The Commish Gets a Wind Pool Education…..

The first incarnation of Commissioner Chaney mentioning wind pool rates and pre Katrina pricing levels was at the Chamber luncheon last month when (I thought) I heard him tell the crowd that by June of 2009 we’d be back close to pre Katrina levels for wind pool pricing. Somehow I missed this yesterday:

Coast insurance premiums will reach “nearly pre-Katrina levels by June,” Mississippi Insurance Commissioner Mike Chaney says in a news release about the state wind pool.

The paying public didn’t miss it as our Insurance Commissioner’s Tuesday Press Release was soundly ridiculed by Sun Herald readers:

They are closer to pre-Katrina levels except that they are 75% more expensive. C’mon. Do the Math: 1,189 over 679. What a joke!

thought you had to at least have some math ability to get a job as commissioner… apparently not – $1189 = $679. It doesn’t take a rocket scientist to know that those 2 numbers are not even close…

Just once I would like to hear the truth from a politician. If they can’t do the math, they should get someone who can to explain it to them. If I had a house payment I couldn’t afford my house because of the insurance. Affortable housing isn’t the ptroblem. Insurance is the problem.

This is a bunch of bureaucratic baloney.

And to think those were some of the nicer remarks.

Today Anita Lee has a follow up story┬áthat tells the tale. Like so many things in insurance one has to wade waste deep through the BS and propaganda to understand the reality of the situation. For those who write the check to pay the wind pool premium the Commissioner’s press release comes across as insulting. Staying in Lala land will not help Commissioner Chaney from a PR standpoint IMHO.

Coast readers of the Sun Herald want to know who Insurance Commissioner Mike Chaney thinks he’s fooling when he says that state wind pool premiums will approach pre-Katrina levels in June.

“They are closer to pre-Katrina levels except that they are 75 percent more expensive,” one reader commented at sunherald.com. “C’mon. Do the math… What a joke!”

A news release that Chaney sent via e-mail quoted a rate of $679 for $100,000 of coverage on a masonry dwelling in August 2005, compared to $1,189 for the same coverage once wind pool rates drop in June. The average decrease will be 11 percent, after a statewide increase in 2006 of 90 percent for residential customers.

Chaney defended his math Tuesday afternoon. He said $100,000 in wind pool coverage for a Fortified Home would be only $97 higher than pre-Katrina rates, $776. A Fortified Home must meet tougher construction standards.

Problem is, only one has been completed in South Mississippi. Three to five others are under construction.

11 thoughts on “The Commish Gets a Wind Pool Education…..”

  1. Just another reason IMO for him to ditch the State Farm market conduct study – Chaney doesn’t need to borrow trouble.

    I’ve never found him to be the kind of person that would intentionally put out misleading information – but intentional or not the math doesn’t work. My best guess is he wasn’t given all the numbers because Chaney was one of the “go to guys” in the Legislature when the math was really complicated.

    Nonetheless, all that can be done at this point is to welcome the Commissioner to the real world of insurance where you never have all the numbers you need to make things add up.

    btw, Sop, speaking of the real world of insurance, did you notice any familiar names in the list of attorneys for Corban v USAA?

  2. Nowdy there is a good bit of overlap between Dickinson and Corban on the plaintiffs side. For USAA I suspect Greg Copeland and his firm would be representing them. Ronnie Musgrove was affiliated with them when he announced for Senate.

    I suspect you’re right about Mike Chaney. I’m pretty busy today otherwise I would have emailed his office asking for clarification. It is possible for instance his press release was strictly about fortified building premiums though Anita Lee didn’t report it that way.

    One other thing about the timing. With news Lecky King is “willing” to be deposed in McIntosh but is ducking the subpoena I wonder if that ties in to the completion of the Market Conduct Study. If she were to hold off on the deposition until after it’s issuance it is possible some skeletons could remain officially buried.

    Meantime those here that actually pay wind pool premiums continue to wonder who spiked Commissioner Chaney’s coffee yesterday.

    sop

  3. Thanks for the information/site. Have not seen anything about Lecky King playing depo dodge. Who is tring to depose her? The comments Chaney got yesterday in the Sunherald were pretty harsh. Like going on the Rossmiller site and saying something negative about State Farm.

  4. LOL Duesouth you got that right on the S/H comments. One difference between the S/H and Rossmiller is the S/H does not initially moderate the comments posted.

