DOI Wind Pool Expansion Renewal Order
  DOI Order to Continue Wind Pool expansion until March 29, 2011

Coastal Insurance Relief Plan

Please see  SC Wind Pool Expansion section for news on SC Wind Pool rates effective Oct. 1, 2007.

SCSafeHome (comprehensive hurricane damage mitigation program (by SCDOI))
This web site is THE resource for information on mitigation grants and other programs created by the Omnibus Coastal Property Insurance Reform Act of 2007.

What agents need to know: the bill became law the second it was signed; therefore, personal and commercial property policies cannot be non-renewed during the flood season unless there has been a 90-day notice of non-renewal. See CIRP Legislation section below for specifics on the bill.

More about Catastrophe Savings accounts.

SC Wind Pool expansion & rates (October 1, 2007)

The South Carolina Department of Insurance has approved changes to the rating plan and plan of operation for the South Carolina Wind and Hail Underwriting Association (Wind Pool).

Though loss data initially indicated an overall increase in the rates in excess of 65%, improvements in the plan of operation and updates to the underwriting rules by the Wind Pool Board and approved by the Department, reduced its rate request to an overall 35%. Not every consumer will receive a 35% increase in rates. Choosing higher deductibles should result in a significant reduction in property insurance premiums.

“We expect small future adjustments to the plan of operation as we continue to review the performance of the Wind Pool. The Wind Pool will operate as a true residual market mechanism and rates will be reviewed every six months as required by the Omnibus Coastal Property Insurance Relief Act of 2007 (H.3820) which passed in the 2007 legislative session,” said Director Scott H. Richardson, who signed off on the changes.

These changes are effective October 1, 2007 and follow expansions to the Wind Pool territory in both March and June of this year, which addressed issues related to the lack of available property insurance coverage. This resulted in a “two-tiered” rating plan to ensure that the rates charged for coverage reflected the risk of the property. In addition, the plan of operation was changed to increase minimum deductibles to better reflect the realities of the market. Underwriting standards were also revised.

Among the significant changes effective October 1:

·         Implementation of a two-tiered rating system based on proximity to the coast;

·         “Overall” rate increase of 35%, which will vary by territory and can be reduced by choosing various deductibles (see SC DOI Press release);

·         Increased minimum deductibles to 3% in tier one and 2% in tier two;

·         Availability of higher deductibles for lower premiums;

·         All townhouses will be rated as dwellings regardless of the number of units in a structure; and

·         Condominium associations consisting of only one or two units will be rated as “dwelling” not “commercial.”

·         Requiring a National Flood Insurance Policy for those insureds choosing replacement cost coverages, (effective January 1, 2008 ).

The new deductibles and rates will strengthen the Wind Pool’s operation and reduce the “probable maximum loss” (PML) expectations, which will allow the Wind Pool to purchase a better reinsurance program.

“It is our feeling that these changes will reduce the risk of any future assessments to both the South Carolina insurance marketplace and South Carolina consumers,” stated Director Richardson.

The SC Wind Pool has updated their website with information on the new rates, forms and manuals.

(June 2007)

In addition, the legislation signed into law by Governor Sanford on June 11, 2007, reforms laws relating to the wind pool line to give clearer guidance on the circumstances under which that line can be moved. Using the current statute, Department of Insurance Director Scott Richardson modified the wind pool line by Executive Order on March 22 and again on May 23 as steps toward alleviating existing availability issues along the coast.

The coastal reform bill, summarized below, includes a Senate amendment that makes the March 22 Wind Pool territory expansion law. This means the Director cannot shrink the territory back to the original lines without General Assembly approval.

The Wind Pool board is currently comprised of 14 members – 11 company representatives, two agents and one consumer.  The Senate amendments added three more consumer members to the Board.

Director Richardson’s first order expands the Coastal Area effective March 30, 2007.  The order includes dividing the Coastal Area into two zones.  Zone 1 is the existing “beach territory” plus the 150 foot set-back in Horry and Georgetown counties.  Zone 2 is the expanded areas in Charleston, Georgetown, and Horry counties.

Director Richardson's second order follows the Zones 1 & 2 format, with expansions in Charleston, Georgetown and Horry counties, effective June 1, 2007.

SC Wind is preparing a rate filing based on the two zones.  It is also anticipated that a county factor will be included in the rate filing.  Until the filing is approved, the existing SC Wind rate is to be used in both zones. 

Effective June 1, 2007, the eligible territory will be defined as:

(a) all areas in Beaufort County east of the west bank of the intracoastal waterway with the exception of Lady's Island, Coosaw Island, and Morgan Island.

(b) all areas of Colleton County that are east of the west bank of the intracoastal waterway.

(c) the following areas in Charleston County: the portion of Edisto Island which is east of Peters Point Road and Point of Pines Road, Edingsville Beach, Kiawah Island, Botany Bay Island, Folly Island, Seabrook Island, Morris Island, and all areas north of the city of Charleston that are east of the west bank of the intracoastal waterway.

