As insurers dump policies and raise premiums on the coast, legislators and insurance officials are debating whether to expand the state's wind pool - a last-resort property insurance market that runs east of U.S. 17 Business.
At the same time, the property insurance market has eased a bit - with some owners able to find lower priced coverage. It's still tight for wood- and vinyl-sided construction, insurance agents say.
The governor and S.C. Director of Insurance Scott Richardson say market-based reforms are the way to handle skyrocketing coastal premiums.
Richardson, who was appointed by Gov. Mark Sanford last month, says he is considering expanding the territory "a sliver" - although a new line hasn't been announced. Richardson wants expansion to be accompanied with tax breaks for insurers and property owners who make homes more hurricane-resistant.
Other independent insurance agents and some tourism leaders say wind pool expansion is needed to create more availability.
Several bills in the House and Senate call for wind pool expansion to the Intracoastal Waterway or the entire county.
Signs of improvement
The wind pool, or S.C. Wind and Hail Underwriting Association, must cover any property in that zone that requests it. The volume of premiums it wrote jumped by 443 percent between 2005 and third quarter 2006 - from $3.5 million to $19.3 million, according to the department's Coastal Property Insurance Issues in South Carolina report.
Director Smitty Harrison said applications spiked in March, and then a large number of condo associations rushed to the wind pool for coverage in May and June.
"Business we hadn't seen in years came flooding back," he said.
The skyrocketing increase in wind pool premiums over prior years shows how little was available in the standard insurance market, especially for condominiums, the report said.
Then, in November, Harrison said condominium associations started canceling policies with the wind pool because they'd found better prices elsewhere.
"It's good news they're finding better prices," Harrison said.
Tommy Cook, owner of John T. Cook & Associates in Myrtle Beach, said he's been able to find policies cheaper than those some folks had gotten last year. Others, however, may see increases if they have not renewed for a while.
But he's hearing that more companies are interested in coming to South Carolina to do business, such as one Florida company.
"Companies are seeing rates are high enough that they may be able to come in and make a buck. That may drive down prices," Cook said.
Tim Baxley, president of the Independent Insurance Agents of Horry and Georgetown counties and president of Statewide Insurance Group in Myrtle Beach, said the market has gotten better, but not much.
"If they'd seen a 700 percent increase, it may have come down 20 or 30 percent," he said. "Availability is still pretty limited. As the market shrinks, the carriers that are left are getting inundated and they are quickly filling up as well."
The pros of expansion
Condominium owners have been crying out for immediate help since early summer when they saw their association insurance skyrocket - as much as 700 percent. Many retirees and working people couldn't afford such a dramatic escalation and were forced to sell their properties.
Former S.C. Director of Insurance Eleanor Kitzman said thousands of coastal homeowners would not have been dropped by their insurance companies if the wind pool had been expanded in August. Kitzman testified that she wanted to expand the pool, but Sanford would not agree.
An expansion today would give the 20,000 homeowners who've already been dropped by insurance companies another option to find insurance, Cook said.
Condominium association insurance saw the highest spikes in premiums, and some say the wind pool price might be better than those offered through nonadmitted carriers. Those carriers are not regulated by the insurance department.
Baxley said expansion is still needed because there are still properties that agents can't find coverage for.
He recently had an apartment complex in Myrtle Beach that he couldn't get insurance for because it was framed construction and an older building.
The cons of expansion
An expanded wind pool would offer more insurance availability, but not necessarily lower rates.
The wind pool would need to charge a new market rate after expansion - one that would likely be higher because there's more exposure.
Indeed, the wind pool already needs a rate increase, according to the insurance department report, which found that based on the most recent catastrophe models, the rates charged by the wind pool appear to be inadequate.
The average premium for wind coverage through the wind pool in 2005 was $1,385 for residential coverage and $4,188 for commercial.
Harrison said the models call for a rate increase that is double or triple what the wind pool will file for.
The last increase was in June for 4.3 percent.
"Expanding the wind pool is not going to lower rates," Cook said.
"When they expand the wind pool, who knows what [the rate] is going to be."
The insurance director and others think expanding the wind pool could cause rates to go up for some single-family homeowners.
Those homeowners who already have an insurance policy with a standard carrier may have to pay more for wind coverage if their company drops the wind coverage when the wind pool is expanded.
"If companies can avoid paying the wind, why wouldn't they?" Richardson said.
Richardson told a House insurance subcommittee meeting that a survey of several large insurers found that expanding the wind pool would add $800 to $1,000 to premiums on a $250,000 home. Those pre-miums now run between $2,000 and $2,500.
Baxley said that he thinks that large an increase sounds too high but that the new wind pool rate is a complete unknown.
"Those are the magic questions," Harrison said.
"If you push this domino down, what will pop up?"
In the event of a hurricane, the wind pool would cover losses through premiums and reinsurance. If it didn't have enough to pay all the claims, it would assess all the companies that write property coverage in South Carolina for the difference.
In that case, insurance companies would likely pass on those increases to policyholders in the state over time. Those rate increases would have to be approved by the S.C. Department of Insurance.
Those potential increases are at the heart of why inland residents and some lawmakers are against wind pool expansion.
Such increases would not happen right away, Harrison said.
"People in Greenville, Clemson, Columbia think the rates will go up on the coast and immediately they are going to see a rate increase on their policies," Baxley said.
"It's not an immediate rate increase. It's based on loss or assessment. The potential is there."
The debate
Because of the possible effects, Cook agrees with the insurance director that any expansion should be small one.
"I think it is something we need to do gradually and in small baby steps," he said.
"I think that's smart. Open it up a little bit at a time and see how it affects the marketplace."
But Baxley says he thinks dealing with a wind pool rate increase is better than not having availability - and that's why he thinks the pool territory should be expanded at least to the Intracoastal Waterway. A survey of Myrtle Beach independent agents shows nine of 10 agents agree.
Consumers "can choose to take it or not take it [at that price]. Right now, there are some markets where they don't have that choice. I'd rather have market availability rather than not have a market at all," he said.
He's concerned that a smaller expansion of the wind pool - like perhaps to U.S. 17 Bypass - could help folks in Horry County but would not help those in Georgetown County.
"My personal opinion is [that expansion] should be at least to the waterway," he said.
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