Residents of Mobile and Baldwin counties who are shopping for homeowners insurance today find that their choices are increasingly not the familiar names of State Farm, Alfa and Allstate, but instead names like Lexington, Lloyd's, Scottsdale and GeoVera.

The new insurers pushing into the area are not only different companies, but also companies writing in a different kind of market. While most familiar companies are fully under state regulation, most fast growing companies are "surplus lines" companies, subject to much less over sight by the Alabama Department of Insurance.

"I think it's going on all over the Gulf Coast and Atlantic coast," said Bill Wilson, head of research for the Independent Insurance Agents & Brokers of America, a trade group for insurance agents who aren't tied to any one company.

A combination of factors is pushing the market shift. The state's dominant insurers fear the losses they could suffer on the coast in the event of a severe hurricane, leading them to refuse new business and in some cases not renew existing policies.

At the same time, surplus lines, traditionally more expensive, are becoming price competitive for homeowners, some brokers and industry experts say. Investors have poured billions into new insurance ventures, particularly reinsurers, since 2005's Hurricane Katrina. By 2007, that new money was cutting the cost of insurance from these less-regulated carriers, which are far quicker in responding to market changes.

"Right now, the rates that are being written are competitive," said Bruce White of Gulf Shores-based Whitehaven Insurance Group.

A new marketplace

For at least the last 15 years, it's been difficult for homeowners very close to the beach to buy policies from traditional insurers, forcing them to turn to either the state's insurer of last resort, the Alabama Insurance Underwriting Association, or to surplus lines companies. Over time, local brokers built expertise in dealing with surplus lines companies, including syndicates based in the Lloyd's of London market, as well as branches of industry behemoths such as American International Group and Nationwide Mutual Insurance Co.

Now, the surplus lines companies and their brokers are spreading away from the beach as traditional insurers pull back. For example, White said his company started selling policies north of Gulf Shores for the first time last year, after it worked out a deal with its Lloyd's syndicate to sell up to $10 million worth of coverage in every ZIP code in Mobile and Baldwin counties.

The amount of premiums collected by surplus-lines companies in Alabama has more than doubled since 2001, according to state tax figures, rising to $541 million last year. Regulated insurers collected more than $1.12 billion in homeowners premiums alone in 2007, and billions more in other kinds of regulated insurance.

Regulators see the growth of surplus lines companies as both good and bad. Good, because they're making policies available where otherwise there might be none, plus paying a 6 percent premium tax, about double what regulated companies pay. But bad, because policy holders are more at risk if a company fails, and could find unpleasant surprises in their policy language, or from a quick cancellation.

"Certainly it's not what we would prefer, but during the instability of the market now, we're certainly happy they're here," state Insurance Commissioner Walter Bell said last month.

Buyer beware

Buyer beware starts with the fact that surplus-lines companies don't submit their policy forms to the state. That means purchasers have to check, or get their agent to check, what a policy really covers.

It's also possible that a surplus lines company could cancel or non-renew a policy more quickly than a state-regulated company. Admitted companies have to notify the commissioner 150 days before canceling policies en masse, said Ragan Ingram, deputy insurance commissioner.

People who buy a policy from a surplus-lines company also aren't protected by the state guaranty fund, which covers at least some of what's due policy holders if a regulated company goes belly-up. Regulated companies pay

1 percent of premiums each year to the fund.

That means buyers should check the financial strength ratings put out by A.M. Best and other rating groups

"The likelihood of any given insurer going under is fairly remote, but the lower the rating, the more likely it is," said Bob Hartwig of the Insurance Information Institute.

White says that his agency is able to match or go below the prices of traditional insurers in some areas, though his company may have stricter underwriting criteria. He said that 10 miles inland, his agency can write policies for 50 cents per $100 of value. In 2005, traditional insurers were averaging at least 68 cents per $100 of value statewide, according to figures from the National Association of Insurance Commissioners.

Others who sell surplus lines agree rates are falling, even if they say theirs haven't gotten that low. J. Taylor Norton, an agent with Southern Alabama Insurance in Gulf Shores, said homeowners rates through his agency have fallen between 15 percent and 25 percent since November. Even so, Norton says traditional insurers are probably a better deal.

"If they can get coverage through the standard market, then that's where the homeowner needs to go," he said. "Price and coverage-wise, more of the time the standard lines market have a more complete policy."

But with the state's top three home insurers restricting new coverage along the coast, surplus-lines companies are likely to keep expanding.

"The standard markets don't want to take the chances these surplus lines carriers want to take," White said.