Posted by Benji Riggins on May 3, 2010 under Flood | 
“Homeowners can mitigate against wind damage, but they’re powerless, really, to do anything against storm surge,” says one researcher whose job it is to develop ways to determine the vulnerability of homes and other properties not only to storm surge, but wildfires, sinkholes, earthquakes and other natural perils.
Dr. Howard Botts, vice president and director of development for First American Spatial Solutions (FASS), says a recent report and model developed by his company are able to demonstrate how destructive, both physically and financially, storm surge can be.
Storm surge is “such a large scale phenomenon that doesn’t really respect construction and other kinds of things,” Botts said. “If you’re in a storm surge zone, you’re likely to be impacted by it.”
Until Hurricane Katrina in 2005, however, the impact of storm surge on the overall property losses caused by hurricanes was generally not in the forefront of concern to most residential property insurance companies. After all, storm surge was a flood loss not covered by the traditional homeowners insurance policy.
Katrina and the lawsuits that followed changed that mindset.
Insurers, and indeed the world, saw first hand the amount of damage storm surge could produce. Just three years later, Hurricane Ike blasted ashore near Galveston, Texas, with a massive storm surge that helped it become the third most costly U.S. hurricane on record, largely due to the surge.
A member of the First American Corp. family of companies, FASS has access to information on around 90 percent of all the private properties in the United States, or at least 124 million separate addresses. The group has used that information to develop a model to analyze storm surge exposure at the individual property level.
The 2010 First American Storm Surge Report released in late March illustrates the exposure of single residential structures to storm surge in 13 key geographic areas. The numbers are massive. The storm surge exposure to Miami alone in the event of a Category 5 hurricane $53.6 billion, according to the report.
Flood Coverage or Not?
Insurance agents throughout the United States, and especially those whose customers own properties near the nation’s coastlines, are painfully aware that only a fraction of residential property owners that need the protection of flood insurance actually buy it. Even homeowners in areas that are high risk for flooding sometimes are reluctant to spend the extra money, although the coverage is far less expensive than traditional property insurance.
Botts said the information provided by the storm surge hazard model could be a useful tool for agents and insurance companies to use to educate insureds about the danger of storm surge in vulnerable coastal areas — and in informing property owners of the need to buy flood insurance.
“What we do is we build large, hazard risk data sets, tax data sets, sales and use tax, premium tax for the insurance industry. And we combine these very granular risk-hazard or tax databases with a geocoder that we developed, which takes an address and can get you right down to, literally, the rooftop,” Botts said.
What this means for insurers, and agents, is that they can visibly show owners of properties along and near the hurricane prone coastlines just what the impact of storm surge from a Cat 1 or Cat 5 hurricane, or any size storm in between, would be on a particular insured’s property.
For example, storm surge report released in March was designed “to look at 13 major residential property markets in the Gulf and Atlantic coastal region and understand, at a property-by-property level, which of these properties were in a storm surge potential area or would be exposed to storm surge,” Botts explained. Then property-by-property the dollar value of those single family homes — the buildings only, not the contents — in potentially affected areas was determined.
A Ton of Water
“Storm surge moves with the forward speed of the hurricane — typically 10–15 mph,” the report states. “One cubic yard of sea water weighs 1,728 pounds — almost a ton.”
Adding to the impact of rushing water, the trees, pieces of buildings and other debris that are typically caught up in the swirl act as a battering rams when they come into contact with a stationary object, such as another building.
Even areas that are not in direct path of a hurricane can be hugely impacted, as evidenced during Hurricane Ike, when its storm surge powered north up Galveston Bay, along the east side of Houston.
Botts says natural and man-made channels and barriers can add to the destructive possibilities.
“What’s going to facilitate inward movement? Creeks, bayous, drainage ditches,” he said, adding that un-raised highways and railroad rights-of-way can also serve that purpose. Meanwhile, natural and man-made barriers, such as hills, levees, even mounds of earth can keep the surge from flowing out of inland areas.
