Insurers Cutting Back On Wind Damage Coverage
A number of insurers are cutting back on their wind coverage in states along the Gulf Coast. Most recently, State Farm announced that it wouldn’t renew coverage for residents in Mississippi that live within 1,000 feet of the water.
Insurers are trying to reduce their potential liability in hurricane prone areas. As the aftermath of Hurricane Katrina showed, juries were more likely to side with homeowners in legal battles with insurers over the wind vs. water issue.
This leaves many residents in coastal regions with a gap in their coverage, as is the case with flood damage. While the federal government offers flood insurance, the Senate resisted efforts to include wind damage coverage while voting to renew to National Flood Insurance Program that was set to expire on September 1st.
With many state regulators fighting attempts to raise already high rates in coastal states, insurance companies are finding it a losing proposition if a major storm hits. If the private market coverage for wind damage dries up further, Congress may have to revisit the issue despite the increased cost it would place on the program.
Congress is already considering a nationalizing catastrophe reinsurance, which would help lower premiums for high risk residents but that would only shift the cost to the rest of the public.
