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State to Supplement Wind Pool Insurance Program to Help Reduce Rate Increase

By Keith Burton - GCN        Filed 6/14/06

Standing along side State Insurance Commissioner George Dale, Governor Haley Barbour announced today he has set aside $50 million in state-administered federal grants to help mitigate an expected increase in the cost of insurance to consumers under "wind pool" policies. The governor made his announcement at a press conference at the Coast Coliseum Convention Center in Biloxi, where FEMA's Coast headquarters is located.

The wind pool - officially known as the Mississippi Windstorm Underwriting Association - is an insurer of last resort for homes and businesses in Harrison, Hancock, Jackson, Stone, George and Pearl River counties. It is funded through customer premiums and assessments from every insurance company in Mississippi.

"We are taking action to try to help Mississippi recover from Katrina," said Governor Barbour. "This $50 million dollars will help people recover from Katrina, but it will not affect insurance rates later," Barbour said.

As a result of Hurricane Katrina, 16,000 policy holders in the wind pool, almost all of whom have already incurred devastating personal losses, face the prospects of huge increases in their annual premiums for wind and hail insurance. Insurance companies have requested premium increases that are nearly 390 percent higher than before Katrina, an amount that would keep many homeowners from being able to rebuild or afford insurance and would be economically debilitating for the Coast.

Neither the Governor, nor Dale would comment on how much the $50 million will help reduce the amount of the rate increase, but both said it would substantially reduce the 390 percent increase requested by insurance companies to help offset their losses from Katrina. Dale said it would be two or three weeks before they will be able to know exactly how the money will affect the requested increase. He said an announcement will be made then.

"But it will be considerably less than 390 percent," said Dale.

In a written press release, Governor Barbour said, "Mitigation of these costs is integral to the recovery of the Mississippi Coast. If insurance becomes unaffordable, financing and rebuilding efforts become much more difficult.

The Governor said he intends to use $30 million this year and $20 million next year in Community Development Block Grants to offset these costs, making policies more affordable for consumers who need the protection. The money for the state help is from the $5 billion the state received to help the Coast recover. The federal Department of  Housing and Urban Development has given the state approval to proceed on the state's plan to spend the money pending the outcome of a public comment phase.

Many industry observers believe that absent another huge storm, reinsurance costs will substantially decrease for the 2007 hurricane season. With a grant to cover the surge in reinsurance cost, the wind pool can reduce the amount of premium increase needed for 2006. 

Dale says that keeping insurance affordable and available is a priority to the recovery of the coast and will continue to be a priority for the Mississippi Insurance Department. An important part of that process is making sure the wind pool remains solvent so that people living on the coast have access to the windstorm coverage they so badly need during hurricane season.

As part of an approval process through the U.S. Department of Housing and Urban Development, the Governor's plan for wind pool mitigation and a ratepayer mitigation plan to defray potential additional consumer costs resulting from utility infrastructure restoration in the wake of Hurricane Katrina are open for public comment.

The ratepayer mitigation plan is designed to help South Mississippi customers of utilities that incurred additional costs to provide emergency and temporary services after Katrina.

Dale said the state's wind pool insurance program needs to be updated. He said that when it was created, lawmakers and insurance industry officials never anticipated the size of losses as were seen from Katrina. State lawmakers are studying what changes are needed for the future.

The Ratepayer and Wind Pool Mitigation plans are posted on the Mississippi Development Authority Web site, www.mississippi.org. The draft plan is also available at county courthouses, administrative offices, city halls, and on the Internet at: www.mshomehelp.gov. Comments can be faxed to 601.359.9280 or submitted through a comment form on the aforementioned Web site. All comments must be received by June 24, 2006 to be considered.

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