“We spend an enormous amount of time looking at what happens once that water gets onshore, what are the likely areas of inundation,” Botts said.
Listen to Insurance Journal’s interview with Dr. Howard Botts online at http://www.insurancejournal.tv/videos/3622/.
By Stephanie K. Jones
April 30, 2010
Posted by Benji Riggins on April 19, 2010 under Safety |
The 2010 Atlantic hurricane season will produce an above-average eight hurricanes, four of them major, posing a heightened threat to the U.S. coastline, the Colorado State University hurricane forecasting team predicted Wednesday.
In its second forecast in four months for the 2010 season, the leading storm research team founded by hurricane forecast pioneer William Gray said the six-month season beginning on June 1 would likely see 15 named tropical storms.
The team forecast a 69 percent chance of at least one major hurricane making landfall on the U.S. coastline in 2010, compared with a long-term average probability of 52 percent.
Major hurricanes pack powerful sustained winds of at least 111 miles per hour .
For the Gulf Coast, from the Florida Panhandle west to Brownsville, Texas, including the Gulf of Mexico oil patch, the probability of a major hurricane making landfall was seen at 44 percent versus a long-term average of 30 percent, the Colorado State University team said.
“While patterns may change before the start of the hurricane season, we believe current conditions warrant concern for an above-average season,” Gray said in a statement.
An average Atlantic season has about 10 tropical storms, of which six become hurricanes.
The Colorado State University team also predicted a 58 percent chance of a major hurricane tracking into the Caribbean, where Haiti is vulnerable after a devastating Jan. 12 earthquake that left more than a million people homeless.
Extreme Season Feared
The earlier forecast in December by Gray’s team had already predicted an “above-average” season producing 11 to 16 tropical storms, including six to eight hurricanes. It had said three to five of next year’s storms would become “major” hurricanes of Category 3 or higher on the Saffir-Simpson intensity scale.
Another forecaster, AccuWeather.com, last month also forecast a potentially “extreme” hurricane season this year, with “above-normal threats” to the U.S. coastline.
AccuWeather said five hurricanes, two or three of them major, were expected to strike the U.S. coast, forming out of an expected 16 to 18 tropical storms, almost all of them in the western Atlantic or Gulf of Mexico.
The 2009 season ended Nov. 30 had only nine storms, including three hurricanes, and was the quietest since 1997 due in part to El Nino, the eastern Pacific warm water phenomenon that tends to suppress Atlantic hurricanes.
But Phil Klotzbach, lead forecaster with the Colorado State team — whose research is followed closely by energy and commodity markets — said El Nino was expected to dissipate fully by the start of this year’s storm season.
“The dissipating El Nino, along with the expected anomalously warm Atlantic ocean sea surface temperatures, will lead to favorable dynamic and thermodynamic conditions for hurricane formation and intensification,” said Klotzbach.
The Colorado State University team has repeatedly cautioned that extended-range forecasts for hurricane activity are imprecise and can often miss the mark.
The university team originally expected the 2009 season to produce 14 tropical cyclones, of which seven would become hurricanes. But the season, which ended on Nov. 30 and was the quietest since 1997, had only nine storms, including three hurricanes.
By Pascal Fletcher
April 8, 2010
Posted by Benji Riggins on January 26, 2010 under Insurance News |
When it comes to government-created insurance, the state health plan isn’t the only entity facing trouble.
An attempt to fix an ailing coastal insurance plan made steps through the North Carolina House of Representatives this week as HB 1305: “Beach Plan Changes” passed the insurance committee Tuesday and moved on to finance.
“Over the last six months, my office, legislators, business owners and homeowners across the state have been working furiously to find an acceptable compromise so that we could avoid a statewide insurance crisis,” said North Carolina Commissioner of Insurance Wayne Goodwin. “It is vital that North Carolina pass meaningful legislation this session before the next hurricane or series of hurricanes hits.”
