WNC shouldn't pay insurance bill for coastal mansions
A hurricane that makes landfall along the North Carolina coast could trigger a 10 percent — or greater — surcharge called a “catastrophic assessment recoupment” on homeowner insurance policies in Western North Carolina. A bill currently in the N.C. House would cap the financial risk from catastrophic loss to property owners along the coast, allowing insurance companies to pass along rebuilding costs to all N.C. policyholders.
House Bill 1305 is an effort by the General Assembly to fix the North Carolina Beach Plan, a little-known program established in 1969 to make affordable, state-subsidized property insurance available to a limited number of people on North Carolina’s barrier islands who could not afford to buy it through the standard insurance markets.
Special interests
Like many government efforts with good intentions, the Beach Plan has been manipulated by special interests. What was once an insurer of last resort is now the de facto first choice for property insurance, available to anyone regardless of need in 18 coastal counties. Today, the plan insures nearly 176,000 coastal properties valued at $73.6 billion.
Because premiums are kept artificially low, the Beach Plan doesn’t have enough money to cover potential damages.
This kind of government interference in the free market is almost always a bad idea. By tinkering with market-driven property insurance rates, the state has elected to subsidize the development of vulnerable coastal areas, exposing all North Carolinians to the risks of hurricane impacts. Some insurance companies have already stopped writing policies in North Carolina because they were required to participate in the Beach Plan and faced open-ended liability.
Of course, from a scientific perspective, it is clear that there are many areas of the coast that should not be rebuilt following the next hurricane — many areas that have suffered repeated losses. The state certainly should not be encouraging redevelopment in these areas by subsidizing the risk.
Many supporters of HB 1305 have an overly optimistic view of hurricane risk in North Carolina. John McMillan, lobbyist for the Insurance Federation of North Carolina believes the possibility of such a surcharge in WNC is “very, very remote.” Tommy G. Thompson, president of N.C. 20, a nonprofit group that represents coastal counties, said his group supports the 10 percent surcharge “only because we don’t think it will ever be enacted.” This is wishful thinking.
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