Legislative eNews-JUNE 15, 2007

Airport Deal

STATE

Coastal Property Insurance Bill Becomes Law

On June 11, Governor Mark Sanford signed H. 3820, the Omnibus Coastal Property Insurance Reform Act of 2007.   The law is intended to bring market-based solutions to the rising cost and limited availability of property insurance along South Carolina's coast.  The bill was overwhelmingly supported in the legislature.  Below is summary of the primary provisions of the law. 

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 a home more wind resistant.
• Allows tax credits (up to $1,250) for lower-income property owners who pay more than 5% of their income toward 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 the seacoast area a credit of 25% against the premium tax. (Premium tax is 1.25% of written premium).

South Carolina Wind & Hail Underwriting Association Reform

1. 1)   the number of insurers writing essential property insurance in the seacoast area and the capacity those insurers

1. 2)   the extent to which surplus lines insurers are providing        property insurance in the seacoast area;

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.