Baldwin County residents will receive some much needed homeowners’ insurance relief from a market-based reform bill sponsored by state Sen. Ben Brooks that will restructure and expand the beach pool and offer state income tax credits to homeowners. 

“The (insurance) issue is very complex and therefore the solution is going to be complex,” Brooks said, noting that “this bill alone is not a silver bullet solution to all insurance problems in south Alabama.”

The bill comes at time when private insurers are hiking premiums, cancelling policies, or not offering insurance, in some cases, to new homeowners in the county. 

Allstate, which holds an 11 percent market share in the state, said it would drop 10,500 policies in Baldwin and Mobile counties this year and Alfa, which wrote more than half of the state’s property insurance premiums in 2006, said it would also cancel about 7,000 policy renewals. 

Ragan Ingram, a spokesperson with the state Insurance Department, said, “Stabilizing the marketplace is critical, and we think this bill will help do that.

“We’ve worked closely with Sen. Brooks over the past few months to provide research assistance and advice relative to the bill.”

Brooks, R-Mobile, said that the bill - which was a collaborative effort among the Governor’s Office, state Insurance Commissioner Walter Bell, insurance providers and consumers, and former Mayor of Foley Tim Russell, who heads Baldwin Mutual Insurance – will take a market-based approach to solving the insurance crisis by strengthening the beach pool. 

“The pool itself is the safety net, we are just trying to strengthen it,” Brooks said in a phone interview. 

The beach pool, also known as the wind pool, is the state-mandated insurance of last resort for coastal property owners, officially known as the Alabama Insurance Underwriting Association, Brooks said. 

If homeowners cannot obtain wind insurance, they can turn to the beach pool for help. 

Private insurers who write a certain percentage of policies in the state must also write an equal percentage of policies within the beach pool, which is currently regulated as the area generally south of Interstate-10.  Insurers are required to be members of the pool and share in its writing, expenses, profits and loses. 

Beach pool policy-holders, however, have been experiencing increased rate hikes and difficulty obtaining even this insurance.

Insurers can “write-out” and not be required to participate in the beach pool – which entails being responsible for potential heavy losses - by voluntarily writing policies in the pool’s designated area.  If insurers do not voluntarily write policies in this area, they must provide policies throughout the pool.

Brooks noted, however, that insurers can write policies north of the beach area, in Loxley for example, which is not as susceptible to wind-related claims. 

Brooks said the bill will require insurers, who want to opt-out of the beach pool or be responsible for less catastrophic losses, to voluntarily write a specific number of policies in three zones designated as: Gulf Front including Gulf Shores and Orange Beach; Beach including Foley, Daphne and Fairhope; and Seacoast, central Baldwin and the remaining parts of the county.

In all, the bill will expand and strengthen the area covered by the beach pool to include all of Baldwin and Mobile counties and require that insurers write some policies near the coast. 

“No insurer has stepped forward as of yet to communicate to the Department its opposition to the bill,” Ingram said.  

It will also restructure the Alabama Insurance Underwriting Association into a new authority called the Alabama Coastal Insurance Authority, which will be composed of a nine-member appointed board, five members representing insurance companies and three members not affiliated with the insurance industry, providing a “citizen’s perspective,” Brook said. 

Previously, the association was a board - who made rules and set rates - represented entirely by the insurance industry. 

Also, Brooks said the authority will be allowed to carry over unused money from year to year, which will assist building up reserve funds in case there is an active hurricane year.

“Monies in this fund shall not lapse, shall not be subject to transfer to the General Fund or other state funds, and shall not be redistributed” back to private insurers, according to the bill.

Brooks said that under the current beach pool regulations, unused money from policy premiums is redistributed back to the participating insurers.

A reserve fund, he said, will help stabilize beach-pool premiums for consumers.  

Homeowners can also receive state income tax credits, up to $1,000 or 25 percent of the improvement cost, whichever is less, if they make their homes more wind-resistant with improvements such as roof deck attachments, tie downs, or non-decorative shutters and window covers. 

The bill will be introduced in next year’s legislative session, which begins February.

Todd C. Stacy, deputy press secretary for the governor, said, “Gov. Riley has worked hard to make coastal insurance reform a reality and he will do everything he can to insure the bill’s passage in the Legislature.”

Stacey added: “We cannot allow a situation where we have to close down a whole section of the state just because insurance companies refuse to provide coverage there.  When small business owners can’t buy insurance – they won’t be able to stay in business.”

State Rep. Steve McMillan, R-Gulf Shores, said, “I think (the bill) looks good.  It’s the most comprehensive position anyone’s made.”

“I particularly like the free-market approach,” he said.

Brooks said that “if the governor calls a special session in October, I will ask that (the bill) be included.”