Sea Change In Insurers' Coastal Coverage

Major insurance companies are throwing cold water on America's new passion for living near the ocean and by the bay.

Recently, the biggest companies in the homeowners insurance business announced that they will stop writing new policies in some coastal areas of the mid-Atlantic and will otherwise limit coverage there. They have already reduced their coverage in states more prone to hurricanes.

Some real estate agents say they expect the situation will make it harder to sell second homes and investment properties on the waterfront. "We've already been experiencing problems since last year getting insurance for second-home buyers and the investment class, because many times the properties are more than five miles from the firehouse and there aren't any fire hydrants around, although they could just throw a hose in the pool or in the river," said Schuyler Benson, an owner of Benson & Mangold Real Estate, a brokerage on Maryland's Eastern Shore.

Benson said the insurers that will write policies are insisting that buyers also use their companies' coverage for their primary homes and cars, a problem for out-of-town shoppers. Some people, he said, are deciding not to buy.

Benson said he has not heard of any effect from the recent announcements that insurers are tightening coverage, "but I suspect that these changes won't help."

In Delaware, agents have been taking the changes in stride, said Camilla Conlon, the new president of the state Realtors association and a Rehoboth Beach agent with Jack Lingo Realtors. "What I have found in the last six months is that many agents are writing contingencies in their contracts for a week or 10 days so the buyers can see if they can get acceptable insurance."

She added, "Most of the time they can."

But, she said, "It has become a little less easy to do and a lot more expensive."

Allstate, the nation's second-largest home and auto insurer, told regulators in Maryland this month that beginning in February it would no longer sell new property insurance in all or part of 11 counties that are on or near water, mostly on the Chesapeake Bay and its tributaries. (Affected are Calvert, Dorchester, Somerset, St. Mary's, Talbot, Wicomico and Worcester counties and parts of Anne Arundel, Charles, Prince George's and Queen Anne's counties.)

Allstate also will no longer write new homeowners policies in 19 coastal counties of Virginia, said regional corporate relations manager Debbie Pickford. And in the coast-hugging states of Delaware, New Jersey and Connecticut, the company will not write new business no matter where the property is. There is no change in D.C. coverage, Pickford said.

She noted that Allstate agents, who are independent contractors, will still offer quotes from third-party carriers to those seeking new coverage.

Nationwide Mutual Insurance stopped writing new business in coastal areas two years ago, including two Zip codes near Ocean City.