The North Carolina Insurance Underwriting Association (Beach Plan) was created by the General Assembly 40 years ago to provide supplementary wind and hail coverage for property owners on the barrier islands, who were often refused such coverage from standard insurance companies due to high-risk storm exposure.
The plan has since expanded to offer homeowner’s and wind/hail insurance for residential and business properties in 18 coastal counties,
The plan was created and is regulated by the state, but it is not a state entity. It’s an association of independent companies acting as one.
Currently, all property and casualty insurance companies that do business in North Carolina write and fund the plan — and share any losses or profits. According to Goodwin, the plan was designed as a last resort, offering coverage at a higher-than-standard rate to those who would otherwise not have it. But Beach Plan rates became lower than those of the voluntary market — and it has become the insurer of first resort on the N.C. coast.
In 2007, the plan provided the Department of Insurance with an actuarial report assessing that their rates were 76 percent inadequate. Officials say the plan is seriously unprepared to pay for the potential losses of a major storm.
If HB 1305 passes, those insured under the plan will pay higher premiums – and maximum coverage will be reduced from $1.5 million to $750,000.
But home owners across the state will be affected if a major storm costs the plan more than it has in the bank. The legislation enables member companies to tack up to 10 percent onto their customer’s bills in the form of a “catastrophic assessment recoupment” — but only if damages get up to around $2.4 billion.
A pivotal part of the bill relates to the tipping point at which private insurance companies can start passing the burden along, which has currently been set to $1 billion. The insurance industry originally wanted the threshold to be $100 million.
Department of Insurance spokesperson Kristin Milam explained the concept with a hypothetical scenario:
“If we had a major storm tomorrow, like a Hazel-type storm, the Beach Plan would use two-thirds of its $800 million surplus to pay claims; they would have to hold some back in case we get other storms throughout the year,” said Milam. “If the plan paid the first $600 million, then the member companies would have to chip in the next $600 million to get to the $1.2 billion reinsurance attachment point. If it goes beyond $1.2 billion in reinsurance, (the plan) would have to assess the member companies again.”
And the member companies would then assess their members with what has been called a 10 percent “surcharge.” But Goodwin said that’s not correct. A surcharge comes after the fact. A catastrophic assessment recoupment is a proactive measure.
“Other states have been reactive, and that has led to extraordinary insurance rate increases in those states,” Goodwin said. “By being proactive, North Carolina will provide consumers and the industry with certainty and have a much more stable and competitive insurance market.”
Officials say that if insurance companies don’t know how much they will be liable for and if they will be adequately compensated, they’re liable to pull their business out of North Carolina — like State Farm recently did in Florida.
“Florida presented a unique set of circumstances,” said State Farm Spokesman Russ Dubisky. “Right now, State Farm is committed to our business in North Carolina. State Farm sees HB 1305 as an incremental step in the right direction. Eventually, we hope to see the Beach Plan become independently solvent by building its reserves, purchasing adequate reinsurance, and truly acting as the market of last resort.”
That’s another important piece of the legislation. Let’s say there are no major storms this year, and the Beach Plan makes a profit. Under HB 1305, member companies will no longer get to take their share of that profit. It will go straight into the Beach Plan surplus and build over time.
“The more money that the beach Plan has in the bank, the larger the storm or series of storms it can handle without turning to its member companies, and subsequently, policyholders,” said Goodwin in a speech to the Insurance Committee on June 25.
“And, as you all know, no one piece of legislation is perfect and this bill certainly is not perfect. But legislation, particularly involving complex subjects, is often about compromise.”
by Olivia Webb
Tags: home insurance, home insurance nc, home insurance north carolina, house insurance, house insurance nc, house insurance north carolina, insurance, insurance agency, insurance agent, insurance nc, insurance north carolina, nc beach plan
Posted by Benji Riggins on September 25, 2009 under Flood |
On October 1, 2009, important changes to the NFIP will take effect. There will be an increase in rates, the standard deductibles, and the basic insurance limits. These combined changes will result in an average premium increase of 8 percent . Many policyholders will have questions about these changes. To help you best serve our clients, we have developed a number of “answers to possible questions” to help our customers better understand how these changes will affect them.
