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Mississippi Insurance Commissioner: Wind Pool Rate Hike Needed to Help Make It Actuarially Sound

Source: A.M. Best

Posted on 14 Aug 2013 by Neilson

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MI WindstomMississippi Windstorm Underwriting Association pool insurance rates for its 44,000 policyholders are set to increase by 3.2% for dwellings and mobile homes and 5% for commercial policies effective Dec. 1.

MWUA Manager Joe Shumaker and Insurance Commissioner Mike Chaney told Best's News Service that MWUA received the rate increases it sought. The increase includes renewals and new business. Chaney said the increase is needed to get MWUA on a path toward being actuarially sound.

The increase is the first for the insurer of last resort since 2006, the year after Hurricane Katrina pounded the Gulf Coast. When Katrina hit, the pool had 16,000 policies but post-Katrina saw the number of policyholders grow to nearly 46,000.

"Depopulation is one of our main goals," Shumaker said, adding he is hoping carriers will return to the market. He said the windstorm market depends on the carrier and which area properties are in. "It's hard to determine if price is the only factor that makes us attractive or not."

Shumaker said MWUA offers wind-and-hail-only policies, which he said could serve as an incentive for insurers carrying fire and other perils that homeowners must obtain from other carriers.

Ultimately, Chaney said he wants to see the number of those under MWUA coverage and the amount of total insured value to be reduced by 50%. "I don't want the Mississippi wind pool to end up like some of those states that are upside down," he said.

Chaney said the MWUA has $200 million in the bank and $800 million in reinsurance on more than $7 billion of exposure. Claims averaged $15,000 during Katrina. "We are very capable of paying whatever comes up," he said.

Mitigation measures continue to be stressed to policyholders by the Mississippi Insurance Department as part of strategic planning. That includes a strict enforcement of building codes and efforts to prevent building in flood plain areas.

The MWUA rates are not the only insurance issue for Mississippi's coastal areas. Chaney said he is extremely concerned about the "draconian" rate increase requests sought by the National Flood Insurance Program, while trying to keep MWUA solid. "These are not big rate increases [for MWUA) in the scheme of things," Chaney said.

The Biggert-Waters Flood Insurance Reform Act passed by Congress in 2012 set increases for flood insurance policyholders during the next five years. A small percentage of flood insurance owners have seen NFIP rates skyrocket and there are at least two bills in Congress trying to delay the rate increases. In June, the House approved language to delay planned rate increases for some property owners by one year by continuing to issue subsidies and discounts on some NFIP flood insurance premiums.