Insurance subsidies for risky coasts.

In our recent research in South Carolina we frequently were told about state initiatives that make it more attractive for insurance companies to underwrite risky property (especially coastal property).

Here is a new Mississippi program. These quotes are from The Clarion-Ledger:

• "The Legislature has sent a bill to Gov. Haley Barbour to be signed into law that would let the state supplement the "wind pool" that covers the most at-risk coastal properties in the state. But if homeowners from Vicksburg to Meridian to Iuka see that their homeowners' insurance premiums under this bill are being used to offset higher premiums on the Coast, their howls could rival a hurricane's."

Hurricane Katrina was the trigger for this initiative.

• "House Bill 1500 [allows] insurers to recoup losses in major coastal disasters from policyholders across Mississippi, not just the Coast. The state's insurer of last resort, the Mississippi Windstorm Underwriting Association, or "wind pool," will receive an $80 million subsidy under HB 1500 - $20 million annually over four years from the state's premium taxes to lower rates until the insurance market stabilizes."

The Omaha World-Herald reported on a meeting which sheds much broader light on the coming insurance crisis. The story was written by Steve Jordon and appeared on Mar. 29, 2007.

• "Troubles in the insurance industry are a harbinger of greater economic and social threats ahead for a planet whose climate is warming, Nebraska's insurance commissioner said Wednesday.
• "The thing is so enormous it's hard for people to get their hands around," said Tim Wagner, who heads the Nebraska Department of Insurance and a national task force of officials studying the impact of climate change on insurance.
• Insurance, he said, is like the canary that coal miners carried with them to warn about dangerous gases. "Our canary isn't dead yet, but it isn't singing anymore," Wagner said.
• That means insurance companies are charging much higher rates, requiring bigger deductibles and seeking taxpayer subsidies to cover homes and businesses in coastal areas. But the impact won't be confined to the 50 percent of the population that lives within 70 miles of the coasts, he said."

Well, there it is. A huge problem. A very complex and controvertial problem. A very "political" problem as well.

We at SEAS L.L.C. feel that insurance is the "Rosetta Stone" of the future of coastal areas and is for us one of the most complex and interesting areas on which to work.

A great source of information on this concern is the Insurance News Net. Go to the following web page for a very useful article "Coastal Insurance Concerns Demonstrate Need for New Catastrophe Solutions." This is a quote from the story:

• "June Holmes [Property Casualty Insurers Association of America (PCI) CEO] * pointed out that a one-size fits all approach is not likely to work given the diversity of coastal markets. "Conditions in Florida are unique from any other state," said Holmes. "Over 80 percent of the insured property in Florida is located along the Gulf and Atlantic Coasts and the total value of insured property there is nearly $2 trillion and growing. Florida is the most hurricane-prone state in the U.S., accounting for roughly half of the total U.S. annual aggregate storm losses. The solution to market disruptions in Louisiana, South Carolina, or Massachusetts will look much different from one crafted by Florida legislators. That's why we [PCI] favor a state-by-state approach backed up at a very high level by federal liquidity protection."

http://insurancenewsnet.com/article.asp?a=top_pc&q=0&id=77248

* PCI is composed of more than 1,000 member companies, representing the broadest cross-section of insurers of any national trade association. PCI members write over $194 billion in annual premium, 40.1 percent of the nation’s property/casualty insurance. Member companies write 51.3 percent of the U.S. automobile insurance market, 39 percent of the homeowners market, 32.1 percent of the commercial property and liability market, and 38.7 percent of the private workers compensation market.