Q: Why are my premiums going up?
A: It is not uncommon for insurance companies to implement annual rate increases to help offset their increased costs, including inflation. The NFIP, like most insurance companies, has found it necessary to implement these important program changes to ensure that current premiums more accurately reflect the current risks.
Q: Are the rates increasing to collect the premium dollars that were used to pay for claims as a result of Hurricane Katrina?
A: No. It is a misconception that rate increases happen to offset debts attributed to Hurricane Katrina or any past event. Actually, Federal regulations clearly state that the NFIP cannot raise rates to recoup for previous losses. Simply put, NFIP premiums only reflect expected future losses and expenses. There is no charge contained in the premium to recoup past losses.
Q: Why is my deductible doubling?
A: The NFIP’s previous minimum deductibles were in place for more than 10 years. The NFIP found it necessary to discontinue the minimum deductible of $500 and increase the new standard deductibles to avoid overall larger premium increases.
It is important to remember, that in most cases the deductible is only a fraction of the average flood insurance claim, which can cost tens of thousands of dollars.
Q: Why are the basic limits of coverage on the Standard Flood Insurance Policy (SFIP) for residential and non-residential buildings increasing?
A: The NFIP takes many steps to financially prepare for future flooding. In order to do so, the basic limit of coverage, the level which sustains the most damage in a flood, needs to be brought into better alignment with the typical NFIP paid claim.
If you purchase flood insurance beyond the basic limit, you will receive more coverage at a lesser charge. And, to get full replacement cost for your primary residence in the event of a flood, you must insure your building to at least 80 percent of its replacement value (or $250,000, whichever is less).
Posted by Benji Riggins on September 21, 2009 under Insurance News, Uncategorized |
As more homeowners are having trouble selling their homes in today’s real estate market, some are thinking about becoming landlords.
A growing number of homeowners who need to relocate for a job or other reason are renting out their homes instead of selling them so they can wait until the market improves. At the same time, investors are taking advantage of low prices to buy rental properties.
Allstate has seen a 27 percent increase in the number of homeowners who switched their insurance policies to landlord policies, compared with year-ago figures. Travelers also said they’re seeing a similar increase. So is State Farm Insurance, but less so.
“When you become a landlord, your property goes from a residence to a place of business,” says Julie Parsons, vice president of consumer household at Allstate.
That requires a landlord insurance policy, which covers the property and the owner’s exposure if anyone gets hurt in it.
These policies typically cover the building in case it’s damaged or destroyed by fire, lightning, wind, hail, cars or collapse from ice, snow or sleet. they also cover the landlord’s personal property used by the tenant or used to maintain the house. This could include appliances and landscaping machinery like snow blowers and lawnmowers.
Landlord policies don’t include any protection against flooding or offer compensation for damage to renter property. And depending on the how extensive the coverage is, it might also exclude damage from sewer backup, earthquake, vandalism and theft.
Allstate’s average annual premium for a basic landlord policy package is $650, but costs can vary widely depending on the state, the amount of insurance and the deductible. Insurance companies also take into account building costs, neighborhood crime, square footage, as well as features like pools and fireplaces, and credit history.
To get a discounted price, some insurers offer an umbrella policy that combines other insurance, like car and homeowner’s insurance, with the landlord policy.
More important, the coverage helps protect landlords from liability if someone gets hurt on their property. Some policies also pay for some or all of legal expenses. It also will pay for some or all the medical expenses for people injured on the property if the landlord is found responsible.
