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Major hurricane could drown insurance industry

Posted September 23, 2008

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— Although North Carolina has fine-tuned its emergency response over the years to prepare for a hurricane, insurance industry officials warn the state could be swamped by claims of coastal damage if a major storm hits.

When Hurricane Ike roared ashore in Texas 10 days ago, that state's coastal insurance pool had more than $2 billion in reserve. Insurers estimate claims from Ike will more than double that, meaning companies and policyholders across Texas will likely make up the difference.

Joe Stewart, executive director of the Insurance Federation of North Carolina, said North Carolina could face a similar predicament unless changes are made to shore up the system.

"For those of us that don't live on the coast, we don't want to have to subsidize those rates on the coast," Stewart said.

The so-called "beach plan," which covers much of the coast, couldn't handle a wave of claims if an Ike-sized storm hit North Carolina, he said, noting property covered by the plan jumped in value from $18 billion to nearly $70 billion in five years.

"The numbers have gotten so big that, in the aftermath of a significant event, we could see companies going under. We could see people having trouble in non-coastal areas getting coverage," Stewart said.

The solution must include higher insurance rates, he said.

"The beach-plan pricing has not been driven by the real risk of what's being insured on the coast," he said.

Rose Vaughn Williams, counsel for the state Department of Insurance, acknowledged the coastal concern needs to be addressed, but she said she doesn't necessarily buy the industry's dire forecast.

"It's always difficult to compare North Carolina," Williams said. "It's a complex issue in trying to balance the need of consumers for affordable home insurance with the need, at the same time, to have a viable coast property insurance market."

A special legislative study commission has been formed to take a closer look at the coastal insurance system. The group's first meeting is next Tuesday, and Insurance Commissioner Jim Long, industry experts and lawmakers are all expected to be at the table.


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  • Me again Sep 24, 2008

    Since global warming is increasing the sea levels I've always thought that Al Gore and John Edwards should sell me their beach property for 10% of it's value.

  • WRAL is joe_dirt Sep 24, 2008

    Merely another EXCUSE and not a real REASON to increase premiums.

  • lgboro Sep 24, 2008

    And the First Lady of NC deserves and earns one of the highest salaries in NC for taking excessively expensive trips on taxpayer money. I sure trust the oil and insurance industry to be honest and not gouge the wage earning citizens of NC and Sleasly to oversee with a commission to "protect" me. Besides, this will protect the chillins of the rich.

  • afairlane500 Sep 24, 2008

    I guess they're hedging on a bailout as well like all the rest.

  • chfdcpt Sep 24, 2008

    Wait, here it comes.....

    But what about the children? Don't you realize how devastated they will be if their beach house is washed away? What that will do to their sense of security and esteem?

    And what about our college children? How will this impact their psyche to the point that it may affect their educational pursuits?

  • djofraleigh Sep 23, 2008

    Wrong location, part of state, part of town, kind of business (bar), and all should be determined by fact: tables showing risks.

  • Madonna Sep 23, 2008

    Oh how I lose sleep at night thinking about a Raleigh dentist losing his vacation villa at the beach. No bailout here!

  • makeitright Sep 23, 2008

    another joke Rake in billions in premiums and at the first hint of having to pay out a dime, cry poverty. If they don't keep enough money to coer their obligations to their insured, then they should be up for criminal charges like the rest of the crooked company execs out there making sure their pockets are well lined.

  • chargernut69 Sep 23, 2008

    wow... what a concept... charge more for those people that have their houses wash away with every hurricane.... I think that's a no brainer!

  • davidgnews Sep 23, 2008

    Insurance, autos, pharmaceuticals, even big oil - there's no one we can't bail out after this round !!!

    When will we be told it's 'the patriotic thing to do?'