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print thisInsurance crisis slamming S.C. coast
Skyrocketing rates could force people from their homes, hurt real estate market and tourism
By JENNY BURNS
jeburns@thesunnews.com
MYRTLE BEACH — Mary Lewis shakes her head in disbelief. The letter has to be a misprint.
How could her homeowners association’s insurance premium increase from $126,000 to $879,000?
She’ll have to find a way to pay an initial increase of $690 along with the $1,600 a month she pays for her multiple sclerosis medication.
Lewis, 64, and her husband, Vern, 66, live on a fixed income, and the increase might force them to move out of their Waterway Village condo, which they bought seven years ago for $77,000.
“We’re seeing nightmares across the board,” said Bruce Langston, certified public accountant at Wright Management, a Myrtle Beach management company. “It’s every condo — no matter whether the condo costs $100,000 or a million dollars. This is going to result in foreclosures or people forced to sell.”
An insurance crisis along the S.C. coast could drive people from their homes, devastate the real estate market and slow tourism.
“I see this becoming one of the major obstacles that we’ve had to overcome along the coastal zone in South Carolina. If we don’t deal with this crisis rapidly, it could affect our economic future as badly as anything that most can see looming on the future,” said sSen. Dick Elliot, D-Horry, who on Monday, hosted an insurance forum for concerned residents in Myrtle Beach.
The effect could be far-reaching:
• Businesses might have to pass the extra expenses on to consumers or take a financial hit.
• Apartment building owners might be forced to raise rents.
• Condo owners planning to vacation or move to the S.C. coast might go elsewhere.
“We have to do something about this,” said Rachel Broadhurst, a Myrtle Beach broker and president of Century 21 Broadhurst. “People can’t hold units or houses when fees skyrocket like this. To be honest, we have blips in the market with insurance, but this one has the makings of being pretty rough.”
In a town house in Murrells Inlet, Bob and Carol Bathgate are going through the same experience as the Lewis family.
Their insurance company expects them to pay $3,300 by Oct. 1. They used to pay $993 for their condominium association insurance in St. John’s Bay.
They’re putting their home on the market because of the costs. No vacation this year — all that extra money just went to insurance.
INSURANCE MARKET FORCES
Growth along the coast and rising real estate values have tightened the state’s insurance market, said S.C. director of insurance Eleanor Kitzman. Every time a new home is built, more insurance is needed.
With skyrocketing reinsurance rates — the insurance that insurance companies buy — and forecasts of severe hurricane seasons, the problem has worsened, she said.
“A large part of this is the fear that insurance companies have of another Katrina-like event,” Kitzman said. “That has really caused a lot of companies to reconsider how much business they want to write.”
Kitzman acknowledged that a 700 percent increase is “certainly a lot,” but added: “If no one else will write it for less, I don’t know how you can think it is too much.”
Condominium projects are seeing the highest increases because few companies are willing to write large policies.
“It’s a niche that only so many companies do, and if you write several of those, you don’t want to write the one next door,” said Smitty Harrison, executive director of the S.C. Wind and Hail Underwriting Association, or the wind pool.
Rating organizations also have been placing pressure on carriers to reduce risk on the coast by threatening to reduce financial ratings if the carrier is overexposed, Harrison said.
REAL ESTATE MARKET TROUBLE?
A once-booming real estate industry could take the biggest hit.
Condo owners can’t afford to pay an HOA fee that is almost as large as their mortgage.
And when potential buyers find out what the insurance payments are, some might back out. Investors are finding they can’t raise rents enough to cover the increased cost.
“I hope that the insurance industry realizes what’s going on because they could devastate the real estate market,” said Tom Maeser, local market analyst and president of the Fortune Academy of Real Estate.
The Myrtle Beach area has seen the number of condos on the market triple since last year and condo sales have fallen by 27 percent.
“This is not going to help that. This is without the massive insurance scare. It’s just going to add to that problem,” Maeser said.
Hotels, restaurants and other businesses can’t pass on such increases to consumers without impacting tourism, said Brad Dean, president of the Myrtle Beach Area Chamber of Commerce.
Already, tourism officials are seeing a softening in discretionary spending. Raising hotel rates and other prices would just make the situation worse, Dean said.
For the Lewises, moderating prices can’t come too quickly. It’s only a matter of time before they’ll have to leave their home because of the insurance increases, even though they’ve got no idea where they’d go.
“I might have to pay for insurance instead of my meds,” Mary Lewis said.
Jenny Burns is a reporter for the (Myrtle Beach) Sun News , a McClatchy newspaper
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