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Robert Trigaux

As Hurricane Irene bears down on east coast, multiple 'insurers of last resort' may be tested




A Thursday morning update on Hurricane Irene can be  found at Accuweather.

Wake up and good morning. The bad news is that Hurricane Irene may test a number of the "insurers of last resort" operating in southeastern states along the coast. The good news is that Florida's Citizens Property Insurance won't be one of them. This time.


The Wall Street Journal reports that of the 14 U.S. states in Irene's projected path (as of late Wednesday), at least 10 of them run insurance pools created by the states for homes in vulnerable areas. Those insurers, which have ballooned in size in recent years, now have about 677,000 policyholders and overall exposure of $196.2 billion, according to the states.

Irene could prove to be a test case for all insurers of last resort which, like Florida's Citizens Property, lack the depth of resources to handle major storm hitting populated areas. As the Journal notes, more than half of the total property-insurance exposure along the North Carolina coast belongs to the state's last-resort insurer, known as the Beach Plan. It was created in 1969 to cover barrier islands near the Atlantic Ocean. Lawmakers expanded its territory in 2003 to all 18 coastal counties.

"Many of the (insurance) pools are in the same uncomfortable spot as North Carolina, with capital cushions that could be wiped out by one mega-storm, or several midsize ones," the Journal says. in most cases, including Citizens Property, that would trigger an assessment on most of the privately insured in the state to make up any shortfall.

Florida's Citizens Property has been the state's largest home insurer since 2006 and is one of the nation's 10 largest insurers in premium volume. Citizens has potential exposure of $406 billion and $13 billion available to pay claims before it would have to levy assessments, the story states.

Overall, says, the insurance and reinsurance industry is bracing itself for billions in possible losses from Hurricane Irene. Read more here.

-- Robert Trigaux, Business Columnist, St. Petersburg Times


[Last modified: Thursday, August 25, 2011 7:11am]


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