The Hanover Insurance Group and Louisiana regulators have reached an agreement for the insurer to withdraw two of its companies doing business in the state, but continue coverage through a new partnership.

James Donelon

Louisiana Insurance Commissioner Jim Donelon announced Feb. 19 that he has approved a proposal made by Massachusetts-based Hanover to continue homeowner’s coverage for 14,000 existing policyholders in the state. Through the deal, Hanover will partner with Sarasota, Fla.-based Gulfstream Property and Casualty Co. to provide coverage to affected policyholders.

The move comes as Hanover proposed to withdraw Massachusetts Bay Insurance Co. and The Hanover Insurance Co. from Louisiana and have Gulfstream assume all the coverage from those two companies. Donelon said he initially objected to that move out of concern over setting a precedent that other insurers could emulate in violating Louisiana’s statute protecting homeowners policyholders who have maintained coverage for three years.

The other result, Donelon noted in a statement, could have been companies “dumping” large numbers of policyholders, resulting in a huge flow of policies to the Louisiana Citizens Property Insurance Corp., a non-profit insurer created by the state to provide coverage for those who are entitled, but unable, to secure insurance through the voluntary insurance market.

Donelon’s office anticipates that ultimately half of the 14,000 policyholders affected by the departure of Massachusetts Bay Insurance Co. and The Hanover Insurance Co. will be covered by Gulfstream and the other half by Hanover American Insurance Co., another subsidiary of The Hanover Insurance Group. All of these policyholders will be offered coverage by the companies and none will have to acquire coverage through Citizens.

“This action will guarantee uninterrupted coverage for 14,000 homeowners in our state who may have otherwise lost their insurance and prevent other companies from dumping tens of thousands of policies into the Citizens book of business,” Donelon said in a statement. “Additionally, I am very pleased to welcome Gulfstream into Louisiana as it is a well established company that has been in business for over five years in the Florida market and meets much higher standards than the statutory requirements for writing business in Louisiana.”

All of the new policies will grandfathered with the protection they have acquired under the unique Louisiana homeowners consumer protection law that prevents insurers from canceling or altering coverage for homeowner’s policies that have been in place for three consecutive years, except in rare circumstances, Donelon’s office said.