As a State Senate committee prepares to hold hearings on the Long Island homeowners insurance crisis, the state's top insurance regulator is offering a solution.

Insurance Superintendent Eric Dinallo is proposing a regulation that would require companies to create a rainy-day fund to pay hurricane claims.

Over five to 10 years, the fund aims to lower premiums and reduce nonrenewals, Dinallo said.

Since early last year, a half-dozen insurance companies fearing large payouts from a major hurricane have been issuing nonrenewal notices to homeowners policy holders.

Long Island residents have complained they have to hunt for new insurers and have experienced high premiums and big windstorm deductibles.

State regulators estimate that insurance companies in New York collect $5 billion a year in homeowner premiums. About 5 percent, or $250,000,000, would be placed into a reserve fund each year to cover hurricane repair costs, they said.

That percentage is the average percentage of a homeowner's premium that goes to cover a catastrophic loss.

Companies should drop fewer customers because they will have set aside money to pay claims, Dinallo said.

Under current regulations, in years where a catastrophic hurricane doesn't hit New York, insurance companies pocket as profit the catastrophic loss part of customers' premiums, Dinallo said.

The fund would be public, and "transparency" would allow consumers to see where their premium dollars go, Dinallo said.

"Consumers ought to applaud it because they'll be able to see what money is available for storm coverage" and be able to refute requested rate hikes, Dinallo said.

Dinallo's proposal, and others designed to ease the homeowners insurance squeeze in coastal areas, will be discussed at a public hearing next week in Suffolk.

State Sen. James L. Seward (R-Oneonta), chairman of the Senate Insurance Committee, will hold a hearing Tuesday at 10 a.m. at the Grant Campus of Suffolk County Community College in Brentwood.

"We are looking forward to learning more," said Krista Conte, a spokeswoman for Allstate, which has about 25 percent of the homeowners insurance market on Long Island.

Since the spring of 2006, more than 9,000 Suffolk homeowners and more than 6,500 Nassau residents have received letters saying their policy wasn't being renewed.

After the busy hurricane season of 2004 and 2005, and with forecasters saying Long Island was overdue for a catastrophic storm, insurance companies began shedding homeowner policies in hurricane-prone and coastal areas of New York.

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BY KEITH HERBERT

Copyright © 2007, Newsday Inc.

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