Dolese said.

Sunshine State Insurance Co. is an investor in the company, along with Hancock Bank's Hancock Insurance Agency, six local agencies and residents of Mississippi, Dolese said. Sunshine State, of Florida, is the underwriter. Coastal American will require policyholders on the coast to buy flood insurance to get out of the anti-concurrent causation clause spats that were so prevalent following Hurricane Katrina.

"The homeowners are going to be covered, and we will not be paying them anymore than 100%, which occurred after Katrina," said Dolese, who said the company will not make money off the flood policies. Commissions go to the agents.

Coastal American will look for homes valued between $150,000 and $250,000. About 92% of homes on the coast are valued at under $250,000, Dolese said, and other insurers like Lexington Insurance Co. and the Chubb Group write wind for homes valued at more. Plus, the National Flood Insurance Program puts a limit on flood coverage at $250,000.

"The big guys have the more expensive homes but that's only 8% of the market in the South -- and why compete with them?" Dolese said. "We think we can fill a big need."

The insurer has about $5 million in capital, all equity and no debt, Dolese said. Coastal American currently has two employees to avoid overhead costs. The company plans to eventually write statewide, Dolese said.

In 2008, the top five writers of homeowners multiperil in Mississippi, according to BestLink, based on direct premiums written, were: State Farm Group, with a 26.3% market share; Southern Farm Bureau Group, with 15.5%; Allstate Insurance Group, with 12%; Nationwide Group, with 9.7%; and Farmers Insurance Group, with 6%. BestLink provides online access to A.M. Best's Global Insurance & Banking Database.

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