From the AP:
Homeowners Far Away Pay Katrina’s Damage
The letter begins: “We’re writing to you with what we know is unfortunate news about your Allstate Insurance.”
Startled, Marie Collins reached for her glasses, then a magnifying glass and pored over the letter, realizing with a sinking feeling this isn’t a standard mailing from the company that insures her home.
It was a cancellation. Her home was being dropped, the letter said, because it’s in the path of future hurricanes.
But Collins doesn’t live in New Orleans or even Florida. She lives in New York City.
Hurricane Katrina may have made landfall on the Gulf Coast last year, but its impact is being felt hundreds of miles away, as insurers scramble to reduce their exposure to future catastrophes.
…
Yet hers is one of 30,000 homes the nation’s No. 2 insurer, Allstate Corp., is canceling in coastal counties of New York, citing the need to protect itself from future storms. Other major players are following suit: Nationwide Mutual Insurance Co. is no longer writing new policies on the eastern half of Long Island, N.Y., while MetLife Inc. is requiring extra inspections and expensive storm shutters for new customers living within 5 miles of salt water.It’s a strategy of retreat that’s unfolded before: After Hurricane Andrew in 1992, insurers drastically scaled back their presence in Florida, forcing residents into the expensive, state-run insurance pool. The difference is that now insurers are not just shedding policies in traditional hurricane targets such as Florida, but all along the eastern seaboard.
…
Even though the Northeast has not had a direct hit in decades, the high replacement value of homes there makes it an especially vulnerable spot in an insurer’s portfolio.“Homes in Long Island (N.Y.) have gone up in the last five years between 60 and 70 percent. Believe me, our rates have not gone up by 60 or 70 percent,” said Edward M. Liddy, chairman and chief executive of Northbrook-Ill.-based Allstate. “You look at our exposure and you say ‘We want to have enough capital to protect and care for all our 17 million households across the country.’ To do that, you may have to reduce your exposure in a small way in other areas.”
Those in the industry stress that a single massive event like Katrina can wipe out years of savings, putting an entire company with policyholders all over the nation at risk.
Good, maybe a hurricane will come and wash out Brooklyn and the Bronx….then again, we the taxpayer will get stuck with that bill too.
Unrelated, but important nonetheless. 10Y hit 5.20% earlier in the day.
FOMC meeting scheduled for Thursday of next week..
Between now and then, we’ve got the existing and new home sales numbers, consumer confidence, and the final read on GDP for Q1.
grim
I know a lady near my house in Florida who lives about 20 miles north of Clearwater, and 7 miles east of the beach and she is selling her home because the insurance will go from $800/Year to $3,000/year. Also, she is in a no flood zone. My house is within walking distance to the bay, and my rates only went up by $200.
Not sure how the insurance companies are determining rates, but I’ll shut my mouth and thank my lucky stars!
maybe nj needs a cleaning as well.
i think some nj towns could wash
away,, would not be missed.
Lets start with, Bayonne,
Weehawken, and up river Kearny
“…but important nonetheless.”
Very important indeed.
Treasurys drift lower ahead of expected rate hike
http://tinyurl.com/fnzbe
“NEW YORK (MarketWatch) — Treasury prices extended losses Thursday afternoon, pushing yields higher, as traders positioned for a widely expected increase in the fed funds rate next week to the 5.25% level.
…The fact that the yield on the 2-year note exceeded the 10-year yield, making it more expensive to make long-term loans than short-term ones, signaled that investors see an economic slowing.”
The sucking sound you
hear, are people leaving the
areas for parts unknown.
Interesting charts…
http://www.bankrate.com/brm/news/mortgages/states.asp
and this article too
http://www.bankrate.com/brm/news/mortgages/20060622a1.asp
Our insurance in Fl. is $4,200/year plus $5,000.00 deductible. Property taxes also doubled in 2006.
I would suspect that some of the companies are pulling out of states in the coastal northeast because the regulatory climate in those places makes it difficult for them to do business. The hurricane risk is just an excuse to start shedding policies.
There’s also the building codes in those places. In many commmunities, houses that conform to code because they’re grandfathered couldn’t be replaced today. F’rex, it’s now illegal to build a *new* three-decker in the city of Boston, although three-deckers make up a huge percentage of the city’s medium-density housing stock. I seriously wonder what happens if a three-decker gets destroyed in a fire or a weather event–*can* the owners replace it with something similar, or do they have to take the money and walk away?
This article doesn’t say where in NYC.
Lots of homes and glass towers that are right on the water, but my flag goes up that they’re talking about hurricanes but their real concern is terrorism. Or maybe it’s both now.