Unlike a homeowner’s policy, the landlord policy also will compensate for lost rent if the building is uninhabitable because of damage that is covered by the insurance. This is a big deal for a landlord who relies solely on that income, especially if a building is under repairs for a long time.
“What if you need to rebuild the building? What about that income?” says Ed Charlebois, vice president of personal lines at Travelers.
Landlords can add on other options, for a price, to either increase how much money an insurance company will pay out or to expand coverage to certain events.
For example, a landlord may want protection from burglary or vandalism. Or, he may want to insure against building code violations and fire department charges. Some companies allow landlords to insure specific property like satellite dishes.
Like homeowner’s insurance, landlord policies don’t include any protection against flooding. That coverage is available through the National Flood Insurance Program. It includes building coverage with personal property coverage as an option.
While flood coverage can be expensive in high flood zones, it could help offset a huge hit if a property is flooded. The average flood claim totaled more than $33,000 over the past 10 years, according to the government, and just a few inches of water can cause damage costing thousands of dollars. And most mortgage lenders require flood protection in a high flood zone.
Renters also can get their own flood insurance from the National Flood Insurance Program to protect their personal belongings. Landlords may want to recommend that tenants buy that and their own renter’s insurance since landlord policies don’t cover a renter’s property. Some of the large national apartment owners require their tenants to buy renter’s insurance.
To head off any disputes with an insurance company if as there is a claim, landlords are advised to have dated photos of the property, both inside and out, to show its condition before any damage.
Also, they should make the property safer by regularly inspecting it for any hazards like cracked or uneven sidewalks, broken handrails and burned out light bulbs, State Farm recommends. Out-of-town landlords may want to hire a property manager to deal with these problems promptly.
___
On the Net:
www.floodsmart.gov
Posted by Benji Riggins on September 18, 2009 under Claims |
Man’s best friend is sinking its teeth into homeowners insurance costs. Dog bites account for one-third of all homeowners insurance liability claims, costing $387.20 million in 2008, up 8.70 percent from 2007, according to the Insurance Information Institute (I.I.I.).
An analysis of homeowners insurance data by the I.I.I. found that the average cost of dog bite claims was $24,461 in 2008 (the most recent figures available) down slightly from $24,511 in 2007. Since 2003, however, the cost of these claims has risen nearly 28 percent. Additionally, the number of claims has increased 8.89 percent to 15,823 in 2008 from 14,531 in 2007.
“The rise in dog bite claims over the course of the past five years can be attributable to the increased medical costs as well as the size of settlements, judgments and jury awards which have risen well above inflation in recent years,” said Loretta Worters, vice president of the I.I.I.
More than 4.5 million people in the U.S. are bitten by dogs annually, and nearly 900,000 of those — half of them children — require medical care, according to the Centers for Disease Control and Prevention (CDC). More than 31,000 Americans needed reconstructive surgery after dogs attacked them in 2006, center figures show. With more than 50 percent of bites occurring on the dog owner’s property, the issue is a major source of concern for insurers.
Dog Owner Liability
There are three kinds of law that impose liability on owners:
- Dog-bite statute: The dog owner is automatically liable for any injury or property damage the dog causes, even without provocation.
- “One-bite” rule: In some states, the owner is not held liable for the first bite the dog inflicts. Once an animal has demonstrated vicious behavior, such as biting or otherwise displaying a “vicious propensity”, the owner can be held liable. Some states have moved away from the one-bite rule and hold owners responsible for any injury, regardless of whether the animal has previously bitten someone.
- Negligence laws: The dog owner is liable if the injury occurred because the dog owner was unreasonably careless (negligent) in controlling the dog.
In most states, dog owners are not liable to trespassers who are injured by a dog. A dog owner who is legally responsible for an injury to a person or property may be responsible for reimbursing the injured person for medical bills, lost wages, pain and suffering and property damage.
“Although some people purchase dogs for the purpose of guarding their homes, deadbolt locks and home security systems are safe burglary deterrents and that will often earn you a discount on your insurance premium,” said Worters.
