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Coastal Insurance Issues: Search for Solutions Begins

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

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  • Headline

    A once-in-a generation opportunity is upon us. A transformational moment in Alabama history.

    That’s how Gov. Bob Riley described hopes for the Coastal Recovery Commission (CRC) of Alabama, created by his executive order on September 27, 2010.

    The CRC’s mission: To shape, in the wake of BP’s Deep Water Horizon oil spill, “a roadmap to resilience” for South Alabama.

    “We must do everything we can to restore what’s been lost because of this disaster,” said Gov. Riley. “But we should also use this moment to strengthen the resilience of our state and coastal communities. The commission will recommend ways that improve our ability to respond to future challenges and examine strategies that will mean far less suffering the next time a catastrophe threatens us.”

    The CRC’s work is funded entirely with BP money already contributed to the state. No tax dollars will be used. What’s more, Gov. Riley took pains to insulate the Commission as much as possible from politics as usual. Since he leaves office in January, he’s acutely aware that the recommendations of the Commission will be in another governor’s hands. So he’s reached out to the political camps of both men vying to replace him, inviting them to appoint their own representatives to the Commission to participate in shaping a report that should inspire the new governor no matter who wins in the November elections.

    What’s more, Gov. Riley is asking local elected officials to give the Commission a little room to work. “We’ll bring politicians in,” said the governor. “But this will be a citizen-led – not a politician-led – effort. If we do that, I promise you it will be successful.”

    The CRC is made up of citizen leaders with broad ranges of experience in civic life in Alabama’s coastal region. It’s headed by Mobile Press-Register publisher Ricky Mathews, who brings to this effort the experience of a similar commission in the post-Hurricane Katrina environment of coastal Mississippi. For a complete list of CRC members, go here.

    “What we learned after Katrina on the Mississippi Coast,” said Mathews, “is that a crisis of even enormous proportions provides opportunities to re-imagine a whole region.

    “If we do our work on this commission right,” Mathews said, “we can position South Alabama for not only bouncing back more effectively from future catastrophes like oil spills and hurricanes but also for providing greater security and more opportunity for all of our citizens, even when there are no emergencies. That’s the essence of resiliency.”

    Forging consensus on what the oil spill’s impacts were and how to make the coast safer for citizens and visitors and more secure for long-term investment is tough enough. Implementing the Commission’s recommendations next year and in the years after will be harder – if the Commission is not able to begin building coalitions of support during this process. “If we’re to make the most of this opportunity,” said Mathews, “we have to begin thinking bigger and broader than we ever have.

    “Oil spills and hurricanes don’t just threaten isolated spots on a map,” said Mathews. “Their effects reverberate through an entire state, through a region even. So our chances for coping with future threats depend upon us building a regional vision, an awareness of how we’re connected with one another and how we can work with one another to do more than any of us as individual citizens or individual communities ever imagined.”

    This is a project on a fast track. At some point – no one knows exactly when – there is the potential for billions of dollars to flow to the coastal states from BP and from other energy-related sources. To assure that Alabama is positioned to make the most of this potential investment, “we need a plan,” said Gov. Riley. And it has to come quickly.

    So the Commission is committed to delivering its report by Dec. 15, initially as a downloadable pdf from this website. Printed books will be available soon thereafter.

    The Commission is organizing its work under three broad topics, each connected with the other and each representing a key component of regional adaptability and sustainability:

    A Healthy Environment
    A Healthy Society
    A Healthy Economy

    Commission members are assigned to each of the topics and will break the broader categories into sub-committees as they see fit. We’ll report on the activities of those committees and sub-committees on this website regularly.

    This is a very public process. Participation of regional experts, elected and appointed officials from all the towns and counties affected by the oil spill, regional business folks, and residents will have plenty of opportunities to review CRC work in progress and contribute their ideas and comments. They’ll be able to do that in person at community meetings, by mail or phone, and online via this website.

    Here’s how to make the best use of this site:

    If you want to know who’s on the Commission and who’s staffing it, click on the WHO tab in the toolbar above.

    If you want to understand the CRC’s mission, get answers to frequently asked questions, and see background data committees are gathering, click on the WHAT & WHY tab.

    If you want to know the schedule of public events and locations for meetings, click on the WHEN & WHERE tab.

    If you want to contact us directly, you’ll find information under CONTACT US, and at the bottom of each news post in the column to the left, is space for comments and questions.

    If you want to read or see what others are saying about the CRC effort, we’ll post links and documens under IN THE NEWS.

    This is going to move fast. So keep in touch. We need your participation.

    To see how the CRC based its work on the experiences of those most affected by the oil spill, click this video below:
    Click this video to watch our mid-course update:
    Click this video to explore the CRC's goals and principles:

    September 2018
    S M T W T F S