Mississippi’s insurance commissioner is pushing a bill to strip a tax subsidy and authority from the state’s insurer of last resort for hurricane-prone coastal residents.
Chaney said the measure will make premium increases less likely on the pool’s 25,000 policyholders in six coastal counties. Customers pay $1,700 on average to cover only wind and hail, buying insurance elsewhere that covers other risks such as fire, liability and theft.
The number of policies has been falling in recent years, in part because rates are deliberately kept high to encourage property owners to buy insurance from other carriers. Policies in the pool ballooned after 2005’s Hurricane Katrina as traditional insurers balked at covering coastal risks.
House Bill 948 , sent Tuesday to the full House for more debate by the House Insurance Committee, requires the Republican Chaney’s approval before the pool can buy more backup coverage, known as reinsurance, above a certain level. Chaney said he’s been imploring the 11-member board that runs the pool to buy less reinsurance for years. The pool spent $38.4 million last year to buy enough coverage to cover $910 million in losses.
“Why are we buying so much reinsurance?” Chaney asked. He said his office will soon release an audit questioning how much the board buys and the rates it pays for reinsurance, saying Alabama’s pool bought roughly the same amount of insurance last year, but only paid $15 million.
Pool manager Joe Shoemaker said that if the pool were to run out of money after a severe hurricane, insurance customers across the state would be forced to make up the shortfall. Shoemaker said the pool board wants to avoid such an assessment.
The bill also requires the pool self-insure at least $100 million in risk, using the $250 million the pool has built up from premiums and public subsidies. Chaney said that in years without a storm, that will allow the pool to spend less on reinsurance. Shoemaker said that move will deplete the pool’s reserve if a hurricane strikes.
The bill would also divert $3 million yearly in insurance fees that have been subsidizing the pool since after 2005’s Hurricane Katrina. That money would go to help buy rural fire trucks until at least 2021.
Some coastal members opposed the bill Tuesday, at least in part because they fear the pool will never regain the insurance fee subsidies if they are shifted to the politically popular fire truck program.
“This has the ability to be somewhat destabilizing for our constituents down on the coast,” said Rep. Scott DeLano, a Biloxi Republican.
BEFORE YOU GO…
… we’d like to ask for your support. More people are reading the Mississippi Business Journal than ever before, but advertising revenues for all conventional media are falling fast. Unlike many, we do not use a pay wall, because we want to continue providing Mississippi’s most comprehensive business news each and every day. But that takes time, money and hard work. We do it because it is important to us … and equally important to you, if you value the flow of trustworthy news and information which have always kept America strong and free for more than 200 years.
If those who read our content will help fund it, we can continue to bring you the very best in news and information. Please consider joining us as a valued member, or if you prefer, make a one-time contribution.Click for more info