A single lawsuit — even if won — can end up costing hundreds of thousands of dollars, Worters said.
“Most dogs are friendly, loving members of the family,” said Worters. “But even normally docile dogs may bite when they are frightened or when protecting their puppies, owners or food. Ultimately, the responsibility for properly training and controlling a dog rests with the owner.”
Posted by Benji Riggins on August 28, 2009 under Insurance News |
North Carolina Governor Bev Perdue has signed into law legislation to shore-up the state’s backup coastal insurer and reduce the liability of private insurers should a major catastrophe strike the state.
House Bill 1305 also sets limits on the coverage that can be sold by the North Carolina Insurance Underwriting Association, known as the the Beach Plan, and requires insurers to offer discounts for storm mitigation efforts by policyholders.
The signing came more than two weeks after House and Senate lawmakers reached agreement on the bill, which was sponsored by Rep. Hugh Holliman in the House and led by Sen. Tony Rand in the Senate.
The bill (HB 1305) that is now law is intended to reduce the exposure and prevent a funding shortfall in the Beach Plan, which insures 170,000 properties valued at nearly $74 billion in 18 coastal counties.
The measure was supported by lobbyists for the property/casualty insurers who said it was necessary to provide certainty and stability in the private marketplace.
Momentum for the reform was helped by an actuarial report, commissioned by the Property Casualty Insurers Association of America (PCI), that showed the Beach Plan was seriously underfunded. According to that report, the Beach Plan has no more than $1.5 billion available to pay for hurricane losses. However, a large storm could cost more than $7 billion, leaving a $6.2 billion deficit and affecting the plan’s ability to pay claims.
The bill addresses this concern by capping private insurers’ liability at $1 billion if the state insurer’s funds fall short and providing for surcharges on all policyholders in the unlikely event that there is such a devastating storm that even more funds are needed
Private insurers say the certainty the $1 billion liability cap provides them is important to their ability to properly price policies. Several insurers have stopped writing business in the state out of concern over the uncapped liability.
Any surcharges on policyholders statewide would be limited to no more than 10 percent annually and could begin only after the Beach Plan exhausts its surplus, about $2.4 billion in reinsurance and the $1 billion private insurer non-recoupable amount.
The law also requires the Beach Plan to limit the coverage it offers on residential properties to $750,000 and on commercial properties to $3 million. It now offers limits twice those amounts. Contents of habitational property could be insured only up to 40 percent of the home or building value under the bill.
If the value of the property exceeds the new maximum coverage limits available from the Beach Plan, the property owner must arrange to purchcase the excess coverage in the private market before the Beach Plan can issue its policy.
The Beach Plan’s rates for standalone wind and hail coverage must be 5 percent more than those of private insurers, and rates for full homeowners policies that include wind and hail coverage must be 15 percent higher. The industry had preferred that Beach Plan rates be even higher to further encourage policyholders to buy policies from the private market rather than the more expensive state insurer.
The new law requires the private market, as well as the Beach Plan, to file rating plans including mitigation discounts.
“Governor Perdue has taken an important step today in securing the financial stability of North Carolina following a hurricane or major storm,” said David Sampson, president and CEO of the insurer lobby PCI. “HB 1305 will reform the Beach Plan, protect consumers across the state and improve the property insurance market.”
The law has already convinced one insurer to begin writing in the state. A subsidiary of AAA Carolinas said its decision was in response to the passage of HB 1305.
Posted by Benji Riggins on August 8, 2009 under Insurance News |
The North Carolina General Assembly has approved a bill to reform the state’s coastal insurance system that caps private insurers’ liability for any funding shortfall in the state-backed Beach Plan, reduces coverage for property owners who get coverage in the Beach Plan and requires insurers to offer discounts for storm mitigation efforts by policyholders.
