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With hurricane season meeting election season, the candidates to be North Carolina''s next insurance commissioner cite coastal insurance concerns as a priority, but neither is promising a quick or painless resolution.
The final weeks of the campaign are unfolding at the same time a special state committee is studying the ability of the North Carolina Insurance Underwriting Association (known as the Beach Plan) to respond financially to significant storm events. The Joint Select Study Committee on the Potential Impact of Major Hurricanes includes representatives from the Department of Insurance, Beach Plan, the North Carolina Joint Underwriting Association (FAIR Plan), the North Carolina Rate Bureau and representatives of insurance companies.
The committee''s mandate includes studying the ability of the Beach Plan to pay claims, reinsurance purchases, private market assessments, financing options and related issues. It is scheduled to report findings and recommendations by Feb. 1, 2009, shortly after the state''s first new insurance commissioner in a quarter century will take office.
While the plan holds approximately $600 million in reserves, with $1.1 billion in reinsurance, that is not nearly enough to cover losses from a truly catastrophic hurricane hitting the state, Democratic candidate Wayne Goodwin said. Coastal properties are currently valued at approximately $78 billion, he said.
"We need to re-examine how the Beach Plan operates in the state," said Goodwin, who is currently the state''s assistant insurance commissioner.
Both Goodwin and Republican John Odom say higher insurance deductibles may be necessary to increase reserves, with Odom calling them "a given" in any comprehensive solution.
Odom, a former Raleigh city councilman, said he has already discussed options for a multistate wind pool with officials from South Carolina and Georgia. Goodwin said he is also open to that option.
"If we can get more people in the system, we can lower the rates," Odom said.
Goodwin advocates tax incentives and rate discounts to homeowners for retrofitting and windproofing their homes. He also would ask for industry input on what incentives would help keep them writing homeowners policies in coastal areas.
In August, Farmers Insurance Group said it will stop writing homeowners insurance in North Carolina because it risks paying out about double what it collects in premium in the state (BestWire, Aug. 15, 2008).
The Beach Plan provides coverage for wind damage in 18 coastal counties. While not an arm of the state government, its operations are subject to review by the state insurance commissioner. All property/casualty insurers that do business in the state participate in funding the plan and sharing its profits or losses; the state mandates assessments in the event the plan''s reserves cannot cover catastrophic losses.
While the candidates agree on making coastal concerns a priority, and some steps toward addressing it, Odom said new leadership is needed to make changes happen. Like his assistant, whom he has endorsed, six-term incumbent commissioner Jim Long is a Democrat.
"It''s been ticking for a while, and no one''s doing anything about it," Odom said.
Goodwin said the Beach Plan "is in a better shape financially than it was in the past" but added, "We must reform our current plan so that we keep homeowners and commercial rates fair, reasonable and as low as possible, while maintaining sufficient reserves and necessary reinsurance."
Odom said a statewide publicity campaign is needed to educate residents and politicians from the western, inland part of the state that addressing coastal insurance issues is in their best interest.
"Everybody will pay unless something is done," he said.
As the Nov. 4 election approaches, Goodwin has had the wind at his back, according to a recent poll. Goodwin held a 41% to 34% lead over Odom, with Libertarian Mark McMains at 9%, according to a mid-September survey from Public Policy Polling. Goodwin said his campaign also is benefiting from a surprisingly competitive presidential contest in the state; with Barack Obama polling even with Republican John McCain, greater attention is being paid to other down-ballot contests.
"It''s a rarity, but North Carolina is in play," Goodwin said.
(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)
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