Mississippi officials seek ways to fix wind pool insurance

Published 8:00 pm Tuesday, November 21, 2006

As soaring insurance rates stifle Hurricane Katrina recovery, Gov. Haley Barbour is trying to finagle a second federal bailout of the state’s “wind pool” insurance program while coast business leaders and lawmakers ponder more permanent solutions.

Wind-pool premiums were recently increased 268 percent for business owners and 90 percent for homeowners. The hikes would have been far worse had Barbour not received permission to cushion the blow with $50 million in federal Katrina-relief money.

Even with the drastic increases, more people are being forced into the state-sanctioned wind-pool insurance because private companies are refusing to write policies after Katrina.

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The wind pool was created after Hurricane Camille in 1969 to provide wind-damage coverage in areas in the six southernmost counties where companies don’t want to write standard policies. Home and business owners pay the premiums. When damage exceeds the money collected in wind-pool premiums, the more than 500 insurance companies that do business in the state have to pay the difference.

Those companies have had to cough up more than $545 million in wind-pool losses from Katrina.

Even with this year’s rate increases, the wind pool is nowhere near “actuarially sound.” The wind pool since 1987 has taken in $188 million in premiums and paid out $778 million.

“We have been very concerned about this,” said Ron Peresich, co-chair of the Gulf Coast Business Council’s legislative committee. “The 268 percent has been really hurting business recovery. A lot of people are suffering the 90 percent on their homes, and also suffering the 268 on their businesses — getting hit twice.”

Peresich said he was pleased about Barbour’s plan to seek more federal money, to reduce the rates at least temporarily. He hopes such an infusion would cut the business-insurance rate increase to “something under 100 percent.”

Barbour and the Legislature face a dilemma with the wind pool.

If they don’t help people find affordable insurance, the coast cannot recover from its housing and business losses.

If they pump money into it to artificially reduce the rates, then it will be the cheapest, and only, game in town. Private insurers will totally leave the coast market and the state would essentially be faced with running a huge insurance company whose books are so out of balance that one good hurricane could sink the state budget.

If more money is not pumped into the wind pool, yet people still flock to it, insurance companies would likely still flee, because their exposure to wind-pool losses would be great.

Many hope Congress can provide a federal solution, but that would likely be years away. Meanwhile, Peresich’s business group has come up with four proposals for the 2007 state Legislature to keep the wind pool and the private insurance industry afloat. They include measures that would force more insurance companies to participate in the wind pool, and tax and/or assessment incentives for insurance companies to “encourage them to again write wind coverage on the coast,” Peresich said.

Rep. Diane Peranich, D-DeLisle, has been a leader in work on possible legislative solutions. She has drafted bills offering several options and has been studying similar initiatives — and failures — in other states.

One idea she is pitching is for a diversion to the wind pool of the sales-tax windfall that has been spawned by Katrina recovery.

“After listening to the state economist, we know that the prosperity (the state budget) is enjoying is a result of the Katrina factor,” Peranich said.

She said experts have been advising that the coast’s insurance market should improve and stabilize with “each year we do not have a hurricane,” so officials hope such a subsidy would be temporary.

“We have had no solution suggested to us by the insurance industry, so that leaves those of us who represent the people to come up with a resolution in a vacuum, in a void, because we can’t get any input from the industry,” Peranich said.

She has also been critical of Barbour not calling a special legislative session this year to deal with the problems.

House Insurance Committee Chairman Mark Formby, R-Picayune, whose committee has also been studying the issue, said, “I am absolutely not leaning toward using any state dollars to subsidize (the wind pool). But I think we should look, as the governor is doing, at using some federal disaster funds for some temporary relief.”

Formby said one partial solution might be creating “equity” in wind-pool premiums, noting that currently “someone on the shoreline pays the same rates as somebody in northern Stone County.”