    We’ll have more on Lecky King – perhaps as early as tomorrow. There have been several rulings on McIntosh, many did not go the way State Farm wanted either. Bellesouth posted on this topic here.

    sop

  5. Don’t forget that the wind pool premiums are still temporarily subsidized by federal and state taxpayers paying a large share of the pool’s reinsurance premiums. When the subsidy ends or is reduced or when a hurricane hits somewhere and the reinsurance premiums jump up again, the wind pool premiums will be beyond any economic justification compared to the risk. In the long run, it just won’t work.

  6. Good point, Brian, and welcome to slabbed.

    It’s hard to find economic justification now IMO – there’s been so much “cost shifting” to the states over the last decade. In that light, the idea that adding wind to the NFIP would shift state wind pool costs to the federal government justified a veto was laughable.

    What Mississippi is investing in the Wind Pool could do a lot to offset the budget woes created by “cost shifting” rule changes and/or legislation at the federal level – Medicaid being just one example.

    btw, I very much appreciate the excellent information you post on Congressman Taylor’s blog. I know it must take a great deal of your personal time and appreciate that commitment as well.

  7. I can’t believe the commissioner would make those statements. There is no way insurance rates will retreat to almost pre-Katrina levels.

    The pool is probably still grossly underfunded. The standard sector is not going to write wind freely in the wind pool areas. That is just the way it is. It is not just MS, but anywhere with coastal exposure.

    Has the Excess and Surplus markets increased on the Gulf Coast? Within the past year nine new companies have come into SC writing homeowners in coastal areas. Why? The Department of Insurance allows them to charge adequate rates.

    That is the solution.

  8. Welcome, supsalemgr, and sorry for the wait.

    I can’t believe he made those comments myself – and bet he can’t either after he got all the facts from the Sun Herald and its readers.

    Sop is traveling but I expect him to reply as soon as he can.

    I recall a fairly recent announcement of new companies writing policies on the Coast – but not covering wind damage on the three coastal counties bordered by the Gulf.

    I believe one or all was to reconsider this decision if the State added more money to the windpool.

    If you happened to read the comments posted on the Sun Herald, you’ll see evidence of both the lack of coverage and the cost of what is available unaffordable to many.

    Remember, we’re talking shipyards, shrimp boats, and the service side of the hospitality/gaming industry down here – not Hilton Head.

    I think that President Carter saw that and that it very much factored into his recommendation of a federal subsidy to make insurance more affordable to the people who live and work in our coastal counties.

  9. I agree the MS Gulf Coast is not as upscale as parts of the SC coast. However, there are many “natives” in other parts of Beaufort, Georgetown, Charleston and Horry Counties. They are being squeezed by the prices, but coverage is available.

    I am of the opinion that as long as Americans want to live near the coast they will. The ones who continue to move there understand it will cost more. The major carriers in SC are not writing freely as their PML continues to increase without adding new exposures due to increased values. The new carriers also have limitations, but at least they are willing to “play”.

    Part of this capacity comes from the “house of cards” the Gov, legislators and regulators have constructed in FL. Citizens is continuing to write business at grossly inadequate rates. Private insurors will not compete with those rates. They go where rates are adequate.

    I am glad to participate in this board at it is not as emotional as the other board we post.

  10. Welcome Ms Supsalesmgr to you and Brian.

    I went back and rechecked the MID press release and found it was accurately reprinted in the Sun Herald. My understanding is the money from the legislature was used to buy multiple years of reinsurance at a better rate. My understanding is one more year of subsidy could reduce rates more. Like Brian I’m not certain I like that arrangement from a public policy perspective.

    I understand there is a mechanism in the current law that would trigger a state wide HO assessment in the unlikely event another combination of events that made up Katrina were to occur.

    There are some private markets available on the coast, especially in the 3 coastal counties not on the sound. There are also new markets opening in Louisiana.

    Frankly slabbed needs the insight of an actuary or two. My limited understanding of the underlying statistical theory is there is no such thing as a 100% corrrect answer.

    The thing that gives me heartburn is the lack of transparency in the reinsurance market. The devil is in the underlying assumptions and as the NAIC’s squabble with reinsurers over their global warming assumptions shows, those details are closely held.

    I agree Citizens in Florida is underfunded. Chip Merlin had some interesting thoughts on his blog why that was but I don’t have the link handy.

    We’d do well to emulate the Carolina coast Ms Supsalesmgr. In fact we liked that area so much that we used an architect in Beaufort for our rebuild plans.

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