Wayne Goodwin, the North Carolina Insurance Commissioner recently announced a settlement agreement that will require the North Carolina Insurance Underwriting Association, also known as the “Beach Plan,” to reverse the payments of more than $16 million it made to its member companies in 2009.
The Beach Plan is North Carolina’s “insurer of last resort” for coastal policyholders who cannot find coverage elsewhere. Most of them purchase coverage for damage from hail and windstorms. Under the previous operating guidelines for the Beach Plan any surplus premiums have been allowed to be returned to the member companies. However, in 2009, the North Carolina legislature passed a law stipulating that the Beach Plan’s surplus funds must actually be retained from year-to-year, and be used to cover reinsurance costs, losses, and other expenses. The change in the law was a response to hundreds of thousands of coastal homeowners seeing their insurance premiums increase by an average of up to thirty percent.
Commissioner Goodwin ordered that an examination be conducted by the Insurance Department’s Financial Evaluation Division, which found that in December, 2009 the Beach Plan had distributed about $16.4 million to its member companies, which put it out of compliance with state law, which had taken effect on August 26th of that year. After negotiating with the Beach Plan officials, it was agreed that no wrongdoing would be admitted, but that the funds would be returned.
Goodwin told the press, “I am pleased that we came to an agreement that this money will be returned to the Beach Plan where it can help protect coastal property owners.”