What’s All the Huffing and Puffing About in North Carolina?

                                                                                                                                                                  

Will It Blow Our Houses Down and Our Insurance Companies Away?

Just as President-Elect Obama has the economy to keep him awake at night, our newly elected North Carolina Commissioner of Insurance, Wayne Goodwin, has inherited an issue sure to cause nightmares.  What do you do with a $70 billion coastal property exposure growing at the rate of $900,000.00 per month but not enough insurance to put it all back if hit with a Katrina?

Most homes insured along our coastline are covered for wind and hail through the NC Beach Plan, also called the Wind Pool, sometimes called the Last Resort.  This is a result of insurance companies excluding wind and hail on homeowners policies because of the huge exposure.   This plan currently has around $2.4 billion in reserves, or money available to pay claims.    Do the math.  $70 billion minus $2.4 billion equals NOT NEARLY ENOUGH MONEY.  What happens if (or when) our coast has a major storm?  When the $2.4 billion is handed out and more is needed the state will begin to access all licensed property insurers in NC according to their percentage of the market.  For example, Hurricane Floyd hit the coast in 1999 and a carrier could have easily been assessed $30 million.  If a major storm hits the coast their cut of the damage today would exceed six times that amount.  So even though companies may choose to exclude the coverage, they still have to help pay for the claims.  And if some companies declared bankruptcy as a result of a major storm the remaining companies would be assessed again.  How does this impact us?  Many options are being explored: • Increase homeowner premiums for coastal property. • Increase wind and hail deductibles for coastal property. • Increase homeowner premiums across the state. • Many of our companies are already asking for a better spread of risks; they want agencies to write auto and other lines of business as well as homeowners, or we may be forced to move the homeowners only client to another company. What’s the worst that could happen?  Companies could begin a mass exodus out of North Carolina.  Farmers Insurance has already left the state.  Encompass, an independent market of Allstate, has declared a moratorium on new property insurance.   Nationwide announced they will stop writing new “wind and hail policies” in North Carolina. As with the economy there is no quick fix, just the hope that the wind doesn’t blow for a few more years until this can be resolved.   In the meantime, I will let you know of any changes that may affect you or your clients.      

Annette White  (704-957-2764)  annette.white@allentate.com

                                                                                                      704-896-5141     Allen Tate Company      www.LeeAnnMiller.com

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