ANDOVER DROPS 14,000 CUSTOMERS THROUGH COST OF REINSURANCE

About 14,000 homeowners’ policyholders in Cape Cod, Massachusetts, are to be dropped by Andover Cos, the parent of locally based Cambridge Mutual and Merrimack Mutual. Frank O’Brien, counsel for the Property Casualty Insurers of America, to which Andover referred enquiries, said that the cost of reinsuring the Barnstable County residents would have been so high that Andover “would not have been able to make money elsewhere in the state”. He noted that reinsurers were looking to charge companies between six and eight times what they had charged insurers in the past. Reinsurers have justified the rate increases because of changes in modelling techniques, which have revealed part of the north-eastern sector of the US to be a significantly more dangerous place than had previously been thought. Today Andover will send 1,200 notices of non-renewal and will continue purging Barnstable County residents every month between now and January 2005. Under Massachusetts regulations, Andover customers will be guaranteed replacement policies under the Fair Plan, administered by the Massachusetts Property Underwriting Association. Cape Cod had 95,000 householders in 2000 and the move of Andover policyholders to the Fair Plan would increase its membership by more than 10%.