Small businesses to lose Zurich insurance policies as part of Farmers cutback

Small businesses to lose Zurich insurance policies as part of Farmers cutback
By Jeff Amy
May 19, 2010, 7:01AM
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MOBILE, Ala. -- Zurich Financial Services will drop 554 small business property policies in Mobile and Baldwin counties beginning Oct. 1, citing risks from hurricane exposure. The move comes after Farmers Insurance Group, a Zurich unit that mainly covers homeowners, announced a larger cutback in February.

"This is an effort to manage our overall business volume and our coastal catastrophe exposure," said spokesman Mark Toohey.

He said the 554 policies represent a little more than half of the number of Zurich small business policies in Mobile and Baldwin counties, and about 10 percent of such policies statewide.

Company officials said they were not dropping all commercial wind coverage in Mobile and Baldwin counties. Independent agents who sell the policies, though, said they believe the insurer is exiting the market entirely.

"Zurich is pulling out," said Jay Ison, a partner in the Thames Batré Mattei Beville & Ison agency in Mobile.

The Swiss insurance titan took control of Farmers in 1998. In 2008, it combined its pre-existing small business line with Farmers, creating one of the five largest insurers for small business, with $2.3 billion in nationwide revenue.

Farmers said in February that it was dropping wind coverage on 10,000 residential policies in Mobile and Baldwin counties. It also dropped 400 small business policies sold by Farmers-brand agents. Toohey said those 400 policies represent just more than 30 percent of Farmers-brand small business policies in Mobile and Baldwin counties. Farmers agents can continue selling business coverage that excludes wind.

Zurich had largely stopped writing new business along the Alabama coast after 2004's Hurricane Ivan and 2005's Hurricane Katrina, agents said.

Gaylord Lyon, president of Mobile's Lyon Fry Cadden Insurance Agency, said about 40 of his customers have policies with Zurich right now. He said it would be hard to find equal coverage at the same price.

In the overall market, prices and availability are not as good as they were before Ivan. But things have improved, said Andrew Davis, a vice president with International Assurance Inc., a Mobile agency.

"Right after Ivan, if property was involved, your were going to pay through the nose," he said.

Ragan Ingram, chief of staff for Insurance Commissioner Jim Ridling, noted the decline in policies carried by the Alabama Insurance Underwriting Association, an insurer of last resort. "The department believes that commercial insurance is readily available in the Mobile and Baldwin marketplace," Ingram wrote in an e-mail.

He wrote that regulators know of no other carriers that are leaving.

By contrast, the states four largest homeowners carriers have announced that they are dropping wind coverage or all coverage on more than 50,000 homeowners policies since Ivan. 