| Understanding Wind Pool
I know it's more fun to pay attention to national and international happenings, but I found this breakdown of a rather confusing issue here at home and thought I would share it with you all. It's so important that we kkep on top of the redevelopment of the coast...this is our home.
The wind pool
The state insurance wind pool was created in the 1960s in an effort to provide wind coverage in areas in the six southernmost counties where companies didn't want to write policies because of hurricane risk. Home and business owners pay premiums into the pool. When damage exceeds the money collected in premiums, the more than 500 companies that do business in the state have to pay the difference. The companies have had to cough up more than $545 million in wind pool losses from Katrina. Since 1987, the wind pool has taken in $188 million in premiums and paid out $778 million. After Katrina, wind pool premiums were jacked up 268 percent for business owners and 90 percent for homeowners. The hikes would have been worse if Gov. Haley Barbour had not secured $50 million in federal funds to reduce the increase. Even with the drastic increases, more people are flocking to the wind pool, worsening its financial lopsidedness and risk, because private companies are refusing to write policies on the Coast.
The crisis:
Private insurance companies are halting their policy-writing on the Coast, and as people and businesses flock to the wind pool as their only alternative, it becomes more financially unsound, with its total insured value skyrocketing from less than $2 billion pre-Katrina to about $6 billion today, lacking the wherewithal to pay losses if another hurricane hits. A recent, 268 percent wind pool rate increase for commercial policies, Coast leaders say, has all but halted Katrina business redevelopment, and a 90 percent rate increase, and lack of availability of private insurance, are thwarting homeowners' rebuilding efforts.
The proposed solutions:
• Remove George, Pearl River and Stone counties from wind pool eligibility, allowing only Hancock, Harrison and Jackson county people to buy the insurance. This was pitched for the first time by the state insurance commissioner on Thursday.
• Allow "recoupment" for insurance companies. This would allow them to tack a charge onto premiums, statewide, for three to five years to recover losses after a hurricane as long as they stay and write policies in the six South Mississippi counties.
• Allow the wind pool to reinvest any surplus at the end of the year instead of distributing it to member insurers as it does now.
• Provide tax credits and incentives for insurance companies and for customers who hurricane-proof their homes. State Rep. Jessica Upshaw, R-Diamondhead, has also proposed a tax break for people and businesses who are socked with huge increases in insurance premiums.
• Make excess- and surplus-line insurance companies, who aren't required to be in the wind pool, pay a 1 percent fee.
• Allow higher deductible options - voluntary, not mandatory - for policyholders in the wind pool. This would let them pay lower premiums.
• Encourage wind mitigation techniques by offering premium discounts.
• Pump state and/or federal tax dollars into the wind pool, to provide temporary relief from large rate increases. A House bill proposes to provide $30 million, and apparently has sufficient votes to pass, but House leaders declined to call it up for a vote Wednesday and Thursday. |