The House Finance Committee considers House Bill 1305, Beach Plan Changes this morning.
JLF has weighed in on the Beach Plan here and here and here. The problem is there is not enough money in the state?s beach plan insurance fund to pay claims in case of a catastrophic storm hits the coast of North Carolina. The solution they are trying to find is who is going to ?shore? it up. Will it be coastal residents? Insurance companies? (they may all just leave instead) All NC residents?
After an explanation from bill sponsor, Rep Hugh Holliman, D Davidson, NC Insurance Commissioner, Wade Goodwin addresses the committee. He explains that less coverage and less choice will drive up costs. It?s a complex bill and it?s a difficult problem. The bill is not perfect. Legislation is often the result of delicate compromise. The solution will involve both science and policy. It?s his responsibility to protect the citizens.
He lists positive things that protect citizens:
Requiring insurance industry to give up large sums of money to minimize the risk
Mitigation credits
Voluntary payment plan
Cuts deductibles in half
Oversight of the wind pool by the department
John McMillan, NC Insurance Federation representative speaks about catastrophic storms. There is now $750 ? 800 million in the fund to pay. 2/3 would be used for first losses, non-recoupable assessments up to $700 m charged to insurance companies. Re-insurance up to $2 B in additional losses, first $300 m would be paid in non-recoupable assessments. Total would cost $1 Billion to insurance companies in NC. $2.4 billion in claims would be paid before any assessments would be charged to policyholders across the state. If Hazel, Floyd and Fran all came ashore in the same place with same impact today, they would cost (in today?s dollars) respectively $1.4 B, $1.349B, $600 million. Unlikely that you would ever get to the trigger to charge all state policyholders. This bill is the most costly to the insurance industry in the country. But we have to have this bill in order to keep insurance companies doing business in NC
John Bode, representing the Independent Insurance Assoc., worked on this bill for 4 years. All have made compromises. If it is changed substantially, we fear insurance companies will leave the state. Homebuilders, realtors, and folks with mortgages will be harmed if that happens. The fund will have to be closely monitored but it can and should be done.
Rep Jennifer Weiss, D Wake, amends the bill with a technical change.
Rep Paul Stam, R Wake, says this is the 8th longest title ?in the republic? and wonders if the title can be changed to the short title. (with a very tight title, it is more difficult to amend a bill on the floor since it against the rules to amend a bill that would change the title)
There are numerous amendments to be considered and some will have to be held over till the next meeting.
Rep Bill Owens, D Pasquotank, has an amendment that changes the deductible to go to 1% on all deductibles on named storms only. Rep Edgar Starnes, R Caldwell, asks what the deductible is, is it raised or reduced in this bill? Increased by the commissioner to 2%, but a court decision put it back at the current rate, which is a flat $100 or $1000 depending on the value of the property. This amendment would set it at 1%. Committee members requests staff to explain what the amendment does, unintended consequences and real costs. As their alloted time to meet runs out, the committee recesses.
An email will be sent to members from Finance Chairman William Wainwright, D New Hanover, to let them know when the meeting will continue ? noon today or after session. There are many parties who wish to speak to the committee and numerous amendments to be proposed before legislators leave for the week, perhaps for a relaxing weekend at the coast.
