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Coastal Homeowners Insurance Which Way the Wind is Blowing Depends on Where You Sit In Raleigh Tyler Newman Governmental Affairs Director Business Alliance.

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Presentation on theme: "Coastal Homeowners Insurance Which Way the Wind is Blowing Depends on Where You Sit In Raleigh Tyler Newman Governmental Affairs Director Business Alliance."— Presentation transcript:

1 Coastal Homeowners Insurance Which Way the Wind is Blowing Depends on Where You Sit In Raleigh Tyler Newman Governmental Affairs Director Business Alliance for a Sound Economy (BASE)

2  BASE  The Business Alliance for a Sound Economy, is an organization of trade associations and numerous independent businesses that was formed to take collaborative action on issues of concern to their broad membership engaged in residential and commercial real estate sales, home building, land development, economic development, finance, property management and leasing.  Representation: Brunswick County Home Builders Association Brunswick County Landowners Association Topsail Island Association of REALTORS® Wilmington-Cape Fear Home Builders Association Pitt County Economic Development Partnership …and a growing number of independent businesses BASE also has the resources of the National Association of Home Builders and the NC Home Builders Association

3 NC-20 is a partnership among the people, local governments, and businesses of the 20 Coastal Counties of North Carolina. NC-20 MISSION STATEMENT: To support the common environmental and sustainable economic development interests within the 20 coastal counties through coordinated communication, information sharing, data collection and monitoring, scientific research, and proactive interaction with legislative and executive decision makers at all levels of government.

4 Coastal Homeowners Insurance Issue BEACH/Fair Plan Surcharge and Deductible Issue:  Effective February 1, 2009, the eighteen coastal counties covered by the Beach Plan will begin to see the following changes to their rate and deductible:  SURCHARGES for new and renewal policies are increasing from 1.15% to 1.25% (Full Peril) and 1.05% to 1.15% (Wind Only).  DEDUCTIBLES for any new residential plan will be 2% of insured value or $1,000 minimum PER OCCURENCE.  EX: $150,000 home at 2% would have to pay $3,000 each time  Commercial structures are also changing to 2% with a $1,000 minimum, which can be capped with a $75,000 fixed-dollar deductible for coverage of $7.5 million or greater.  Bald Head Island residents now have a 5% deductible with a $1,000 minimum.  For policy renewals and continuations all of the deductible changes will become effective April 1st.  Action approved by Commissioner November 22, 2008

5 Coastal Homeowners Insurance Issue Homeowners Insurance Rate Increases:  Effective May 1, 2009, 63 Counties in North Carolina will see homeowners rates increase.  Rate Increases range from 2%-nearly 30%  Action follows increases in 2005 and 2007.  Over the last 6 years, the Department of Insurance estimates that homeowners insurance rates in the Beach Plan beach area have increased 90% and rates in the Beach Plan coastal area have increased 65%.  Mainland New Hanover, Brunswick, Pender, Onslow and Carteret Counties homeowner's insurance rates will increase roughly 30% and 17.5% for the barrier islands.  The settlement with the N.C. Rate Bureau also realigned several insurance territories along the central and northern coast into separate territories according to their risk. The new territories purportedly serve to give the inland areas of those coastal counties a break on insurance compared with areas that border the sounds and ocean. Action approved by Commissioner on December 18, 2008


7 Perception vs. Reality  Eastern NC is being subsidized by the remainder of the state, “everyone in Eastern NC lives in front row beach mansions”  Reality: 7 of the 18 Coastal Counties are Tier I Counties, among the 40 most economically distressed in NC  Nine of the Counties have poverty rates above the statewide average and income below the statewide average  57% of properties insured by the Beach Plan have an insured value for building /contents of $300,000 or less  The Beach Plan has $72 billion exposure and only $2.5 billion in reserves and reinsurance. What if we have a Katrina in NC?  Reality: Katrina’s losses were primarily flood related (not at issue: NFIP), Are we assuming a storm that causes total destruction between Calabash and the Virginia border?  Actual History vs. Modeling  Joint Select Study Committee: Continued reliance on modeling, proposed increases to enable funding of losses for “probable maximum loss of 1:100 “storm (by 2010), 1:150 storm (by 2022). What are these numbers?  Strength, track, duration, intensity—all assumptions  “If Hazel hit today…$6.5 billion to industry and $1b assessments”  What about stronger building codes? No codes during Hazel  Impact of Hugo, Fran, etc.  1851-2004: NC had 6 category 3+ storms  only 1 category 4, 0 category 5  REALITY:  Hurricanes are a statewide problem  Need statewide equity in homeowners rates  Stay rate increases, continue study, fix it once and for all  Affordability and availability for consumers AND stable market for insurers with a reasonable rate of return

8 1892 TO 2007 STORM TRACKS

9 Actual Wind Losses

10 Litigation  Through the Williams Mullen Law Firm, Dare County, the Town of Nags Head, Starco Realty & Construction, Inc., and Joseph M. Geraghty have initiated four separate legal proceedings, including a lawsuit and an appeal to the North Carolina Court of Appeals, challenging Beach/FAIR Plan rate increases and homeowners rate increases as approved by the NC Department of Insurance in late 2008.  CRITICAL LOCAL SUPPORT: A number of local governments, including the Town of Southern Shores, Duck, Nags Head, Kill Devil Hills, Pine Knoll Shores, Emerald Isle, Indian Beach, Kitty Hawk, Surf City, and the Counties of Dare, Currituck, Beaufort, New Hanover, Pender, Brunswick, Craven, Carteret, Hyde, and Washington County, have already agreed to join the challenges as named parties and to provide financial support.  HEARING OFFICER DENIES REQUEST: On Friday afternoon February 6, 2008 the N.C. Department of Insurance hearing officer dismissed the petitioners claim to a hearing because of lack of subject matter jurisdiction and because the Petitioners Request for Hearing failed to state a claim upon which relief may be granted.

