NU Online News Service, March 19, 3:32 p.m. EDT
An Alabama representative is proposing to offer a $2.5 million incentive to insurers that remove wind risks from the state's assigned-risk pool.
The legislation, introduced earlier this month by Rep. Randy Davis, R-Daphne, is one of a series of measures the state's legislators have introduced to reduce exposure in the Alabama Insurance Underwriters Association (AIUA).
It a story reported by The (Mobile) Press-Register, the fear is that the AIUA has grown too large to handle a major catastrophe, which could result in assessments to insurers that would ultimately be borne by policyholders. South Alabama legislators are considering ways to bring more private insurers into the state and relieve the insurer of last resort of some of those risks.
Under Davis' bill (HB470), which is co-sponsored by three other legislators, any domestic insurer with assets of more than $100 million that agrees to remove 1,000 policies from the plan over a 12 month period would receive the incentive.
Failure to acquire the policies will result in repayment of 50 percent of the funds.
A domestic company with less than $100 million in assets will be eligible for the one-time lump sum payment of $2.5 million if it agrees to acquire at least 300 policies in a 12-month period. That company would be subject to the same penalties as larger insurers.
Depending on the success of the program, the legislation calls for continuation or expansion based on a report from the state's insurance regulator.
Several legislators were non-committal about the success of passage of the bill.
Earlier this month, Davis introduced a piece of legislation (HB456) aimed at establishing catastrophe-savings accounts to cover insurance deductibles and other uninsured portions of risk for homeowners faced with windstorm events.
Chris Hackett, director of personal lines policy for the Property Casualty Insurers Association of America, says that the association is in favor of any government "incentive for insurers to take out business" from a state run homeowners program, typically known as the insurer of last resort, and place it in the private market.
These state companies were created when the private market was no longer willing to assume property risks, usually high-risk coastal areas.
"This promotes a healthy and competitive insurance market," says Hackett, adding that states with small pools are a sure sign "of a health and vibrant market," but he did not have recent figures indicating the size of Alabama's homeowners assigned risk market is.
He notes that the Alabama plan is unusual because most states offer tax credits and not direct cash payments to take business.
"This is a more unusual plan, but it will definitely cause insurers to look at it," says Hackett.
This story was updated at 4:52 p.m. EDT with comments from PCI
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
