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Industry Issues | Coastal Homeowners Insurance
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Shoring up Coastal Homeowners Insurance Markets
In 2009, PCI has worked with state and federal lawmakers to protect coastal homeowners by establishing sound property insurance policy measures. Legislators in Florida, North Carolina and Texas championed significant reform this year that will improve their insurance markets by addressing underfunded, state-run coastal residual markets.
PCI supports long-term solutions that promote competitive private insurance marketplaces, strong loss prevention strategies and financially sound methods of funding catastrophe losses without unfairly burdening insurance policyholders and taxpayers in areas less prone to large scale natural disasters.
Learn More
PCI Public Policy Solutions for Catastrophe Insurance
Natural Catastrophe Insurance Fact Sheet
State Initiatives
North Carolina
On August 26, North Carolina Gov. Bev Perdue signed into law House Bill 1305, legislation that will protect homeowners and business owners across the state by reforming the Beach Plan and strengthening the state's property insurance market. This is an important step for securing the financial stability of North Carolina following a hurricane or major storm.
The bill protects consumers and provides needed long-term stability to the insurance market. Lawmakers responsibly chose to solve the property insurance crisis before a devastating event such as a hurricane. This is a victory for consumers statewide.
The reform of the Beach Plan evolved into a top public policy issue for the North Carolina General Assembly. In 2008, the Joint Select Study Committee on the Potential Impact of Major Hurricanes on the North Carolina Insurance Industry made a series of policy recommendations for consideration in the 2009 Legislative Session. PCI commissioned an actuarial analysis of the Beach Plan for the study committee and state lawmakers to use as a guide for understanding the dynamics of the coastal insurance system’s problems. The Milliman report indicated that the Beach Plan is woefully underfunded, which financially threatens the whole state and Beach Plan policyholders.
Gov. Perdue Signs Law to Prepare N.C. for Hurricanes
N.C. General Assembly Champions Beach Plan Reforms
Florida
This year, the Florida Legislature passed significant property insurance legislation that will provide a wide range of benefits to homeowners and business owners.
House Bill 1495, sponsored by Rep. Bryan Nelson (R- Apopka) was a step in the right direction for Florida’s property insurance market. The bill was signed into law by Gov. Charlie Crist and calls for measured rate increases for the Citizens Property Insurance Corporation (Citizens) over a multi-year glide-path. Starting in 2010, Citizens policyholders will see no more than a 10 percent increase per year. In addition, HB 1495 calls for a decrease in the Florida Hurricane Catastrophe Fund's (CAT Fund) Temporary Increase in Coverage Limits (TICL) layer. Both provisions were main tenets of PCI’s Milliman actuarial analysis conducted in 2007.
Lawmakers also passed House Bill 1171, sponsored by Rep. Bill Proctor (R-St. Augustine), to allow certain insurers to use rates in excess of the otherwise applicable filed rate. As passed, only insurers with at least $150 million to at least $500 million in surplus can participate. Gov. Crist ultimately vetoed this measure. As a trade association that represents the greatest cross-section of property insurers, we find that HB 1171 highlighted a very important debate among lawmakers about the future of rate regulation in the Florida market. While we continue to advocate for a level playing field for all insurers to have access to this level of rate flexibility, we commend the fundamental shift in debate that calls for a market-based system dedicated to the consumer’s right to choose.
In 2010, PCI will work with lawmakers to continue their good work and pursue additional reforms to the Florida property insurance system to reduce the risk on the state and all taxpayers. Lawmakers, consumers, insurers, and businesses must together address the fundamental problems in the Florida market to bring more choice and competition to consumers with a healthy and competitive insurance system.
Florida Session Adjourns; PCI Commends Legislators for Taking Positive Steps in 2009 (PCI News Release)
Restoring the Private Property-Insurance Market to Reduce Florida’s Risk of Financial Insolvency (The James Madison Institute)
A Unique State with Unique Insurance Problems
Texas
Reforming the Texas Windstorm Insurance Association (TWIA) was a top priority this year for the Texas Legislature, Gov. Rick Perry and insurers. On June 23, Gov. Perry signed House Bill 4409, which fixes many of the problems associated with TWIA to help ensure the state is able to prepare for and recover from catastrophic events.
TWIA, the state's property insurance provider for the high-risk buildings along the coast had been woefully underfunded as its rates were historically too low to cover its exposure. Following Hurricane Ike in 2008, TWIA reserves had been depleted, leaving the state-backed insurer dangerously vulnerable and putting all Texas citizens at risk if a major storm strikes.
The TWIA funding crisis was a key component of HB 4409 and was an important step toward improving the state’s insurance market. The landmark legislation establishes a more rational plan for the growth of TWIA reserves and premiums and stops unlimited assessments on insurers that together will encourage a healthier marketplace. Additionally, it will move TWIA to a more actuarially-sound rating system but will not implement an immediate rate hike for coastal policyholders.
Texas Legislature Adjourns; TWIA Reform Progresses (PCI News Release)
Windstorm Insurance Bill Sent to Perry (Austin American Statesman)
Educational Resources
Wharton School of Business: Managing Large Scale Risks in a New Era of Catastrophes
Georgetown University: Coastal Disaster Insurance in the Era of Global Warming
Links
South Carolina Safe Homes Program
Institute for Business & Home Safety's DisasterSafety.org
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