Mount Pleasant SC Homes For Sale -

Update 3/29/07:...State Insurance Department Director Scott Richardson leads a public forum in March at The Citadel. The departments announced Monday they were expanding the wind pool and that rates would increase come October.

What the new rates mean

For a property with an insured value of $250,000:

Zone 1: Premiums range from $2,457 a year with the minimum 3 percent deductible to $1,746 with a 10 percent deductible.

Zone 2: Premiums range from $2,133 a year with the minimum 2 percent deductible to $1,431 with a 10 percent deductible.

On the Web

For more information, you can visit the Department of Insurance's Web site at doi.sc.gov.

For information on the S.C. Wind and Hail Underwriting Association, visit scwind.com.

State Insurance Department OKs 35 percent increase

Coastal property owners who are insured through the so-called wind pool will see their rates increase an average of 35 percent come Oct. 1.

The state Department of Insurance announced the higher rates Monday for areas near the ocean where a state-sponsored group provides wind and hail coverage to people who can't obtain it through private carriers.

The wind pool is overseen by the S.C. Wind and Hail Underwriting Association, which had requested a 65 percent rate increase.

Smitty Harrison, the association's executive director, said the need for higher rates was driven by the growing number of policies and the rising cost of reinsurance, which is an insurance policy for an insurer.

Insurance Department Director Scott Richardson suggested that more increases may follow.

As specified by a bill that lawmakers passed in May, the wind pool's rates will be reviewed every six months to ensure the program is financially sound.

"We expect small future adjustments to the plan ... as we continue to review the performance of the wind pool," Richardson said.

Under a tiered rating system introduced June 1, wind pool customers closer to the coast (Zone 1) will pay more than those farther inland (Zone 2). But property owners can pay a lower premium if they choose a higher deductible and pay more out of pocket when filing a claim.

For example, a home in Zone 2 ? farther from the coast ? with an insured value of $250,000 and a 2 percent deductible would pay a premium of $2,133 a year. But if the owner agrees to a 10 percent deductible, the annual premium would drop to $1,431.

Property owners should think carefully before choosing their deductible, said Allison Love, executive director of the S.C. Insurance News Service, an industry-backed group. While a larger deductible may keep the premium down, it can be expensive if triggered.

She noted the out-of-pocket costs for any claim on a property with an insured value of $250,000 would range from $5,000 to $25,000, regardless of amount of damage.

"People with higher deductibles should try to put some money aside," Love said.

The last time rates increased for wind pool coverage was June 2006, when premiums rose 4.3 percent. In 2003, they went up 11 percent.

Over the past year or so, property owners along the coast have had more trouble finding affordable insurance, as some carriers weighed the risk of paying out massive claims if South Carolina was hit by a major storm. As a result, some of the country's largest property and casualty insurers began limiting their coverage near the ocean.

In response, the Insurance Department twice this year has expanded the size of the wind pool territory to include Awendaw, McClellanville, sections of James and Johns island and large parts of Mount Pleasant east of U.S. Highway 17.

But development and soaring property values have placed considerable strain on the wind pool. Between 2001 and 2006, the most recent data available, the number of wind-pool policies soared 51 percent, to 26,895. The value of insured property jumped 156 percent, to $10.2 billion, over the five-year period.

Background :...Years of development and soaring property values have prompted many of the nation's largest insurance companies to scale back coastal exposure, putting greater strain on state-run property insurers of last resort, according to a new industry report.

That reliance ultimately could leave property owners as far away as the Upstate with higher premiums and taxes if South Carolina's residual insurance market is hit with a rash of claims from a major storm.

At the end of 2006, total exposure to losses by state-run property insurers is estimated to have surged to more than $600 billion from $54 billion in 1990, according to the Insurance Information Institute, a New York-based industry group. Total policies in force rose to more than 2 million.

In South Carolina, the residual market is catered to by the S.C. Wind And Hail Underwriting Association, a coalition of insurance companies that do business in the state, commonly called the wind pool.

Since 2001, the number of policies in the pool has increased 51 percent, according to the institute's data. Over that period, premiums have more than tripled, rising 225 percent, and liability has more than doubled, climbing 155 percent.

Nevertheless, South Carolina's wind pool is still small compared to similar programs in other states, said S.C. Director of Insurance Scott Richardson. Further, in the event of a large number of claims, member companies would pay an assessment to replenish spent funds.

"The state doesn't have the consequences," Richardson said. "It's the companies that are responsible for this."

But that's just the scenario in which insurers of last resort like the wind pool may end up shifting the long-term risks of hurricane-related losses to policyholders and taxpayers who do not live near the coast, the institute's report says.

Insurers may look to recoup heavy assessments through statewide premium increases, said Claire Wilkinson, vice president of global issues for the institute and co-author of the report. State taxes, too, could be affected, she said.

Insurers have to be able to charge a premium in proportion with the risk. In many states insurers can't charge an adequate premium in high-risk areas, so they reduce their exposure in those areas.

Moreover, with enormous growth in the property market, there is a potential for the state to be on the hook if the plans are bailed out by a diversion of tax revenues from state coffers, Wilkinson said. That would force a state to make decisions about expenses somewhere else in the budget, she said.

"It's not just an insurance issue," Wilkinson said.

But as far as rate increases go, the state has some control, Richardson said.

Companies registered in South Carolina must apply to the Insurance Department for rate increases that add up to more than an average of 7 percent across the state. The department also allows insurers to levy greater increases in, say, Charleston than in Greenville. It means coastal areas could see a 10 percent increase, while the Upstate would see only a 1 percent jump.

"It doesn't have to be flat � that's the protection" Richardson said. Over the last year, the biggest property insurers, such as State Farm and Allstate, have cut some 20,000 coastal policies in South Carolina, prompting calls from Myrtle Beach to Charleston to Hilton Head Island for the wind pool territory to be expanded.

Richardson has responded twice this year, expanding the territory first to include parts of Johns Island and James Island and then to parts of Mount Pleasant. Previously, only a small strip of the mainland and the barrier islands were in the wind pool. While there's a fine line between moving the line too much and not enough, the system is working, state officials said.

For example, since the line was moved, there hasn't been a rush of policies to the wind pool, said Smitty Harrison, executive director of the Underwriting Association. That lack of a flood of policies suggests the private market is softening.

Richardson said there's further evidence of that shift in his home town of Hilton Head, where a group of condominium associations recently took their policies, worth a combined premium of $2.5 million, out of the pool. That's a significant amount of liability, he said. "And that's exactly what you want," Richardson said.

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