Shelter from the Storm 

Advisors whose high-net-worth clients have trouble getting coverage for their homes in coastal and other hard-to-insure areas might want to take a look at PURE. While not yet available everywhere, Privilege Underwriters Reciprocal Exchange (PURE) has moved into the coastal and mid-Atlantic markets in a big way, offering coverage for "high-value, well-built homes," as well as watercraft, collectibles, and personal excess liability.

The HNW market, according to PURE founder and president Ross Buchmueller, is underserved, with "lots of signs of inefficiencies." The companies serving this market, he says, were "very large commercial insurers that had a personal insurance division," rather than companies dedicated exclusively to that demographic, and he felt that there was a "tremendous opportunity" to focus solely on the HNW market. In addition, customer satisfaction surveys showed that policyholder-owned companies dominated the top levels. He also cites the "post-Hurricane Katrina insurance reaction. If you could get it, affordability was quite challenging."

Founded in 2006, PURE began offering coverage in Florida, reasoning that the high-net-worth, with houses built to higher standards than those of the general public, would be better risks than the average individual.

The company began offering policies a few hundred at a time, in communities such as Palm Beach and Naples; then it began to move into other states. Currently PURE offers coverage not only in Florida but also in South Carolina, New York, and New Jersey, enrolling "a few hundred or a few thousand families," with the lure not only of coverage in a tough market but also substantial savings on premiums—something that in today’s economic conditions tempts even the HNW.

Buchmueller says that growth expectations are steady. "The nature of our business is to be great at managing risk by limiting the number of members in any one area," he explains. This way, PURE avoids "the kind of aggregations that cause problems when hurricanes and wildfires and earthquakes occur and you say, ‘My gosh, I wish I didn’t write everybody in that town!’" The next state on the list for coverage is Connecticut, where Buchmueller says PURE is having discussions with regulators. The company has "a long list of states in which we’re licensed, or have applications pending," but it’s not rushing into anything, preferring to grow smartly rather than quickly.

Buchmueller knows the HNW market well, having served as president of AIG’s Private Client Group, which he founded in 1999. Under his guidance, the division grew to approximately $500 million of gross written premium. Now that he’s put his experience to work for PURE, it seems that the HNW are responding, but coverage from PURE is somewhat different from the policies the high-net-worth were formerly able to get.

One innovation offered by PURE is taking into account the differences between a newer, more sturdily built home and an older home not built to the same standards and less able to stand the stresses of hurricanes. "We gave enormous premium credits," he says, to homeowners who’d paid for hurricane-resistant glass and had their roofs strapped on; those homeowners found that they were saving thousands of dollars in premiums.

The company is also environmentally friendly, offering to pay for the increased cost of environmental upgrades, and is also proactive with regard to loss prevention. "If you had a burglary, we would contribute to the cost of an alarm system," says Buchmueller; "if a lightning loss, we’d contribute to lightning suppression." Overall this drives premiums down, since forestalling future losses means fewer claims—further evidence that PURE is paying attention to ways to grow smartly.