Posted on Sun, Feb. 11, 2007

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S.C. COASTAL INSURANCE

High cost creating political tempest

State leaders say situation is a crisis, propose variety of possible solutions

By JASON RYAN

jpryan@thestate.com

More than 20,000 dropped policies and rising coastal insurance rates have prompted coastal lawmakers to propose a flurry of fixes this legislative session.

Gov. Mark Sanford last week responded to what he and others have deemed a crisis, naming Sen. Scott Richardson, R-Beaufort, the state’s new insurance director.

Richardson, a former insurance executive and consultant who lives on Hilton Head Island, could be confirmed by the Senate this week.

The designation of a crisis, as well as the grim tone of some business leaders and politicians, makes it sound as if a 100-year storm already has hit South Carolina.

“We can’t wait,” Senate President Pro Tem Glenn McConnell, R-Charleston, said of insurance reform last week. “The private market has failed.”

“It’s frightening,” said Doug Wendel, chief executive of Burroughs and Chapin development company in Myrtle Beach. “There’s going to be a lot of blood on the streets of Myrtle Beach if something doesn’t happen soon.”

McConnell has sponsored legislation that would:

• Make the state’s insurance director an elected position

• Expand a state-backed association for those having trouble obtaining insurance

• Require insurance companies to cover more residents on the coast and use state-specific catastrophe models when setting rates, instead of broader coastal models

Richardson and Sanford have shied away from increasing regulation.

“We want to operate with a carrot, not a stick,” Richardson said shortly after his nomination.

But for all the action, are the proposals nothing more than some Category 5 bluster?

While acknowledging there is a discrepancy between the demand and supply of coastal insurance, outgoing insurance director Eleanor Kitzman said rates would have gone up even if companies like Allstate, State Farm and the S.C. Farm Bureau had renewed about 20,000 coastal policies.

“As disruptive as this has been, I know a lot of those 20,000 have found other coverage,” said Kitzman, a few hours before resigning Tuesday.

Kitzman was ambivalent about enlarging the so-called wind pool territory — a coastal area in which residents who can’t get private coverage are entitled to wind insurance provided by a state-backed association of insurers.

Richardson has opposed making more than minor adjustments to the line, which covers a strip of barrier islands on the coast. Some legislators have proposed making the wind pool cover all residents of coastal counties.

Should a hurricane hit and wind pool funds not cover damage, insurers in the state would be forced to pay the deficit based on their market shares. In turn, they would raise the rates of customers statewide.

“That would be way too extreme,” Richardson said of moving the wind line to include all parts of coastal counties. “When you start moving the wind pool lines, that could be some really big numbers.”

Kitzman advocated outfitting homes with storm resistant materials, such as shutters and roof ties.

Richardson suggested that instead of drastic reform, change should take the form of “lots of little things.”

Reach Ryan at (803) 771-8595. The Associated Press contributed.