N.C. Beach Plan Reform Progresses Through Assembly

NU Online News Service, July 15, 2:08 p.m. EDT

North Carolina lawmakers have moved a step closer to passing legislation aimed at making the state's Beach Plan solvent for the future.

Yesterday by a vote of 89-27 the Assembly approved on second reading changes recommended by a study committee to make the residual market property insurance plan solvent in the case of a major hurricane wiping out its surplus.

The bill (H1305) now awaits approval on a third reading before it can go to the state Senate.

Under the legislation, insurers underwriting property insurance in the state would be responsible for assessments for the first $1 billion in losses to the plan in a year. Above that cap, insurers would be allowed to recoup the losses subject to approval by the state's insurance commissioner.

An amendment to increase the cap on insurers to $2 billion was defeated yesterday, but a legislative source said it could gain support during the third reading or in the Senate.

In a statement, Raymond G. Farmer, Southeast regional assistant vice president for the American Insurance Association, said the bill does not clearly state the absolute cap insurers will be assessed for losses incurred in one year. The bill also needs to clearly lay out the Beach Plan's liabilities for payment.

"Once these remaining issues are addressed, AIA believes H1305 has the potential to return the Beach Plan to its original purpose as a market of last resort, while also encouraging private insurance capital to compete for customers," said Mr. Farmer.

Lynn Knauf, regional manager for Property Casualty Insurers Association of America, said, "PCI supports reform of the Beach Plan as key to assuring that the North Carolina insurance market is prepared to respond to a hurricane and to assure market stability for policyholders statewide."