The NC Beach Plan will likely become insolvent when the next major storm hits the NC coast.  In my part I article on this topic I explained just how and why this crisis has developed.  This part II article tells you what you can and must do now to protect yourself from being swept up in this disaster.

When insurance companies doing business in NC begin to renegotiate their July 1 reinsurance contracts, they will discover that they are no longer able to purchase insurance for Beach Plan assessments that will hit them when the next big storm hits the NC coast.  They will then begin to scramble to lessen the impact of this potential assessment.  There are three ways that they can do this:

1. Work to have the laws in NC changed so that the insurance companies do not have to carry the losses that will be incurred by a Beach Plan that has not lived within its means…
2. Reduce the number of homeowners insurance policies that they write in NC…
3. Increase the rates on homeowners insurance policies in N.C.

How each company reacts will be a direct function of their market share.  It is estimated by some experts that the assessment from a category 3 storm strike could be as much as $5 million per 1% market share.   The largest homeowner insurance provider in NC is estimated to have a market share of nearly 25%.  That means this company is facing potential assessments of over $125 million!  So the companies with larger market share are likely to do everything that they can to reduce their market share.  This means you will see companies raising rates, applying high percentage deductibles and non-renewing policies.  Already in NC we are seeing companies require that consumers place their auto insurance with them in order to write a home policy.  Some companies are planning to stop writing new home insurance policies in NC altogether until this crisis is settled.

The flip side of this is that some companies with very low market share in NC may take this opportunity to increase their homeowners policies.  If they go from .25% market share to .5% market share, they can double the number of policies that they write and only increase their assessment risk by about $1.25 million, a price that many could afford.

So what can you do?  Here’s my quick list for the steps you can take to protect yourself from getting swept up in this mess.

1. Contact your state legislators and ask them to work to solve the Beach Plan crisis.  The rates for those owning beach property must be increased, perhaps as much as 1000%.
2. Make sure that you are not insured with one of the insurance carriers with the largest market share as they will be the most impacted.   The top 3 in NC are: Nationwide, Allstate, then State Farm, in that order.  Each of these companies will have a heavy burden in assessments when the big one hits.  One of these companies is already asking their customers to sign “consent to rate” forms prior to renewal that allow them to charge rates above the rates that they filed with the NC insurance department.  This is a big warning sign and should be a red flag to anyone who insures their home with this company.
3. Place your home insurance with a company with low market share.  They will be the most flexible when times get hard and they will be most able to keep writing home insurance and the least likely to send you a non-renewal notice.
4. Put your home and auto insurance with the same carrier.  This will give you the best rate and it will also give you more clout with that insurance company since you will be a bigger client for them.
5. Use an independent agent.  Agents that are direct writers and only represent one insurance company like the big 3 mentioned above will not be able offer you an alternative if they close their doors for homeowners insurance.  It is better to establish your relationship with an agent and a company before the market tightens up.

At Clinard Insurance Group we are an independent agency and represent many companies.  Some of our companies have low market share or large surplus and they will be able to weather this homeowners crisis very well.   If you would like to know more about us and how we can help you keep your home insurance intact, please call us toll free at 877-687-7557 or visit us on the web.

In North Carolina there is a major homeowner insurance availability crisis brewing and recent actions tell us that this crisis is about to reach a tipping point.  By this time next year many people may have trouble finding insurance for their home…  at any price.

It doesn’t take much to read the tea leaves on this one.  But if you aren’t looking you will miss it.  And since no consumers are looking, let me shine a light on this one for you.

Unless you are lucky enough to own a beach house, you probably have never heard of the Beach Plan, or its formal name:  The N.C Insurance Underwriting Authority.  The Beach Plan is a quasi public insurance program of last resort to insure the wind and hail exposure of homes in 18 counties on the NC coast.   You see, insurance companies have had all the losses they can stand from hurricanes and tropical storms on the coast so they have pulled out of these counties.  The Beach Plan is now holding the bag on 99% of the wind and hail exposures on our coast.

The problem is that the Beach Plan is under funded.  They don’t have anywhere near enough assets to pay the losses of a major storm or hurricane.  Here are some numbers: As of last August the Beach Plan was insuring $75 billion in coastal property.  Some experts estimate that their exposure has been increasing at $1 billion a month since then.  The Beach Plan currently has $650 million in the bank as surplus against a large storm and they have purchased another $1 billion in reinsurance coverage.  So you can see, they have funds available for $1.6 billion of losses but they are insuring over $75 billion.  One big storm and poof, no more money to pay claims.

So right now you are probably thinking, “I don’t have a beach house so I guess it’s not my problem if the Beach Plan goes belly up”.   But if you think that, you couldn’t be more wrong.  You see, the Beach Plan, as a governmental organization, has a little trick up its sleeve.  The have the power of assessment.   What does that mean?

In NC, every insurance company who sells homeowners insurance policies in this state, can and will be assessed for any Beach Plan shortfall according to their market share in NC.  That means your insurance company (no matter who you purchase from) is vulnerable to being assessed by the Beach Plan for losses the Beach Plan may experience due to a storm.   And now these assessments are estimated to be over $5 million per 1% market share.  That will be enough money to put many insurance companies out of business.

In the past, insurance companies have been able to purchase insurance to protect them if they were to be assessed.  As of July 1^st this year, that will most likely no longer be available.  Faced with the risks of crippling assessments in the event of a category 3 or higher hurricane, most companies are waking up to the fact that they have to make changes and either raise their rates or reduce the number of homeowners policies that they have in NC or both.  Many homeowners in NC  will begin to receive non-renewal notices from their insurance companies and when they try to find a new company to insure them, they will experience much higher rates or in some cases, no insurance availability at all.

So what can you do to protect yourself from this looming crisis?   At Clinard Insurance Group we have a number of strategies we are already implementing to protect our clients from this crisis.  Watch for part II of my blog for specific tips and tricks you can take now to protect keep yourself from being swept up in this homeowners insurance disaster.