Maintaining pricing freedom and a light regulatory touch is paying major dividends in South Carolina’s property insurance market, where the state is reaping the benefits of the ongoing soft reinsurance market and seeing a major reduction in the size of its wind pool.

The South Carolina Wind and Hail Underwriting Association reports that, over the past three years, it has shrunk from 47,366 policies to just 40,625 policies, as more and more residents of coastal Beaufort, Charleston and Colleton counties find they are able to obtain multi-peril homeowners policies that cover wind from private market insurers. (The chart below, from the Psc beach planroperty Insurance Plans Service Office, shows some of the progress the SCWHUA already had made through 2012.)

The so-called “Beach Plan” operates as a joint underwriting association of property insurers that do business in the state. Any resident of South Carolina’s coastal region may be eligible for coverage.

Amid calls from some quarters for a more onerous “prior approval” regulatory system for rates, R Street President Eli Lehrer and Associate Fellow Ernst Csiszar – a former South Carolina insurance director – determined in a March 2013 paper that the state’s system was holding up fairly well, producing reasonable rates with sufficient choice for consumers.

Of particular note, Lehrer and Csiszar found, is that South Carolina taxpayers faced significantly lower risk of post-storm assessments (sometimes called “hurricane taxes”) than other coastal states, such as Florida, Louisiana, Texas and Mississippi – all states with more stringent rate-making rules. The most recent numbers are bearing that out:

The soft reinsurance market is also having an effect. The windpool recently secured enough catastrophic coverage so it should be able to withstand up to a one-in-200 year storm.

“That reduces the chance we will send those insurers a large assessment,” said [SCWH Executive Director Smitty] Harrison.

We can only hope other coastal states – notably Florida and Texas – will look to the success in South Carolina as a model.

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