With the enormous amount of media attention focused on the hurricanes in the Gulf this season, the Mississippi Wind Windstorm Underwriting Association, or Wind Pool, board meeting last week wasn’t that well publicized. But it could help decrease rates for people who cannot purchase wind insurance in the private market, and instead get coverage through the state-run program.
At the meeting on the Gulf Coast, the board planned on bringing down representatives of the companies that provide reinsurance on the Gulf Coast.
“We did that last year, and as a result were able to see a fairly large decrease in reinsurance,” said Dave Treutel, president of Treutel Insurance, Bay St. Louis, and vice chairman of the Wind Pool. “We are doing it again this year and hope for the same results. The visit is good because, among other things, it allows them to have a better idea what has been built back and how it was built back.”
Treutel said another avenue of hope on insurance rates that hasn’t gotten a lot of press coverage is the passage by Insurance Commissioner Mike Chaney of a plan of operations that gives the Wind Pool the ability to give companies incentives to come in and write on the Coast with wind coverage included. That was something mandated by the legislation that reformed the Wind Pool in 2007.
The plan was officially adopted in June of this year by the Mississippi Insurance Department. The adoption coming at the time when hurricane season had already started kept a lot of companies from reacting to it.
“But I feel we will see more reaction to the plan of operations once we get past this hurricane season,” Treutel said. “Incentives kick in 2009 and incentize companies to write at least a small amount of wind coverage on the Coast. The positive thing this will do is get companies looking at coming in and writing that haven’t written on the Coast before.”
Companies don’t want to start doing business in the heart of the hurricane season, particularly an active season like this with storms like Fay, Gustav and Ike. Treutel is confident that once the season is over, there will be more companies with a greater appetite for writing.
“And then I’m aware of several companies writing now with wind in policies that probably weren’t writing this time last year or not to the same degree,” he said. “I’m cautiously optimistic. As my insureds come in to talk, they are seeing implementation of a rate reduction in the Wind Pool. As each policy renews, people are seeing rate reductions. A lot of people would like to see more, but I’m encouraged by seeing the rates go down. Over the past year or two years, we are seeing an improvement in our market. I’m aware there are some potential new companies that are looking at starting up and writing in Mississippi. More than one company has looked at this area as a potential market with the idea of coming in to write residential or homeowner’s coverage in this area.”
Even if the Mississippi Gulf Coast escapes a direct hit, the active hurricane season could have a sobering impact on the cost and availability of insurance. Treutel said whether the big storm happens in Houston or New York City, everyone in hurricane-0prone areas is affected.
“The reinsurance market affects us all, but we are more impacted if it hits down here instead of the Northeast,” Treutel said.
It is difficult to predict if rates for insurance will increase as a result of the active hurricane season.
“It all depends on a company’s exposure,” said Loretta Waters, spokeswoman for the Insurance Information Institute. “Every company is different. To say rates are going to increase is a difficult thing. I think we will also have to see what happens throughout the rest of the season. We still have until November. At this point there haven’t been rate increases specifically because of Gustav. Ike doesn’t look too good.”
When you look at what the potential risks are, companies are going to look at what has happened so far this season, and what their exposure is in a particular part of the state. To say rates go up “x” percent because of Gustav is a difficult thing to say.
“I would just say companies base their rates on risk, and they are going to look at this hurricane season like they have other seasons,” Waters said. “They will make a determination based on their exposure and the number of storms that hit for the season. Companies take into consideration other storms like Katrina. They know risks are high in coastal areas of Florida, Alabama, Mississippi, Louisiana and Texas. How much exposure companies have and what the season brings will play a part in their determination for rates.”
The past two seasons before this year have been good with few damages. Efforts by homeowners and business owners to build back stronger or make existing structures more storm resistant also have a positive impact on rates. And fact the levees in New Orleans withstood Gustav was a good thing.
“But there are more storms on the horizon, so I think companies would be reluctant to make any promises about increasingly availability at this point,” Waters said.
It is too early to speculate on the storm impact on the State of Mississippi, said Nancy Smeltzer, spokeswoman for Nationwide Insurance. She said claims are still coming in from all the storms that have hit the coast. To date, Nationwide has received more than 400 claims in Mississippi.
As far as the availability and affordability of insurance, Nationwide continues to renew all existing wind policies along the Coast and throughout Mississippi.
“Nationwide is committed to Mississippi and has remained so during Katrina and in the three years following the catastrophic storm,” Smeltzer said. “Nationwide has taken a number of steps to continue providing coverage in coastal areas. This includes modifying deductibles and methodically managing the amount of new wind coverage the company is writing in coastal regions.”
Nationwide is actively working on providing discounts to customers who improve the construction of their home to make them more wind and weather resistant. Nationwide recently increased the multi-line home and auto discount by 5%.
“Nationwide has been and will continue to evaluate closely its business strategy in coastal areas with the goal of maintaining quality coverage and customer service as well as long-term viability,” Smeltzer said.
Contact MBJ contributing writer Becky Gillette at email@example.com.