Residential, commercial coverage on Coast expensive, but improving

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Published: June 16,2008

It might be compared more to a trickle than a flood. But the market for homeowners and commercial insurance on the Mississippi Gulf Coast is slowly improving with a recent decline in the Mississippi Windstorm Underwriting Association, commonly called the Wind Pool, rates average approximately 11%, and the announcement by Insurance Commissioner Mike Chaney that four private companies have started writing wind and hail coverage on the Coast.

Most carriers stopped writing new wind and hail insurance on the Coast after Hurricane Katrina, leaving the expensive state-sponsored Wind Pool as the only game in town. The lack of affordable insurance has been named by many Coast business leaders as the number one impediment to the reconstruction of the Coast.

Guarded

Chaney said that the Coast insurance market has been improving, but he is guarded when he talks about the forward progress because people would like to see much more.

“The market for commercial insurance has improved very well, and consumers are able to get very reasonable rates in the commercial market,” Chaney said. “We have been able to lower insurance from the state-run pool by average of 11%. We were able to announce four new companies will write wind on the Gulf Coast, but we are anticipating several underwriters will discontinue writing wind on the Coast after this hurricane season. I have addressed that with state Legislature including various insurance committees in the Mississippi House and Senate.”

Costs for wind and hail with the four new companies may be a little lower than the state run Wind Pool, but not much. The important thing is the availability. Chaney said it is his statutory job to have availability, but he can only control the rates within a narrow price range.

Available, but…

“My job is to make sure it is available, but it may not be at the cost people prefer,” Chaney said. “The insurance commissioner does not have any statutory law or any big stick to make a company write insurance on Gulf Coast. It is strictly a voluntary market. We do not have any laws that force a company to write insurance on the Coast.”

Getting insurance, especially affordable insurance, within 2,500 feet of the beach is very difficult, Chaney said. But he is getting few complaints about insurance costs and availability for areas north of Interstate 10.

“We have been able to address the needs of the business community a lot better than the needs of the homeowner,” Chaney said. “Commercial codes are stronger and enforced better, and business people by and large understand what it takes to lower premiums. Commercial and business interests manage their risks very well and in so doing they enjoy lower premiums. They do this by training employees on risk management and generally building to stronger standards than homes.”

Chaney’s efforts to improve the situation include calling for strict enforcement of building codes, which saves lives and reduces the risk of loss. He is also still pushing for some type of federal backstop, a catastrophic reinsurance program. And while the multi-peril legislation proposed in Congress appears dead, Chaney is hopeful that major hurdles can be overcome to have multi-state compacts to address insuring properties within 50 miles of the Coast, since approximately half of the people in the U.S. live within 50 miles of a coastline.

Dave Treutel Jr., president of Treutel Insurance, Bay St. Louis, who is also vice chairman of state Wind Pool, said the new lower Wind Pool rates are a shot in the arm.

“We were happy to see that,” Treutel said. “We filed for that rate reduction in September, so were glad to see it come into approval and use.”

The other major improvement is rate reductions on large commercial accounts. Large commercial accounts went up the highest after the storm, so some stabilization and good reductions in rates are very welcome.

Choices grow

Treutel said there are also increasingly more choices in the homeowner market. He has 13 or 14 carriers who offer homeowners insurance, which is better than it was two years ago, and the company has been contacted by a couple other companies interested in writing wind and hail. The Legislature recently passed provisions that give incentives to companies to come in to the market to write wind insurance on the Coast.

Even before the hurricane, it was a tight market on the Coast with six companies writing 90% of the homeowners market. Treutel said he would love to see 50 companies come in and each write 2% of the business, which would help move people out of the state Wind Pool. The amount of coverage in the state Wind Pool was $1.6 billion right after storm, and today is estimated at $5 billion. It could move up to $6 to $6.5 billion.

“That is a tremendous jump,” Treutel said. “It shows as the market got tight, more and more policies ended up being written in the state Wind Pool. We need to encourage more companies to write wind insurance. If we can get enough companies to write a small portion of the wind business on the Coast, we hope to move more policies out of the Wind Pool.”

Treutel is cautiously optimistic about improvements in the Coast insurance market.

“I think we are moving,” he said. “It isn’t as fast as many of us would like to see. But I’m cautiously optimistic things are improving. We are going in the right direction.”

Dena Graham with the Insurance Barn in Gulfport said the lower Wind Pool rates are encouraging.

“It is still a little bit slow, but it is picking up,” Graham said. “Since they dropped the rate down to about where it was before the storm, it is a little better. But there aren’t a lot of people buying houses now and I don’t think that has as much to do with insurance as the economy. Insurance has gotten to where it is more affordable. You have more options. There are more deductibles to choose from.”

Graham said sales of commercial insurance are slow. Sellers of commercial property are asking a large amount for their property, and buyers are checking insurance costs before committing to a purchase. “Then they know whether or not they are going to be able to budget it, if it is going to be feasible for them,” she said. “It is really slow in commercial.”

Dee Anne Majure, Martinez & Majure Insurance Agency, Moss Point, said she asks people if they are sitting down before giving them rate quotes on homeowners or commercial insurance.

“The rates are high,” Majure said. “The Wind Pool had a rate decrease, not a great big one but it helps. We have had a couple of markets open up, Scottdale and Lexington, that we write with that will write wind and hail on homes as long as they are in from the Coast a bit. The rates for the most part seem to be more competitive than the state Wind Pool unless the new home has a wind resistive rating. Then it is cheaper to run those with the state because they have special rates for those kinds of houses.”

Majure suggest when prospective homebuyers start calling around for quotes on insurance, have and open mind and expect the worst. And if building new, considering building to semi wind resistive or wind resistive codes because that can make a big different in wind premiums.

Majure said prices are settling down, and more markets are opening up.

“I would think if we have a quiet year for hurricanes, a few more companies will decide to give it a try again,” she said.

Contact MBJ contributing writer Becky Gillette at 4becky@cox.net.

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