North Carolina Beach Plan Bill Moves Closer to Governor's Desk

Reforms to the state-run North Carolina Beach Plan -- which includes a $1 billion cap on assessments to the state's insurers -- was passed by the Senate Commerce Committee as well as the full Senate and now heads to the House for final passage before being sent to the governor.

Currently, there is no limit on assessments that could be levied on private insurers following a storm, drawing into question some insurers' solvency should a large storm strike North Carolina. The legislation, HB 1305, looks to cap the assessments on private insurance companies and it would allow a 10% surcharge on all policyholders in the plan should losses from a storm go beyond what the Beach Plan and private insurers have (BestWire, July 13, 2009).

The National Association of Mutual Insurance Companies said in a statement that provisions in the legislation restore the Beach Plan, or North Carolina Insurance Underwriting Association, to the insurer of last resort, allowing it to establish rates that match the risk and do not compete with the private market.

"This is not a perfect bill, but it does improve a system that is in dire straits," said Liz Reynolds, Southeast state affairs manager for NAMIC.

The Property Casualty Insurers Association of America and the American Insurance Association have supported the bill, calling it a step in the right direction for North Carolina (BestWire, July 15, 2009). PCI has said the cap could still cause solvency concerns for smaller insurance companies. The bill would also limit the amount of coverage the Beach Plan could write from $1.5 million to $750,000, said PCI. Homeowners with homes valued higher can still get insurance through the plan, but would need to turn to the private market for the remainder of coverage they need (BestWire, July 13, 2009).

The Beach Plan, the state-run insurer for 18 coastal counties, covers about $70 billion to $74 billion of property and pockets about $1.5 billion to $2.5 billion in cash and reinsurance to pay claims. The Property Casualty Insurers Association of America commissioned an examination by actuarial group Milliman Inc. late last year, which concluded the Beach Plan is growing at a rate of about $1 billion a month and could face a $6.2 billion deficit if a large storm (1-in-250 year scenario) strikes (BestWire, May 26, 2009).

In 2008, the top five writers of homeowners multiperil insurance in North Carolina, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with an 18.9% market share; Nationwide Group, with 15.7%; North Carolina FB Insurance Group, with 13.0%; Allstate Insurance Group, with 9.9%; and Travelers Group, with 5.3%.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)