Beach insurance plan a tough balancing act for N.C.

It’s a complicated balancing act for the state. Coastal property owners want affordable coverage. Insurance companies want a viable market. And inland owners don't want to be on the hook if a hurricane hits beach homes.

The Beach Plan now covers about 166,000 homes in 18 coastal counties.

Its total liabilities, or properties it covers, are nearly $74 billion, but its ability to pay claims tops out at about $2.4 billion, including about $1 billion, which would be charged to dozens of insurance companies that do business in North Carolina but may not insure coastal property.

A bad hurricane season that pushes claims above that level would mean unlimited assessments against insurers.

The resulting incentive has been for insurers to limit their business in North Carolina. And companies have dropped wind and hail coverage or raised it to levels above what the Beach Plan would charge.

“I think if we don't get these companies some certainty this year, that they will pull back even more,” said Jennifer Cohen, with the Insurance Federation of North Carolina. “So, even when the big one hits, there might not be enough insurance available to cover all of these claims.”

Like many who don't own property on the coast, John Davis of Bertie County is no fan of the proposed Beach Plan reform. Should an insurer's liability top $1 billion from coastal damage, policy holders across the state would shoulder a 10 percent surcharge on their insurance to cover the rest.

“To me, it's a matter of fairness and fixing the problem long term,” he said. “I see a Band-Aid, not a real solution.”

Davis says coastal growth and property values dwarfed insurance rates for years. Massive rental properties dominate the beaches, not primary residences. He said he doesn't think inland surcharges solve the problem.

“This risk is going to continue to grow out of proportion and the number of 10 percent will only get bigger,” Davis said.

Insurance Commissioner Wayne Goodwin acknowledges the newest Beach Plan isn't perfect, but added this caveat.

“If we don't act this year in terms of the legislative process we have, it could be two years before we have a chance to reform it again. That's two hurricane seasons,” he said.

Home builders said they are also not thrilled with the Beach Plan compromise. It caps coverage at $750,000 per property. The legislation cleared a house committee this week. Commissioner Goodwin said he hopes to get it through the House and Senate in the coming weeks.