A North Carolina House committee seeking a fix for an underfunded coastal insurance program has backed cutting the current coverage maximum of $1.5 million per home by half.
The House Finance Committee rejected a bid to retain the current limit the Beach Plan would pay for primary homes in the 18 coastal counties where the plan is a vital insurance provider.
Instead, it preserved a provision reducing the state-created plan’s per-home insurance limit to $750,000. The proposal should move on to a vote by the full House this week.
In doing so, the committee followed the recommendation of a blue-ribbon committee that studied the Beach Plan’s solvency after a disaster.
Advocates said the $750,000 maximum also would keep inland residents, who could ultimately be asked to pay for catastrophic losses, from feeling they were asked to protect millionaires.
“If you’re asking blue-collar people who are out there working for $15 or $20 an hour to subsidize people who can afford millions for a home, I don’t see the equity in that,” said Rep. Curtis Blackwood, R-Union.
The Beach Plan has property insurance liabilities valued at nearly $74 billion, but its resources top out at about $2.4 billion. That includes $1 billion in extra assessments on all the state’s property insurers.
As of last November, nearly 22,000 out of 166,000 residential buildings the Beach Plan covered in its 18-county coastal region were valued at $700,000 or more, according to its figures.
If the Beach Plan’s claims surpassed $2.4 billion after a massive hurricane or tough storm season, proposed legislation would allow the state insurance commissioner to tack an extra charge on every property insurance policy in the state.
The maximum surcharge allowed after such a disaster would be 10 percent on top of each policy’s annual premium, or about $5.40 a month for an average $650 annual homeowners policy, for as long as it takes to pay off claims.
Hitting $2.4 billion in claims to Beach Plan-insured properties would equal the loss from hurricanes, other wind storms, and hail for the entire state between 1992 and 2005, according to the state Insurance Department.
North Carolina was hit by hurricanes in five out of those 14 years. The 18 county coastal zone accounted for about a third of that damage, the agency’s analysis said.
Insurers are desperate for the reform package, which would cap their additional liability to the Beach Plan at $1 billion a year.
Homebuilders and real estate agents have fought to keep the Beach Plan’s coverage limit at $1.5 million per home, knowing cutting that in half would make it more costly to insure expensive coastal homes and make them less attractive to buyers.
“I believe that the larger the home the better for our economy,” Rep. Dewey Hill, D-Columbus, said in pushing an amendment to keep the $1.5 million limit.
Beaufort County, with its two rivers flowing into the nearby Pamlico Sound, depends on its waterfront views to draw new residents as one of its most dependable economic drivers, county economic development director Tom Thompson said.
The higher coverage limit “encourages people to come and retire to Eastern North Carolina,” he said.
Cutting the Beach Plan’s coverage limit to $750,000 per residence will put some coastal homeowners into financial trouble, said Rep. Bill Owens, D-Pasquotank.
“You’re going to put a lot of these people into foreclosure,” he said.
His plea didn’t sway the bill’s sponsor, House Majority Leader Hugh Holliman, D-Davidson.
“Anybody who’s got a million-and-a-half-dollar house can go out there and get any kind of insurance they want to,” Holliman said.
Topics North Carolina
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