Homeowner insurance rates to soar along NC coast

Homeowners on the North Carolina
coast face drastically higher insurance premiums under an agreement
announced Thursday as the state tries to prepare for the cost of a major
hurricane. Insurance Commissioner Jim Long said the agreement with insurance
companies allows an average statewide increase of about 4 percent. But premiums
will soar on the coastline, with some areas facing increases of nearly 30
percent. A state-sanctioned insurance program, the Beach Plan, some $72 billion
worth of property along the coast but may not have the resources to cover losses
should a major hurricane strike. State officials have allowed coastal insurance
increases in the past with hopes that more companies may begin offering policies
there. Long said a few may do so after the new rate increase, but he's not
counting on it. "It hasn't happened all the other times," Long said in an
interview. Instead, Long said the rate hikes will improve the financial status
of Beach Plan, which was first created in 1969 to provide wind damage insurance
to homeowners on North Carolina
barrier islands who couldn't obtain coverage on the open market. The program has expanded over the years to more counties and situations and now includes 170,000 coastal properties. Lawmakers want it to return to its intended purpose: to serve as an insurer of last resort.
The Beach Plan currently charges premiums that are 5 percent or 15 percent above what
regular insurers can offer, depending on the policy. Under a previous
announcement, that gap will rise to 15 percent or 25 percent above what regular
insurers can offer. So some property owners in the Wilmington area could see
premiums jump 30 percent under Thursday's announcement and an additional
increase under the agreement to boost the Beach Plan margin to 25 percent.
Meanwhile, areas on the western side of the state could face lower premiums:
Charlotte homeowners will see premiums down 4 percent. "There are going to be a
lot of North Carolina people
who are going to get crushed by this," said Rep. Bonner Stiller, R-Brunswick.
The insurance industry had initially proposed seeking an average statewide rate
increase of 19 percent but backed off the idea when Beach Plan leaders increased
the premiums. A General Assembly committee studying the issue also met Thursday
to discuss improving the financial health of the Beach Plan. Committee members
proposed a surcharge in the event that a catastrophic hurricane depleted the
state's money but agreed to revisit the idea after discussing it further. The
Beach Plan would charge hundreds of millions of dollars in assessments to the
insurers in the case of a major hurricane. Those costs often get passed along to
homeowners outside of the coastal area. But the companies are worried because
the assessments aren't capped. In the event of an even larger disaster, the
state may lean on companies to foot the remainder of the bill, threatening the
health of the companies. Encompass Insurance, a division of Allstate Insurance,
has said it won't write any new homeowner policies in North
Carolina because of those
concerns.