Vermont Mutual latest to be driven off Cape Cod

While the Massachusetts insurance regulator is warning about problems in the homeowners market, another insurer has decided it can’t continue to write homeowners insurance on Cape Cod. Starting April 1, Vermont Mutual will stop renewing about 4,700 homeowners and 400 dwelling policies, Tom Tierney, president, confirmed.

Tierney’s Montpelier-based company that writes throughout New England and New York had already stopped writing new homeowners policies on Cape Cod after Andover Insurance Companies dropped its more than 14,000 policies in the spring of 2004. Last December, Quincy Mutual and Hingham Mutual announced they were pulling back on writing Cape policies as well.

“This does not make us happy because of the relationships we have had for years with our agents,” Tierney told Insurance Journal. He said the decision does not affect its writings in its other states or its commercial policies.

While several private carriers remain writing selectively, the exodus of Vermont Mutual and others leaves the residual market insurer, the Fair Plan, as the most likely recipient of the business being dropped. The Fair Plan has become the largest writer on the Cape with about 27 percent of the market.

Tierney says that the Fair Plan is part of the problem because its rates are too low and insurers are on the hook for whatever losses it may suffer down the road. The Fair Plan is currently in negotiations with the state to raise its rates. The insurer has proposed a 25 percent average hike on the Cape but Tierney says even that wouldn’t be enough.

“Politicians use the term ‘affordability’ but that’s not the issue,” he said. As more and more people are moving to coastal areas to live, insurance costs must reflect the risk, he added.

Tierney suggested that the state should grant insurers an offset against Fair Plan assessments on any Cape policies they write to help cover higher catastrophe reinsurance costs on these risks. That offset, along with the Fair Plan buying its own reinsurance and insurers being allowed to charge the correct price, would help restore a private marketplace on Cape Cod, the Vermont executive suggested.

Topics Carriers Homeowners Vermont