North Carolina Beach Plan Reserves Under Scrutiny

The North Carolina Legislature has formed a committee to study the North Carolina Insurance Underwriting Association’s (Beach Plan) ability to respond financially to a significant hurricane landfall.

State Rep. Bruce Goforth, D-Asheville, co-chair of the House Insurance Committee, said the committee plans its first meeting around the end of September. It is required to report its findings no later than Feb. 1, 2009.

The committee will look at the potential impact of category 3, category 4 and category 5 hurricanes on the North Carolina insurance market.

Specific issues to be addressed include the ability of the Beach Plan and the North Carolina Joint Underwriting Association to pay claims, reinsurance purchases by the Beach Plan and the NCJUA, other potential financing options, assessments on the private market and options for recovery of assessments by the private market.

The committee will also look at residual market experience and assessment structures in other states as a basis for comparison, land use issues, mitigation issues, and may consider any other factors deemed relevant by the appointed study committee representatives.

Insurers are concerned that if a storm depletes the reserves of the Beach Plan this would result in massive charges to insurance companies and an almost certain rate increase for homeowners across the state.

Stewart says the Beach Plan has roughly $650 million in reserves — enough, when combined with its current reinsurance arrangements, to pay as much as $2.5 billion in losses.

“But that’s not nearly enough to cover the destruction a major storm could inflict on $75 billion worth of coastal property that the Beach Plan insures,” Stewart added.

Topics North Carolina