Allstate says its reinsurance costs may result in higher rates
Tuesday, January 10th 2006, 1:10 pm
News On 6
CHICAGO (AP) _ Allstate Corp. customers living in areas hard-hit by hurricanes and other natural disasters are likely to see their premiums rise this year as a result of the insurer's costly new reinsurance obligations, the company said Tuesday.
Allstate, the second-largest U.S. personal-lines insurer behind State Farm, said in a regulatory filing that contracts taking effect in 2006 will triple the cost of its reinsurance to about $600 million a year.
``We will aggressively seek to include reinsurance costs in our premium rates in order to mitigate the impact of this increase,'' Thomas J. Wilson, president and chief operating officer, said in a statement filed with the Securities and Exchange Commission.
Its reinsurance programs include nationwide catastrophe coverage for tropical storms, hurricanes and earthquakes and related fires, as well as for excess losses from fires in California.
Allstate also said it expects to increase its coverage limits in New Jersey and Texas by $100 million, and that it is considering as much as $300 million of additional reinsurance for catastrophe losses in New Jersey.
The company also plans to terminate its existing agreements in North Carolina and South Carolina.
Premiums are likeliest to rise in hurricane and earthquake-prone regions as Allstate passes along the risk and higher costs of recent disasters to consumers.
``There's no getting around the fact that we're incurring higher costs for the insurance protection that we're providing. And unfortunately the consumer is the ultimate bearer of those costs,'' said Michael Trevino, a spokesman for the Northbrook, Ill.-based insurer.
``We believe the risks are rising so the costs of protection against those risks are also going to rise,'' he said.
The filing comes less than three months after Allstate reported a third-quarter loss of $1.55 billion as a result of Katrina and other hurricanes that pounded the Gulf Coast last summer _ its biggest quarterly loss as a publicly traded company. It had catastrophe losses of $3.06 billion, of which $2.39 billion was from Hurricane Katrina and $553 million from Hurricane Rita along with smaller amounts from Dennis and Ophelia.