(d) the following areas in Georgetown County: all areas between the Harrell Siau Bridge and the Georgetown- Horry County border that are east of US. Highway No. 17 or By-Pass 17, whichever is further west, and all areas south of the Harrell Siau Bridge which are east of the west bank of the intracoastal waterway.

(e) the following areas in Horry County:

(1) beginning at the northern border of Horry County, all areas east of the west bank of the intracoastal waterway to the point where the where US. Highway 17 crosses the intracoastal waterway

(2) from the point where US. Highway 17 crosses the intracoastal waterway, south to the Georgetown- Horry County border, all areas that are east of US. Highway 17 or By-Pass 17, whichever is farther west

Zone 2 is defined as follows:

(a) the following areas in Beaufort County: Lady's Island, Coosaw Island and Morgan Island.

(b) the following areas in Charleston County:

(1) the portion of Edisto Island that is west of Peters Point Road and Point of Pines Road

(2) The portion of James Island that is east of the west bank of the James Island Creek.

(3) The portion of John's Island that is east of Exchange Road which becomes Plow Ground Road to Hoopstick Island Road to Church Creek.

(4) The portion of Wadmalaw Island that is east of Roseville Road to west of Cherry Point Road to Maybank Highway to Brigger Hill Road.

(5) all areas north of the City of Charleston that are east of US. Highway 17 and west of the intracoastal waterway.

(c) the following areas in Georgetown County:

(1) all areas between the Harrell Siau Bridge and the Georgetown- Horry County border that are east of the west bank of the intracoastal waterway and west of US. Highway 17 or By-Pass 17, whichever is farther west.

(2) all areas south of the Harrell Siau Bridge that are east of US. Highway 17 and west of the intracoastal waterway

(d) the following areas in Horry County:

(1) Beginning at the northern border of Horry County, an area bounded on the west by a line defined as follows: SC Highway 57 (Wampee Road) to the point where it meets SC Highway 9, then following SC Highway 9 east to SC Highway 31 (Carolina Bays Parkway), then following SC 31 west to River Oaks Drive, then following River Oaks Drive to US Highway 501, across US Highway 501, where the road becomes George Bishop Parkway, then following George Bishop Parkway and turning right onto Claypond Road, following Claypond Road to Burcale Road, then following Burcale Road until it ends at Riverside Drive. The line then continues in a straight line from the end of Burcale Road to the intracoastal waterway, where it then follows the waterway to the Georgetown- Horry County border.

(2) The eastern boundary of Zone 2 in Horry County is the western boundary of Horry County Zone 1 as defined above.

The SC Wind web site “in or out” function now includes all updated territories, and updated maps will soon be posted on their web site.

New business applications for the expanded territory can be submitted using eApps.

Information will be updated regularly and can be found at http://www.scwind.com/Expansion.asp and www.doi.sc.gov.

Also, check out these  FAQs by the SC Wind & Hail Underwriters Assn

SC Wind Pool Territory maps

Horry County
Georgetown County

Charleston/ Colleton counties
Beaufort County

Updated territory maps!

CIRP Legislation (H.3820)

CATASTROPHE SAVINGS ACCOUNTS

• Amends Chapter 6 of Title 12 and provides for tax-free catastrophe savings accounts (similar to health savings accounts).
• Catastrophe savings accounts to cover insurance deductibles or other uninsured portions of a loss from hurricane, rising flood waters or other catastrophic windstorm events subject to certain limits based upon the amount of the deductible and for those who self-insure up to a maximum of $250,000.

CONSUMER INITIATIVES

• Allows tax credits (up to $1,000) for costs incurred in making home more wind resistant.
• Allows tax credits (up to $1,250) for lower-income property owners who pay more than 5% of their incomes towards insurance premiums.
• Allows for a reduction (3%) in the sales tax on building supplies used by property owners to make homes more wind resistant.
• Requires insurers to fully disclose to the insured at the time of issuance of a policy and at renewal the availability and the range of each premium discount, credit, or other rate differential for properties that have been constructed or retrofitted to reduce the risk of loss due to a hurricane.
• Amends Section 38-73-1095 to require that insurers provide discounts and credits for certain mitigation measures in their rating plans.
• Extends the notice period for cancellation and non-renewal of policies from thirty days to sixty days.

EMERGENCY ORDERS; RULES

• Authorizes the Director of the Department of Insurance to issue orders when the Governor declares a state of emergency.
• Allows the Department of Insurance to adopt standardized requirements that may be applied to insurers after a hurricane.     These rules shall address claims reporting requirements, grace periods for payment of premiums, and temporary postponement of cancellations and non-renewal. 

INSURERS INITIATIVES

• Allows insurers that provide full insurance coverage to property owners in seacoast area a credit of 25% against the premium tax.   (Premium tax is 1.25% of written premium).

