Coastal Insurance Bill Passed In S.C.

The South Carolina Senate gave final approval today to the insurer-supported Omnibus Coast Property Insurance Reform Act.

Joel Sawyer, a spokesman for Republican Gov. Mark Sanford, said the governor will sign the bill, which probably will not reach his desk until next week.

The Property Casualty Insurers Association of America (PCI) said the governor and legislature, by moving the measure, were "advancing a positive agenda of reform that in the long run will strengthen the state's coastal insurance market."

Among the items in the bill (HB 3820) is a provision for a limited expansion of the South Carolina Wind and Hail Underwriting Association, as well as a requirement that it be the "market of last resort" and not offer rates competitive with the private market.

It puts into law a Department of Insurance order that expanded for two years the territories available for coverage through the windpool.

Additionally, the bill would let insurance policyholders create special tax-free catastrophe savings accounts for payment of a home policy windstorm deductible.

Provisions also grant special tax credits for a homeowner retrofitting a house to make it more resistant to "hurricane, rising water or other catastrophic wind event."

In addition, the measure prohibits an insurer from non-renewing a policy during hurricane season without 90 days notice, and allows a consumer 30 days to appeal a non-renewal.

Robert Herlong, vice president and regional manager for PCI, said the legislation contains "promising steps that could help provide stability to the state's insurance market."

PCI, he said, believes "this effort is the type of innovative thinking that is needed to attract capital to the state. South Carolina appears to be on track with a well-reasoned approach, rather than a quick-fix solution that could ultimately be counterproductive."

In PCI's view, a key part of the long-term solution to natural catastrophe exposure is to expand private-sector capacity to handle the risk, and the organization backs efforts to make markets more responsive to risks.

Mr. Herlong praised the provisions dealing with mitigation, saying that "roughly one dollar spent to better protect a property results in four dollars saved following an event."

He said "the approach outlined in this bill and several being considered at the federal level would give homeowners themselves additional incentives to make improvements, and would save many dollars later in disaster assistance and other government programs. These are the efforts that truly help to bring down the cost of insurance."

The South Carolina action is at sharp variance with legislative moves in Florida, where the state's disaster fund was expanded to sell discount reinsurance and insurers were required to reduce rates as a result.

Alex Sink, Florida's chief financial officer, said the move has left the fund under-reserved, and that the state's insurer of last resort, Citizens, was expanded to take on more risk that was actuarially unsound.

Des Plaines, Ill.-based PCI is composed of more than 1,000 member companies.