One sure way to achieve success for the Coastal Recovery Commission (CRC) is to solve the decades-old effort to balance risk and costs for insuring coastal property. The deadline of Dec. 15 may be a little too tight to come up with all the answers, but the CRC is tackling the dilemma head-on.
“Insurance is just one piece of the [economic] initiative; it’s an important piece,” said Walter Bell, chair of the CRC subcommittee on insurance. Bell is widely believed to be one of the best candidates to lead the effort. A former Alabama insurance commissioner, he’s chairman of Swiss Re America Holding Company.“Buildings can’t put a stick in the ground until they get some kind of insurance. Business can’t open their doors until they get some kind of insurance.”
The cost of catastrophe insurance increased 70 percent in the United States from 2005 to 2006 following active hurricane seasons in 2004 and 2005, according to an estimate by Guy Carpenter and Company LLC, a reinsurance advisor. In addition, major insurers have dropped wind coverage from more than 50,000 policies since 2004 in Alabama’s two coastal counties, Mobile and Baldwin.
“Insurance companies are in the risk business. They are in the business to take a risk, but they aren’t in the business to go out of business,” Bell said. “When we start talking affordability and availability, most companies will take a risk if they can get the proper premium. But if they can’t get what they think is a risk-based premium, then they will pull out of the marketplace, and that’s what we’ve been seeing.”
“On the other side of it, I don’t think that we can allow for school teachers, firemen and city workers to have an insurance premium that’s approaching their mortgage payment,” Bell added. “That’s just not going to be affordable, not going to be acceptable in any marketplace.”
In a wide-ranging discussion at the subcommittee’s first meeting at the Fairhope Municipal Complex, members spoke about possible approaches to improve coastal risk management and access to hurricane insurance — such as providing resources for a captive insurance program, improving mitigation efforts to lower premiums, attracting more competition in the insurance market, and mobilizing the private and public sector to provide citizens with more public education on insurance issues.
Download a pdf of Walter Bell’s context-setting presentation at the subcommittee meeting here. And to get a sense of the complexity of the coastal insurance problem, peruse the links listed under “Insurance Issues” in our Resources section.
– Michael Joe