New Insurer Targets Fairfield Homes

As Hurricane Bill came boiling out of the Caribbean in August, it was mostly a normal work week for Ross Buchmueller, save with making sure his fledgling insurance company was adequately prepared for any influx of calls from policyholders.

Those calls never materialized as the storm stayed well out to sea. As the 2009 hurricane season draws near a close with a storm yet to make landfall in Connecticut, Buchmueller’s big bet looks like a good one of providing homeowners insurance to wealthy residents of Fairfield County, neighboring Westchester County and Long Island, N.Y.

Privilege Underwriters Reciprocal Exchange (PURE) is domiciled in Florida, where it has an office in Fort Lauderdale, and has its headquarters in White Plains, N.Y. The company has about 65 employees in total, and markets both directly and through independent insurance agencies.

In a drive to improve its visibility, PURE recently ran an ad campaign on New Haven Line trains between Connecticut and New York City, and has run television ads as well.

PURE is selling policies where industry giant Allstate Insurance Co. declined to do so after 2006, after the carrier publicly announced it would curtail writing coastal homeowner’s coverage in the Tri-state region on actuarial models predicting the possibility of a second Long Island Express hitting the region.

The 1938 storm killed more than 700 people, most of them in Rhode Island, and caused $6 billion in damage in current dollars. Experts say it an identical storm struck today it could cost nearly $40 billion in damage.

State Farm continues to stand by that decision, commenting on it in an August conference call with investors.

For longtime Allstate homeowners who may have been miffed at Allstate pulling out of the coastal Connecticut and New York markets, they may have gotten a pyrrhic victory – the region has not been hit by a major hurricane, while the Midwest where Allstate transferred its attention has been wracked by tornadoes the past few years at enormous costs.

“We found by looking at changes in weather patterns that the water in the Atlantic and in the Gulf of Mexico did get significantly warmer over the last few years which does fuel more severe hurricanes,” said George Ruebenson, president of Allstate Protection & Financial.

Allstate maintains a significant presence in Connecticut through other property and casualty insurance it sells, including auto insurance.

Of course, insurance carriers are able to hedge their risk through a range of means, including rates, investments, and reinsurance from companies such as Stamford-based General Re or Swiss Re, which has its U.S. headquarters in Armonk, N.Y.

And Buchmueller maintains that upscale homes near waterways, while expensive, often represent better risks due to superior construction that can limit roof or flood damage.

“I can assure you that very little of our original (business plan) involved hurricanes,” Buchmueller said. “What we saw was that there was a relatively unsaturated market in this area.”

At the same time, the AIG and Chubb veteran had no forecast for the credit storm that battered investment and real-estate markets in the past year. Greenwich-based W.R. Berkley Corp. is among the carriers predicting an escalation in property and casualty insurance rates as a result.

“When we started the company, financial risk would not have been at the top of our worries,” Buchmueller said. “We hired a (consultant) … to help us with our investment strategy, and what we told them was, ‘keep it in the fairway.’ The fairways were a lot narrower than we thought.”