The bill (HB 1305) is intended to reduce the exposure and prevent a funding shortfall in the North Carolina Insurance Underwriting Association, known as the Beach Plan, which insures 170,000 properties valued at nearly $74 billion in 18 coastal counties.
Yesterday, just before 5 p.m., the House concurred in a 92-19 vote with a Senate version of the bill. The measure now goes to Gov. Bev Perdue, who can sign it, veto it, or let it become law without her signature.
The measure was supported by property/casualty insurers whose lobbyists said it was necessary to provide certainty and stability in the private marketplace.
“Yesterday was good day for all insurance consumers in North Carolina. Elected officials have realized how out of kilter the current Beach Plan is and have taken steps to begin to rectify the situation,” said Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies (NAMIC).
While overall supportive of the reforms, the insurance industry came away slightly disappointed that a key rate differential provision backed by the House was watered down in the final version. The final bill requires that the Beach Plan’s rates for standalone wind and hail coverage be 5 percent more than those of private insurers, and rates for full homeowners policies that include wind and hail coverage be 15 percent higher– which is what current rules say. The industry preferred the House version that had called for different figures: 10 percent higher for wind/hail and 20 percent higher for full homeowners.
The rate differential is meant to reduce the exposure of the Beach Plan by encouraging policyholders to buy policies from the private market rather than the more expensive state insurer.
Reynolds conceded that the lower rate differential “will make it more difficult to quickly return the Beach Plan to the market of last resort.”
But she said the overall measure is the beginning of “many more incremental steps toward strengthening and diversifying not only the coastal insurance market in North Carolina, but the entire market in the state.”
The bill will require the private market, as well as the Beach Plan, to file rating plans including mitigation discounts.
Momentum for the reform was helped by an actuarial report, commissioned by the Property Casualty Insurers Association of America (PCI), that showed the Beach Plan was seriously underfunded. According to that report, the Beach Plan has no more than $1.5 billion available to pay for hurricane losses. However, a large storm could cost more than $7 billion, leaving a $6.2 billion deficit and affecting the plan’s ability to pay claims.
The bill addresses this concern by capping private insurers’ liability at $1 billion if the state insurer’s funds fall short and providing for surcharges on all policyholders in the unlikely event that there is such a devastating storm that more funds are needed.
Private insurers say the certainty this liability cap provides them is important to their ability to properly price policies. Several insurers have stopped writing business in the state out of concern over the uncapped liability.
“Lawmakers recognized that the Beach Plan is not financially stable which could hurt insurance policyholders across the state,” said Lynn Knauf, regional manager for PCI. “The General Assembly has responsibly chosen to solve the property insurance crisis before the storm, instead of after a devastating event, unlike the fate of some other coastal states.”
Any surcharges on policyholders statewide would be limited to no more than 10 percent annually and could begin only after the Beach Plan exhausts its surplus, about $2.4 billion in reinsurance and the $1 billion private insurer non-recoupable amount. This so-called “catastrophe recovery charge” would have to be clearly identified to policyholders on their premium statement, declarations page, or by some other electronic or written method.
As part of an attempt to control the state-backed insurer’s exposure, the measure requires the Beach Plan to limit the coverage it offers on residential properties to $750,000 and on commercial properties to $3 million. It now offers limits twice those amounts. Contents of habitational property could be insured only up to 40 percent of the home or building value under the bill.
If the value of the property exceeds the new maximum coverage limits available from the Beach Plan, the property owner must arrange to purchcase the excess coverage in the private market before the Beach Plan can issue its policy.
“This is a strong reform bill,” said Raymond G. Farmer, assistant vice president for the American Insurance Association’s southeast region. “It meets two key goals: first, putting the Beach Plan on a stronger financial footing, and second, giving private market insurers greater certainty as to their ultimate financial obligations should a major storm hit that depletes the Beach Plan’s claims paying resources.”
HB 1305 was sponsored by Rep. Hugh Holliman in the House and lead by Sen. Tony Rand in the Senate.
