North Carolina’s Beach Plan Gets Rescued

Posted in Home Insurance , Hurricane Insurance

August 7th, 2009

North Carolina’s Senate recently passed a bill to approve the rescue of its coastal insurance plan, known as the Beach Plan. In this bill, reforms have been made to help place caps on the overextended hurricane budget so that property insurers don’t suffer exceeding costs after a disaster.

The Beach Plan was originally conceived 40 years ago as a way to provide hurricane insurance to barrier islands. The plan’s coverage area has grown since its conception, resulting in the insurance liabilities increasing to nearly $74 billion. Since the plan only has resources that top out at $2.4 billion, insurers were finding themselves responsible for any balance that exceeded that amount with no limit. It’s for this reason that the new HB 1305 was created.

Here are some characteristics of this new bill:

• $1 billion private insurers’ liability cap. The bill now has placed a $1 billion cap on the once-unlimited risk they were responsible for in the event of a disaster.
• Property owners may be forced to bail out Beach Plan. As a result of this reform, insured homeowners across the state might be forced to bail out the Beach Plan if claims surpass $2.4 billion after being hit by a challenging storm season. An extra charge of 10 percent could be tacked onto every property insurance policy by the state insurance commissioner for as long as it takes to pay off the claims.

While North Carolina’s Senate had already passed the bill, it still needed approval from the House, which offered a version with slightly different rates. An agreement was reached between the House and Senate, and now the bill has been sent to Gov. Bev Perdue to be signed into law.