SOUTH CAROLINA WIND AND HAIL UNDERWRITING ASSOCIATION REFORM

In lieu of creating a separate mechanism, HB 3820 proposes the following amendments to Chapter 75 of Title 38:

• Updates the definition of Insurable Property.    The definition of insurable property will be updated to reference the most recent building codes approved by the Building Codes Council. 
• Clarifies the purpose of the Wind Pool.    Adds language clarifying the purpose of the Wind Pool and establishing it as a residual market mechanism.
• Enhances the powers of the Wind Pool.    Expands the powers and authority of the Wind Pool.    Provides that the Wind Pool has general corporate powers that are consistent with the powers exercised by other residual market mechanisms.
• Requires Wind Pool rates to be adequate.  The Wind Pool is intended to be a residual market mechanism.   Accordingly, it is supposed to be the market of last resort and not intended to compete with the voluntary property insurance market.  Unfortunately, rates in the Wind Pool appear to be lower than rates in the voluntary market.  It has been reported to the Department that rates for the Wind Pool are inadequate.  This bill requires that Wind Pool rates be reviewed annually to ensure that they are self-sustaining in order to fund adequate reinsurance purchases and to avoid the potential for assessments that not only are passed back to policyholders statewide in the form of higher premiums and deter insurers from doing business in the state.  If the rates are inadequate, the director would have the authority to take corrective action.  Any corrective action order issued by the director may be appealed to the Administrative Law Court.
• Clarifies the criteria for expanding the Wind Pool Territory. Sets forth objective criteria for expanding the Wind Pool territory: 

1)       the number of insurers writing essential property insurance in the

seacoast area and the capacity of those insurers;

2)    the extent to which surplus lines insurers are providing essential

        property insurance in the seacoast area;

3)    reinsurance activity impacting insurers writing essential property

        insurance in the seacoast area;

4)   the demand for property insurance in the seacoast area; and

5)    any other information deemed relevant to effectuate the purpose of this  

       chapter.

In determining whether expansion of the coastal area is warranted, the director or his designee shall consider:

1)    changes in the number of insurers writing essential property insurance  

        in the seacoast area and the capacity of those insurers;

2)   changes in the extent to which surplus lines insurers are providing

        essential property insurance in the seacoast area;

3)   changes in reinsurance activity impacting insurers writing essential

        property insurance in the seacoast area;

4)   changes in the demand for property insurance in the seacoast area; and

5)  any other information deemed relevant to effectuate the purpose of this

       chapter.

INSURANCE RATES

• Approval process for Rate Level changes.    Clarifies that the prohibition against a rate being excessive, inadequate or unfairly discriminatory applies to rates falling within the +/-7% flex-rating band.    Also clarifies that the Department can consider the impact of a rate on individual territories and insureds when determining whether a rate is excessive, inadequate or unfairly discriminatory. Section 38-73-260.
• Use of Hurricane Loss Projection models.    Requires modelers to provide the Department with a list of variables that are subject to insurer input.    This information will enable the Department to better evaluate the filing.  Section 38-75-1140(C).

HURRICANE LOSS MITIGATION GRANT PROGRAM

• Establishes the South Carolina Hurricane Loss Mitigation Grant Program within the Department of Insurance.
• Provides for an Advisory Council to the Director.
• The program does not create an entitlement or obligate the state to pay for inspection or retrofitting of residential property and implementation is subject to annual legislative appropriations.
• Provides for matching grants to encourage single family, site built homes to retrofit their properties to reduce vulnerability to hurricane damage.    Eligible properties must have a homestead exemption with an insured value of $250,000 or less. Grants are limited to $5000.    Low income homeowners are eligible for the $5000 grant with no matching requirement.  The bill specifies the type of improvements eligible for grant funds.
• Matching fund grants are available for local governments to encourage projects that will reduce hurricane damage to single-family, site-built residential property.
• Creates Manufactured Housing Mitigation and Enhancement Program.    Provides grants for manufactured home communities and mobile home parks.
• Provides for consumer education and consumer support. 
• Program funded through appropriations from the legislature, the premium taxes paid by the South Carolina Wind and Hail Underwriting Association and by reducing the commission paid to producers placing business in the Association by one percent.   The commissions will also be used to fund grants.
  

CATASTROPHE MODELS

To recover costs associated with the review and evaluation of catastrophe models the Director may impose a fee on insurers that use the models and on modeling organizations.

For more, see the Dept. of Insurance's Bulletin 2007 - 5, explaining the reform initially with more promised to follow.

Additional Resources

Home Page of SC SafeHome (SC comprehensive hurricane damage mitigation program (SCDOI)). 
Web site of the SC Wind and Hail Underwriting Association, for information on updated SC Wind Pool rates
Press Release from the Governor’s office for March expansion

Order to expand the SC Wind Pool  signed by Dir. Richardson, March 2007
Order to expand the SC Wind Pool  signed by Dir. Richardson, May 2007
Expansion Q&A for consumers

Announcement by the SC Wind & Hail Underwriters Assn

SC Coastal Property Report – January 2007. Report released by the Insurance Dept. under Eleanor Kitzman’s direction.