Alabama bill offers incentives to take out beach policies

by R.J. Lehmann on March 22, 2012

An Alabama lawmaker has introduced legislation that would offer private property insurers incentives of up to $2.5 million each for agreeing to take on policies currently written by the state’s wind pool, the Alabama Insurance Underwriters Association.

Introduced by Rep. Randy Davis, R-Daphne, H.B. 470 looks to shrink the state’s beach pool, which provides basic wind and hail coverage to coastal residents of Baldwin and Mobile counties who can’t find coverage in the private property insurance market.

Originally formed as a voluntary industry pool in the 1970s, the AIUA was codified by the Legislature in 2008. All property insurers who write business in Alabama must share in the association’s underwriting, income and losses in proportion to their market share in the state, although members who voluntarily write wind coverage in the coastal zone receive credits to offset their wind pool obligations.

The pool saw a sharp increase in participation in 2011, with its policies in-force growing from 19,918 to 23,892 and its total insured value up from $3.47 billion to $4.14 billion.

Davis’ bill would offer $2.5 million to insurers with more than $100 million in assets who agree to take on at least 1,000 properties, as well as to those with less than $100 million in assets who agree to take on at least 300 properties. Those who agree to take on at least half the target goal would be eligible for $1.25 million in incentives.

Davis told the (Mobile, Ala.) Press-Register that he had not yet decided how the take-out incentives would be funded.

The program would be similar, in theory, to the Matching Surplus Program created by the Louisiana Legislature to incentivize insurers to remove policies from the Louisiana Citizens Property Insurance Corp. Citizens, which grew rapidly following hurricanes Katrina and Rita in 2005 to ultimately reach a peak of 174,000 policies in September 2008, has since seen 67,660 policies transferred to private insurers through five rounds of depopulation.

Faced with calls to do something about the high cost of homeowners insurance, particularly for coastal residents, Gov. Robert Bentley has appointed a special Affordable Homeowners Insurance Commission and charged them with studying ways to improve the affordability and availability of coverage. Bentley has suggested he would call a special session of the Legislature to deal with insurance issues once the panel’s recommendations are complete, but that has not yet happened.

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