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Insurers Return to SC Coast

The Beaufort Gazette - 06/28/08
By Jeremy Hsieh

"Insurance salesman" probably isn't in Joe Walters' resumé, but the Lady's Island man has a good pitch for high-value homeowners on the coast to switch insurance companies.

Walters, a business consultant, finished building an 11,500-square-foot waterfront home on the north end of Lady's Island in February. Allstate had insured his previous house on the island, but the company wouldn't sell him a new policy, even though the house met the latest building codes for hurricane resistance.

Walters eventually switched to PURE, a Florida-based insurance company that began writing policies in South Carolina last month. The policy gives him better coverage with a lower premium than his initial insurer.

"I'm tickled pink about this," Walters said.

PURE, which stands for Privilege Underwriters Reciprocal Exchange, isn't for the masses. It targets newer homes valued at $1 million and up -- Walters' home is insured for $1.1 million -- with hurricane-resistant features. With traditional insurance carriers, that niche typically subsidizes other policyholders.

CEO Ross Buchmueller doesn't like to characterize it as cherry picking.

"It's taken pressure off the wind pool and is inspiring new competition," he said. "It's hard to argue against innovation and private solutions for the benefit of policyholders. It's hard to argue it's anything but great."

The wind pool is a group of insurers in the state that offer last-resort insurance coverage to coastal property owners where other insurance providers have pulled out.

The company also passes savings on to its policy holders that come from its nonprofit, member-based business model known as a reciprocal. Policyholders in a reciprocal are the company owners, unlike traditional insurance companies where profits are bound for stockholders.

USAA, one of the biggest home and auto insurers in the nation, is also a reciprocal. It serves only military families. A few years ago, USAA stopped providing homeowners coverage for "some members in coastal counties who currently have property insurance with another company, or have multiple policies in catastrophe prone areas," said spokesman Roger Wildermuth.

Business model aside, PURE's arrival is indicative of a possible reversal in the coastal insurance market. PURE is one of 12 insurance providers that have begun offering policies on the coast in the past year, said Allison Dean Love, executive director of South Carolina Insurance News Service. The news service is a nonprofit, non-lobbying organization funded by state insurance providers.

"The good news is there are 12 new insurance companies that have come to South Carolina and PURE is one of them. A year ago, we were worried about availability. Now there's 12 more companies," Love said. "A year later, the environment is very different and there's a lot of good news going on. It's a completely different feeling."

The coastal insurance market became skittish after new risk and damage assessment models were made after Hurricane Katrina devastated the Gulf Coast in 2005. Many insurance companies dramatically increased their coastal premiums, stopped writing new coastal policies or dropped customers entirely.

Even Scott Richardson, the director of the South Carolina Department of Insurance who lives on Hilton Head Island, was dropped.

Love said a package of insurance reforms Richardson created that took effect last year and falling reinsurance rates had a lot to do with the turn around.

Not having major storms in 2006 and 2007 helped, too, according to Bill Thomas, agency manager of BB&T-Carswell Insurance Services on Hilton Head.

"There's a lot of capital out there, lot of money. Insurance companies have a short memory," he said.

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