The Joint Select Study Committee on the Potential Impact of Major Hurricanes on the North Carolina Insurance Industry met again today to hear a couple of reports and most importantly propose recommendations to make to the 2009 General Assembly.

A representative from the Dept of Insurance informed the committee that the Insurance Commissioner had responded to the recent Rate Bureau?s request for massive hikes across the state to fund the coastal Beach Plan.  His decision is much lower with an average 4% increase across the state.  His rate proposal would increase insurance on the beach and coast an average of 18.7% with the highest rate at 29.8%.  The matter is now in settlement negotiations for a final decision.

With higher deductibles and higher rates with the Beach Plan, it should be less in demand and allow the voluntary market to grow.

The average home insured under the Beach Plan is $240,000.

To be eligible for Beach Plan coverage, the home must be occupied 75% of the time.

Recommendations that the Committee approved today:

To make the Beach Plan the market of last resort:

  • Make clear that it shouldn?t compete with the private market
  • The rates would be at least 25% above the private market approved rate
  • Require every two-year review of differential rates with the Commissioner
  • Require consideration of reinsurance
  • All Beach Plan filings could be appealed in Superior Court

Surplus funds in the beach plan will not be returned to insurers but will be used only to pay for losses, expenses and re-insurance.

A legislative study committee will be created to study mitigation, tax incentives and building code changes.

They also approved measures for monitoring what funds might be available from an Obama administration stimulus package that would include mitigation incentives for outfitting homes, particularly low income home owners.

There was a lot of discussion about assessments and surcharges and all the details surrounding these issues. They are considering requiring that in paying claims, the plan would use funds in the surplus fund first, then funds available through re-insurance, then assessments which will most likely be capped and finally a surcharge. 

Other ideas proposed today include:

  • Exclude Beach Plan coverage for second homes.
  • The statutes must tell the insurance companies what the deal is, the assessments need to be clearly defined and the risk needs to be clear to keep companies writing policies here.

The committee will continue to look at these matters at their next meeting in early to mid-January.  They still plan to submit recommendations for consideration during the 2009 General Assembly.

The very latest JLF report,  North Carolina?s Beach Plan: Who Pays for Coastal Property Insurance?   will be posted on our website the first of next week.  Be sure to read it thoroughly to understand this complex issue and the impact on the free market.