Southern governors hear from insurance execs on coastal coverage

Southern governors and insurance executives met late last month in Biloxi, Miss., about the challenges of keeping insurance coverage in coastal areas that are vulnerable to hurricanes, but they reached no consensus on how to best solve the complex problem.

Louisiana, which took a one-two blow from Hurricanes Katrina and Rita in 2005, is offering millions of dollars of incentives to insurance companies that will agree to start writing policies in the state, Gov. Kathleen Blanco said.

Mississippi, which saw thousands of homes and businesses wiped away in Katrina, is subsidizing its state-sponsored wind pool, an insurer of last resort that has seen its coverage expand exponentially since Katrina because private insurers are unwilling to write in some coastal neighborhoods.

Mississippi Gov. Haley Barbour said a stable insurance market is vital to the economies of all coastal states.

“As you know, if you can’t insure it, you can’t finance it,” Barbour said. “And normally, if you can’t finance it, you can’t build it.”

Brian MacLean, chief operating officer of Travelers insurance company, said that from Texas to Maine, property development is now worth nearly $7 trillion. He’d like to see the federal government regluate homeowners’ insurance along the Gulf and Atlantic coastlines. Most regulation is done by states, and MacLean said companies face “inconsistency and unpredictability.”

He said customers need to know they can find affordable coverage.

“The insurance carriers must be assured that they can over time earn a reasonable return and we believe this can only be done with a stable regulatory environment,” MacLean said.

National plan
The Southern Governors’ Association earlier this year endorsed the idea of creating a federal catastrophic disaster reinsurance program, but Congress has not acted on that suggestion.

William R. Berkley, chairman of the board and chief executive officer of W.R. Berkley Corp., said state or local governments need to enact strict building codes, enforce zoning regulations on coastal developments and closely monitor insurance companies to make sure they can meet their financial responsibilities.

He said governments should consider subsidizing coverage for property owners who can’t afford it. But, he said: “It’s just plain silly to provide subsidies to insure million-dollar-plus houses along the oceans and the bays.”

Alabama Gov. Bob Riley sounded frustrated as he said insurance companies have refused to provide coverage in some of the most vulnerable coastal areas of his state.

Riley said he doesn’t believe the state should be in the insurance business.

“Now, we’ve got 50, 60 miles of coast. I can’t get insurance,” Riley said. “I can’t imagine what Texas and Florida are going to have to do. So unless there is some consensus among insurance companies, you’re going to force the states and the fed government to come up with a program,” Riley told the executives.

Topics Carriers Legislation