Ala. Legislation Offers Insurers $2.5M to Take Wind Risk

Updated: 4:52 p.m. EDT

NU Online News Service, March 19, 3:32 p.m. EDT

An Alabama representative is proposing to offer a $2.5 million incentive to insurers that remove wind risks from the state’s assigned-risk pool.

The legislation, introduced earlier this month by Rep. Randy Davis, R-Daphne, is one of a series of measures the state’s legislators have introduced to reduce exposure in the Alabama Insurance Underwriters Association (AIUA).

It a story reported by The (Mobile) Press-Register, the fear is that the AIUA has grown too large to handle a major catastrophe, which could result in assessments to insurers that would ultimately be borne by policyholders. South Alabama legislators are considering ways to bring more private insurers into the state and relieve the insurer of last resort of some of those risks.

Under Davis’ bill (HB470), which is co-sponsored by three other legislators, any domestic insurer with assets of more than $100 million that agrees to remove 1,000 policies from the plan over a 12 month period would receive the incentive.

Failure to acquire the policies will result in repayment of 50 percent of the funds.

A domestic company with less than $100 million in assets will be eligible for the one-time lump sum payment of $2.5 million if it agrees to acquire at least 300 policies in a 12-month period. That company would be subject to the same penalties as larger insurers.

Depending on the success of the program, the legislation calls for continuation or expansion based on a report from the state’s insurance regulator.

Several legislators were non-committal about the success of passage of the bill.

Earlier this month, Davis introduced a piece of legislation (HB456) aimed at establishing catastrophe-savings accounts to cover insurance deductibles and other uninsured portions of risk for homeowners faced with windstorm events.

Chris Hackett, director of personal lines policy for the Property Casualty Insurers Association of America, says that the association is in favor of any government “incentive for insurers to take out business” from a state run homeowners program, typically known as the insurer of last resort, and place it in the private market.

These state companies were created when the private market was no longer willing to assume property risks, usually high-risk coastal areas.

“This promotes a healthy and competitive insurance market,” says Hackett, adding that states with small pools are a sure sign “of a health and vibrant market,” but he did not have recent figures indicating the size of Alabama’s homeowners assigned risk market is.

He notes that the Alabama plan is unusual because most states offer tax credits and not direct cash payments to take business.

“This is a more unusual plan, but it will definitely cause insurers to look at it,” says Hackett.

This story was updated at 4:52 p.m. EDT with comments from PCI

Page 1 of 2
Comments

Resource Center

View All »

Contractors General Liability Coverage 102

What is a prior work exclusion? Which option is right for my client? Why do...

Sign up today to get a 50% matching credit -...

Insurance marketing sometimes seems like it's a game of swings and misses, but we're here...

Guide: 5 Steps to Selling Cyber

Cyber risk and data security is on the agenda of every business owner and executive....

Citation Correlation

Do rigger and signalperson qualifications correlate with the cause of crane and rigging accidents? ...

Complete Guide to Electronic Signatures in Property & Casualty Insurance...

In property and casualty insurance, closing new business quickly is key. Learn how to leverage...

INSTANT ACCESS: Complimentary Sales Closer Questionnaires

Help property owners or managers compare your commercial residential property insurance coverage vs. the competition....

Determining Vacant Property Perils and Valuations

Are your clients fully covered for Vacant Properties? In this economic climate, your insureds may...

Risk Management for Law Firms

This package of 3 concise risk management articles offers straightforward content and practical suggestions law...

Guide: Top 15 E&O Risks-And How To Avoid Them

Accidents happen. But when it's an errors and omissions oversight, that accident can open your...

We'll Show You How to Reach Your Sales Goals

Whether you work alone or have a team of agents working for you, we can...

Personal Lines Pro eNewsletter

Critical insights into the personal auto, homeowners, and other consumer insurance markets to help P&C professionals stay informed – FREE! Sign Up Now!

Advertisement. Closing in 15 seconds.