11 JUDGE ISSUES STAY ON BEACH PLAN SURCHARGES/DEDUCTIBLES  Dare County is spearheading an effort of Coastal Counties which have filed suit on these increases (Dare County v. NC Department of Insurance, 09 CVS 1980).  On Friday March 20, 2009, Wake County Superior Court Judge William Pittman issued a stay finding that the Commissioner did not act according to law, in that he did not create a record supporting his findings nor did he use proper procedure, including convening a hearing, as the General Statutes contemplate.  The Court issued the stay making no findings with respect to the substance of the Commissioner’s decision, finding only that the Commissioner used unlawful procedure.  The result is that the Commissioner, if he wishes to, can revisit the issue using proper procedure to create a record for the action.  If the Commissioner properly creates a record for his decision, appeal of the decision would be to the NC Court of Appeals.  Impact on folks with upcoming renewals?

12 Legislation SB 6 Beach Plan and Ins. Rate and Deductible Stay HB 26 Stay Beach Plan Rates, Deductible, Surcharges HB 426 Stay on Homeowners Insurance Actions Primary Sponsors : Spear; Wainwright; Owens; McElraft; Co: Cleveland; Grady; Hughes; Justice; McComas; Mobley; Underhill; Williams SB 428 Stay on Homeowners Insurance Actions. Primary Sponsor: Julia Boseman; Co: Harry Brown; Jean Preston; R. C. Soles, Jr.; HB 426/SB 428  Would enact a stay on the surcharges, deductibles and rate increases until July 2010  Would NOT impact areas of the state that received decreases  Stay allows for original intent of General Assembly: continuing the work of the Joint Select Study Committee in looking at hurricane insurance impacts and analyzing the overall insurance issue in the state  HB426 was heard in the House Insurance Committee and likely will be discussed again this week MOST IMPORTANT: BILLS RECEIVING WIDESPREAD SUPPORT BY EASTERN COASTAL CAUCUS AND LOCAL GOVERNMENTS  letters of support from Brunswick, Pender, New Hanover and Onslow Counties to Insurance Committee

13 Joint Select Study Committee  The Joint Select Study Committee on the Potential Impact of Major Hurricanes on the North Carolina Insurance Industry met seven times from September 2008 to January 21, 2009.  24 members of the Committee, appointed by President Pro Tempore of the Senate and the Speaker of the House of Representatives. Co-chairs were Senator Tony Rand and Representative Hugh Holliman  Report finalized in late 2008, including a draft bill. As drafted, the bill only applies to the Beach Plan  Positives:  concept of recoupable/non-recoupable assessments  Association members participate in both expenses and losses  accumulated surplus being retained from year to year (No distribution: $41 million in 2006?)  Negatives:  "market of last resort" definition does not include any acknowledgement of the surplus lines market  "probable maximum loss" is modeling-based ($ to cover 1:100 year by 2010, 1:150 by 2022?)  reducing the coverage limit to $750,000 (from $1.5 million)  vague language regarding surcharges  Need to add requirement for public hearing when Association files rates, plans surcharges, etc in 58-45-45 (d)  STRONGLY support mitigation credits for homeowners that take proactive steps to mitigate potential losses (shutters, etc) Senate Bill 696 Beach Plan Surplus (Sponsor: Senator Rand) House Bill 742 Prohibit Beach Plan Surplus Distribution (Sponsors: Representatives Spear; Goforth, Justice, McComas, McElraft, Stiller, and Wainwright)  Beach Plan members “participate in expenses and losses”

14 NC–20 Supports  Transparency, accountability and verifiability of the North Carolina insurance system for a higher level of consumer protection  STAY CURRENT INCREASES AND CONTINUE TO STUDY  Statewide rate equity for homeowners policies  Statewide wind deductibles triggered by named hurricanes and capped at 1% statewide  Incentive programs and credits for wind damage mitigation  Utilization of actuarial data over modeling  Support the current maximum coverage limit of $1.5 million under the Beach Plan  Public hearings on rate change requests  Creation of an Insurance Commission similar to the model of the Utilities Commission?  Multi-state wind pool with SC and VA?

15 Get Involved   “Call to Action” Coastal Homeowners Insurance link on right   Continued public participation is critical!!!  Ex: support of lawsuit, support of NC-20, additional letters to House Insurance Committee members, Kure Beach postcards to citizens QUESTIONS? Tyler Newman BASE 910-799-2611

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