Rates for North Carolina home policyholders with Beach Plan, the state's insurer of last resort, are being jacked up to better the Beach Plan's ability to deal with major loss events, plan officials with the insurer said yesterday.
Their comments came at a meeting of the state's Joint Select Committee on the Potential Impact of Major Hurricanes on the North Carolina Insurance Industry.
The session was held to hear from insurance industry representatives as well as state and plan officials, about steps needed to make the Beach Plan (formerly called the North Carolina Insurance Underwriting Association) financially sound enough to handle losses from a major catastrophe.
Beach Plan officials informed the committee that they plan to increase rates charged to policyholders, which Kristin Milan, director of public information for the North Carolina Department of Insurance said today amounted to an overall increase of 10 percent. She said the department has approved the hikes.
Ms. Milan said Beach Plan rates for homeowners insurance would increase from 15 percent to 25 percent above maximum cap. Wind policies would rise from 5 percent to 15 percent above cap.
An increase in the wind deductible was also approved, going from 1 percent to 2 percent.
The maximum charge for personal lines policies in the state are set by the department, said Ms. Milan. Those rates have not changed since 2007, but the department is expecting the Rate Bureau to submit a request for increases sometime next week for homeowners insurance.
Under the current plan, the state's property insurer of last resort could run a $6 billion deficit in a worst-case storm season, according to a report from the consulting firm Milliman sponsored by the Property Casualty Insurers Association of America (PCI).
The report said the plan currently insures $70 billion of coastal property and has a capacity to pay $1.5 billion worth of claims.
"North Carolina has been extremely fortunate in the last year to have escaped the landfall of any major storm," said Robert Herlong, PCI vice president and regional manager, in a statement. "Now is the time to shore up the state's insurance system and give North Carolina homeowners the protection they deserve."
PCI presented a five-point plan under which the Beach Plan would return to its role as insurer of last resort; increase plan transparency; strengthen the plans financial resources; develop a plan to ensure the plan remains solvent after a major storm; and improve building standards to better withstand hurricanes.
The American Insurance Association submitted written testimony that backed up PCI's observations but called for an increase in deductibles equivalent to the private market (5 percent for beach policies and 2 percent for coastal policies).
AIA also suggested ways to induce private capital interest in insuring the marketplace through surcharges post event, for instance. Insurance rates need to be increased, AIA said, to promote plan self-sufficiency.
According to a legislative source, the committee, which has been meeting since October, is not yet ready to make any legislative recommendations on what should be done with the Beach Plan.
Any consideration would not come until after the state's Department of Insurance makes its feelings known on the issue, which is not expected until after the beginning of the new year. The committee is scheduled to hear testimony from the state's insurance department on Dec. 18.
Ms. Milan said the department has not yet decided on making any recommendations to the committee, but that might change after the Rate Bureau makes its filing.
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