Insurance commissioner says he doesn't intend to OK proposed 400 percent increase to cover reinsurance

A proposed 400 percent insurance rate hike on the Mississippi Gulf Coast will threaten the region's charm and affordability, a handful of residents told Insurance Commissioner George Dale on Monday.

"Don't let this happen," said Elizabeth Knight, who lost a Gulfport home to Hurricane Katrina. "You don't want the Mississippi Coast to be nothing but casinos."

The Mississippi Windstorm Underwriting Association, which provides wind and hail coverage for high-risk properties, requested increases of 398 percent for houses, 268 percent for commercial property and 60 percent for mobile homes.

The requested increase is for purchasing reinsurance - that covers an insurance firm's losses - for the hurricane season.

Dale said he has a few weeks to approve a partial increase or deny the request. "I don't intend to approve a 398 percent rate increase," Dale said.

Other possible recommendations to lessen the pain include asking state lawmakers to shore up the wind pool with cash when they reconvene in January and adjusting commissions for agents.

Gulfport lawyer William Weatherly said officials are basing potential losses on structures that were washed away in Katrina, he said. "There's been no survey done about what's there and what's not there," he said. "There's not been any rebuilding as far as I can see."

An attorney for the wind pool said the large rate increases for houses and businesses are necessary to cover potential losses this year and stave off a collapse of the state's insurance market. "We're beginning to see companies say we're not going to write as much or we're not going to write any policies in Mississippi," said Greg Copeland, who represents the association.

More insurance companies have stopped offering coverage for wind damage, meaning more people are joining the wind pool.

The state-created pool had 16,155 home and business policies in the most storm-prone areas of the six coastal counties when Katrina hit. The pool has grown to 17,991 policies since.

As of June 1, the wind pool paid $637 million in claims out of an estimated $720 million in losses, Copeland said. The wind pool had $175 million of reinsurance to pay claims. The remaining $545 million was paid by several of the 500 insurance companies in the state.

The firms are required to pay for excessive claims in the wind pool as part of doing business in Mississippi, he said. That can impact insurance rates in central and north Mississippi as well.

For the next year, the wind pool estimates needing $350 million of reinsurance. "It is the driver of this rate increase," Copeland said. "They don't want to be caught short again."

But residents warn that higher insurance costs will limit rebuilding. Long Beach resident Bud Ray said insurers knew hurricanes could cause great damage and factored that into existing models.

"The insurance industry is much like the gambling industry," Ray said. "They're playing the odds."

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By Laura Hipp
lhipp@clarionledger.com

©2006 The Clarion-Ledger