Adirondack Insurance Exchange exits from NY market

Adirondack Insurance Exchange has announced that it is withdrawing from the New York market due to its worsening financial condition.

The company is advising policyholders to find alternative insurance coverage as soon as possible. Its subsidiary, Mountain Valley Indemnity Co, has issued a similar notice, highlighting that its reinsurance agreement with the parent company expired on July 1.

Adirondack primarily provided home and automobile insurance, along with package insurance, identity theft protection, watercraft coverage, and umbrella policies, according to AM Best. The company has been offering personal lines coverage in New York since 2006.

The New York Department of Financial Services (DFS) confirmed that Adirondack is seeking to exit the state but has not yet received approval for its withdrawal plans.

A DFS spokesperson stated that the department is working with Adirondack and Allstate to ensure compliance with New York laws and regulations, protecting both consumers and the state’s insurance market.

Bradford J. Lachut, director of government and industry affairs at the trade organization Professional Insurance Agents, noted that Adirondack had gained a reputation for offering some of the lowest-priced policies in the New York market. He suggested that this strategy may have contributed to the company’s financial difficulties.

Adirondack experienced annual net losses in four of the past five years, culminating in a $32.5 million loss in 2023, according to its Best’s Financial Report. The company’s policyholder surplus decreased from $82 million in 2021 to $20.1 million in 2023.

As of the first quarter of 2024, Adirondack reported a net loss of $16.8 million and a policyholder surplus of $3.34 million, down from $45.6 million in the same quarter of the previous year.

Lachut observed that Adirondack’s rates were consistently 20% to 40% lower than those of its competitors. As the market hardened, reinsurance costs rose, and claims expenses increased, leaving Adirondack vulnerable due to its low premium strategy.

While this situation may not indicate a broader market trend, carriers in New York are generally tightening underwriting standards and raising premiums.

Adirondack Insurance Exchange is managed by National General Holdings Corp, which was acquired by Allstate for $4 billion in 2021. The company is not rated by AM Best.

What are your thoughts on this story? Please feel free to share your comments below.