Mississippi’s insurance Commissioner, Mike Chaney, is looking to remove a tax subsidy and authority from the state’s insurer of last resort, the Mississippi Underwriting Association (widely known as the wind pool), stating that the pool spends too much on reinsurance protection.
According to an Associated Press article, Chaney is pushing a bill that’s designed to strip a tax subsidy and authority from the wind pool, which acts as the state’s insurer of last resort for hurricane-prone coastal residents.
Chaney feels the wind pool spends too much money on reinsurance protection, and House Bill 948, which was sent to the full House for further discussion by the House Insurance Committee, requires Chaney’s approval prior to the wind pool being able to purchase more reinsurance protection, above a certain level.
According to reports, the wind pool spent $38.4 million in 2017 on reinsurance, which was enough coverage for $910 million in losses. However, Chaney has questioned the cost of the wind pool’s reinsurance protection, stating that Alabama’s pool purchased roughly the same amount of protection last year, but for a cost of just $15 million.
The insurance commissioner believes that removing a tax subsidy and authority from the wind pool, which would give him more authority over the pool, will make premium increases less likely for some 25,000 policyholders in six coastal counties.
In recent times, the number of policies within the wind pool has been on the decline, partly as a result of deliberately high rates in an effort to push property owners to utilise other insurance carriers.
The bill also states that the wind pool must self-insure at least $100 million in risk, utilising the $250 million of premiums and public subsidies the wind pool has built up over time. In years without any storm activity, Chaney said this will enable the pool to spend less money on reinsurance protection.
However, wind pool manager, Joe Shoemaker, warned that this would empty the pool’s reserves if a hurricane were to hit.
Reports also note that the Bill would divert $3 million a year in insurance fees that have been subsidising the wind pool following Hurricane Katrina in 2005, and that money would go to assist with the purchase of rural fire trucks until at least 2021.
