HOMEOWNERS

INSURANCE:

A COASTAL

PERSPECTIVE

Tyler Newman

Governmental Affairs Director

Business Alliance for a Sound Economy (BASE)

www.ncbase.org

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Cameron Moore, AICP

Governmental Affairs Director

Tyler Newman

Governmental Affairs Director

BASE represents numerous independent businesses and the

members of the Brunswick County Home Builders Association, the

Brunswick County Landowners Association, the Topsail Island

Association of REALTORS®, the Jacksonville Board of

REALTORS®, the Pitt County Economic Development Partnership,

and the Wilmington-Cape Fear Home Builders Association.

HOMEOWNERS POLICY

Perils Covered:

WIND/HAIL POLICY

NCIUA/NCJUA (Beach Plan) or Private Market

Beach Plan Policy Distribution:

-71% Beach Area (east of AICWW)

-37% Coastal Area (Coastal Counties)

-13% Statewide

Property Insurance

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One Inland Example

HOMEOWNERS WIND

2009 $385

2010 $382

2011 $438

2009 $1345

2010 $1245

2011 $1484

• 1992, Brick

home

• 5 miles inland

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Comparison?

WILMINGTON RALEIGH AREA

HOMEOWNERS: $438

WIND/HAIL: $1484

$1922

*Situational: credit rating,

coverage amount, deductible,

package credit

HOMEOWNERS: $460

WIND/HAIL: $0

$460*

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Wind Losses Are Statewide

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Property Insurance Continues To Increase

Effective May 1, 2009, 63 Counties in North Carolina saw homeowners

rates increase.

Rate Increases range from 2%-nearly 30%

Mainland New Hanover, Brunswick, Pender, Onslow and Carteret Counties

homeowners insurance rates increased roughly 30% and 17.5% for the

barrier islands.

Historical Perspective:

Coastal homeowners got increases every rate cycle since 1992--including

2005 and 2007. Charlotte area rates remain unchanged since 1992.

Over the last 6 years, the Department of Insurance estimates that

homeowners insurance rates in the Beach Plan beach area have increased

90% and rates in the Beach Plan coastal area have increased 65%.

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2009 Homeowners Rate Case Increases

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2011 Dwelling Fire and Extended

Coverage Rate Case

Impact: 395,000 non-owner occupied properties

across NC--properties that would not qualify for

standard homeowner policies (rental, investment, etc.)

Important fact: Commissioner held a “contested case,”

enabled public input

First Rate Case since 1992, required months of

testimony and analysis. BASE testified January 2011

December 2012: Commissioners order decreasing fire

7.3%, denied request to raise extended coverage by

36.1%

Appeal? TBD or rates take effect in May

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HB1305-Omnibus Beach Plan Changes

Most critically, ensures financial

stability of the Beach Plan (retaining

surplus in the Plan--$41 million out in

2006)

In the event of a loss to the Beach Plan,

creates $1B assessment to Insurance

Companies before statewide

assessments (effectively $4 Billion

damages before statewide impact).

Previously this amount was a critical

unknown which impacted their ability to

quantify their risk in NC.

Protects policyholders statewide by

providing financial stability for the plan

which should encourage insurance

companies to stay in North Carolina and

continue to write policies statewide

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BEACH PLAN FINANCE STRUCTURE

$750 Million Reserves, Surplus

$2.25 Billion Reinsurance

(Cost: $221 Million in 2011)

$1 Billion Insurance Companies Assessment

$4 Billion Total

2012 Legislative Recommendations

Legislative Research Committee on Property Insurance Rate Making

-Pursue North Carolina Rate Bureau territory changes with a report for the 2013 session

-Requiring the Department to accept public comments prior to a notice of hearing in a property

insurance rate filing

-Enabling insurers to offer a residential fire policy that excludes wind to those property owners

willing to assume the risk for wind losses, also providing for residential property insurance without

coverage of windstorm or hail

-Enabling the Commissioner to have more flexibility and discretion in the rate making process,

selecting the appropriate rate based on the evidence and potentially enabling an order to decrease a

rate

-Providing more information about models used in rate filings, specifically simulated loss and

requiring data from more than one catastrophe model

-Requiring more information on the costs of reinsurance

BASE will continue to actively pursue more realistic mitigation credits to new structures that meet

Building Code and retrofits to existing structures

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On The Horizon Legislative Research Committee on Property

Insurance Rate Making

The report also identifies items to be pursued via

further study:

-Tax free bonding proposal to mitigate reinsurance

costs

-Catastrophe fund

-Reforms to the current rate system

-Tax credits for insurers writing new coverage in

coastal areas

-Etc.

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UPCOMING:

-Legislative Short Session

-2012 Homeowners Rate Filing