North Carolina Senate Panel Approves Beach Plan Rescue

August 5, 2009

The North Carolina Senate Commerce Committee today passed legislation (HB 1305) to rescue the state’s underfunded coastal insurer, the Beach Plan.

The bill, which already passed the House, will now bypass the finance committee and go directly to the full Senate where lawmakers will be racing against the adjournment clock, as well as facing doubts of a key Senate leader about the legislation. A vote could come today or tomorrow.

If amendments surface when the Senate takes up the bill, it would have to go back to the House for approval.

The House voted 93 to 23 last month to approve a Beach Plan measure designed to re-establish the state’s coastal insurance provider as a market of last resort and cap the liability of private insurers for any shortfall in its funding at $1 billion.

“All North Carolina citizens, the insurance industry, and elected officials need a stable, solvent Beach Plan with a balanced approach to sharing financial responsibility for paying claims following a hurricane,” said Liz Reynolds, Southeast state affairs manager for the National Association of Mutual Insurance Companies (NAMIC), following the Senate committee vote this morning. “With the movement of the bill to the next stop toward Senate passage, we are moving closer to recalibrating the current system that is out of balance.”

In addition to the $1 billion assessment cap for insurance companies, the measure includes a catastrophic surcharge on policyholders across the state to help cover the costs of a mega-catastrophe or multiple events during the same year.

“This is not a perfect bill, but it does improve a system that is in dire straits,” Reynolds said. “We hope that the full Senate will maintain the momentum and pass this bill; if not, everyone will suffer when – not if – the next big storm hits North Carolina.”

The Associated Press reported that Senate leader Marc Basnight told committee chairmen to wrap up their work for the year by Friday, and that he would push for the General Assembly to adjourn Friday or Saturday.

Basnight, D-Dare, downplayed the need to pass the bailout of the Beach Plan.

Basnight said the House bill to fix the Beach Plan was too complicated and complained that it locked in high insurance rates for coastal residents.

“What the House sent over is unfair to a large population of North Carolina,” he said.

House Speaker Joe Hackney said adjourning on Friday “would probably be optimistic, but we can be that way.”

Lawmakers would not return to Raleigh for their 2010 session until May.

Reynolds said it would be a “shame” if further action were delayed until May because of all the work and progress put into the measure thus far.

The bill authorizes insurers to surcharge policies up to 10 percent — a so-called “catastrophic assessment recoupment”– should the Beach Plan incur a deficit that exceeds their $1 billion responsibility.

The assessments could begin if the Beach Plan exhausts its surplus, the $1 billion private insurer non-recoupable amount and about $2.4 billion in reinsurance.

As part of an attempt to control the state-backed insurer’s exposure, the measure (HB 1305) requires the Beach Plan to limit the coverage it offers on residential properties to $750,000 and on commercial properties to $3 million.

It also requires that Beach Plan rates be higher than private market rates. Insurers contend that Beach Plan rates have not kept up with the exposure.

The Associated Press contributed to this report.

Topics Carriers Legislation North Carolina Politics

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