State News

Beach insurance plan a tough balancing act for N.C.

Posted July 3, 2009

— A fight in the General Assembly boils down to east versus west. It's not the budget. It's the beach plan – a state-run insurance pool that offers homeowner's insurance to residents that some private plans won't cover.

It’s a complicated balancing act for the state. Coastal property owners want affordable coverage. Insurance companies want a viable market. And inland owners don't want to be on the hook if a hurricane hits beach homes.

The Beach Plan now covers about 166,000 homes in 18 coastal counties.

Its total liabilities, or properties it covers, are nearly $74 billion, but its ability to pay claims tops out at about $2.4 billion, including about $1 billion, which would be charged to dozens of insurance companies that do business in North Carolina but may not insure coastal property.

A bad hurricane season that pushes claims above that level would mean unlimited assessments against insurers.

State balances beach insurance plan State balances beach insurance plan

The resulting incentive has been for insurers to limit their business in North Carolina. And companies have dropped wind and hail coverage or raised it to levels above what the Beach Plan would charge.

“I think if we don't get these companies some certainty this year, that they will pull back even more,” said Jennifer Cohen, with the Insurance Federation of North Carolina. “So, even when the big one hits, there might not be enough insurance available to cover all of these claims.”

Like many who don't own property on the coast, John Davis of Bertie County is no fan of the proposed Beach Plan reform. Should an insurer's liability top $1 billion from coastal damage, policy holders across the state would shoulder a 10 percent surcharge on their insurance to cover the rest.

“To me, it's a matter of fairness and fixing the problem long term,” he said. “I see a Band-Aid, not a real solution.”

Davis says coastal growth and property values dwarfed insurance rates for years. Massive rental properties dominate the beaches, not primary residences. He said he doesn't think inland surcharges solve the problem.

“This risk is going to continue to grow out of proportion and the number of 10 percent will only get bigger,” Davis said.

Insurance Commissioner Wayne Goodwin acknowledges the newest Beach Plan isn't perfect, but added this caveat.

“If we don't act this year in terms of the legislative process we have, it could be two years before we have a chance to reform it again. That's two hurricane seasons,” he said.

Home builders said they are also not thrilled with the Beach Plan compromise. It caps coverage at $750,000 per property. The legislation cleared a house committee this week. Commissioner Goodwin said he hopes to get it through the House and Senate in the coming weeks.


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  • rlsmith5 Jul 3, 2009

    maybe everyone should ask Hugh Holliman Rep.from Davidson County why he is pushing this bill so much. He must have a big house there, special interest groups, or some high paying lobbyist he is supporting. Call his office in Raleigh and ask him to tell you why this makes sense. He won't even return your phone calls. If you got beach property pay for it and leave the rest of alone.

  • pmnbunn Jul 3, 2009

    My suggestion is pretty simple. If you can't afford the house and the insurance, don't buy the house. It isn't my responsibility to cover your taxes if you are dumb enough to build/buy a lavish house on a beach. I say dumb bc, seriously, you know the risks and I am smart enough to know that if I had that much money I could find many better ways to spend it. Pay your own bills.

  • SilverWolf Jul 3, 2009

    Here is a deal for the homeowners in coastal communities... we'll flip the 10% surcharge on their property in the event of a devastating hurricane. In return they can flip for 10% of our insurance needs the rest of the year.

  • miseem Jul 3, 2009

    Remember, even if a house is totally destroyed, the lot value is still there (unless on a true beachfront property, the sand washes away). If the cap covers the structure, even properties in excess of $1,000,000 are essentially 100% covered.

  • Myword Jul 3, 2009

    Egads! I have to agree with colliedave on something. Next thing you know dogs will be sleeping with cats. But yes, the Atlantic Ocean is reallly big and our sandbar islands are reallly small. SO STOP BUILDING McMANSIONS ON THEM! Actually 750K is too high-should be lower as it is in many other coastal states.

  • funstuffhere Jul 3, 2009

    Why should I, an "Indlander" who cannot afford a dwelling at the required to pay a 10% surcharge to cover those who CAN afford to live at the beach in the even of a frequent, destructive storm? Make the land or homeowners pay the extra coverage needed. Tack on the necessary insurance rates to THEIR mortgages. Either that, or simply raze the homes back down to dune level and cease to worry about the frequent hurricanes.

  • colliedave Jul 3, 2009

    Home builders said they are also not thrilled with the beach plan compromise. It caps coverage at $750,000

    Then don't build a home that costs more than that amount.