North Carolina's insurance climate is getting tough. Due to over utilization of the North Carolina's Beach Plan, and coastal insurance rates that are under priced, the rest of the state's insurance consumers are about to pay the price.

The North Carolina Beach Plan was established as a market of last resort for insuring coastal property.  Over the years, the North Carolina Beach Plan has become the market of first resort.  The North Carolina Department of Insurance sets the maximum premium(s) that can be charged for any risk.  The problem is that under the leadership of the former insurance commissioner, North Carolina would not allow private insurance carriers to charge adequate rates for coastal risks.  The result, most insurance carriers that do business in North Carolina refused to write coverage in the coastal counties.  The result was made the market of last resort into the market of only resort.

Fast forward to 2009 and The North Carolina Beach Plan is faced with major problems.  The Beach Plan is under funded and unable to purchase adequate reinsurance.  In order to make sure that the Beach Plan remains solvent and capable of paying claims, in the event of the 100 year storm, the Beach Plan will have to impose assessments on all insurance carriers that write property insurance in the state of North Carolina.  The assessments will be made proportionately according to market share by each carrier.  The net affect, the Top 10 Property Insurance Carriers in the state of North Carolina are looking at the potential of being assessed 10's of millions of dollars.

Most North Carolina residents do not concern themselves with what takes place at the beach.  That will soon change.  In order to prepare for the possible assessments, insurance carriers are having to increase insurance rates to the non-coastal risks that they insure.  Is this fair?  The answer is no, but unfortunately since the carriers are unable to increase insurance premiums for the coastal exposures, they must find additional ways increasing reserves.  That leaves only two avenues, increasing premiums to the remainder of the state (which they are doing) and reducing their possible assessment by decreasing their market share (which many are doing by tightening underwriting requirements).

If you live at the beach, it is understandable that you do not want to voluntarily ask for an increase in premiums.  However, is your risk not substantially more than someone who lives in Greensboro?  Shouldn't you pay more to insure your home than someone in the Triad?

The North Carolina Insurance Industry is facing a huge challenge.  Unless some serious resolutions are made, the innocent will again carry the burden.