Mississippi Wind Insurer to Cut Company Rate Breaks

Large businesses and government agencies have been getting a big break on premiums in Mississippi’s coastal insurer of last resort, but it’s coming to an end.

Mississippi Windstorm Underwriting Association representatives tell the Sun Herald that the wind pool’s residential policyholders in the state’s six southernmost counties should benefit, although lower rates aren’t certain.

“The wind pool shouldn’t have been doing this,” said Fox Everett Inc. insurance agent Bobby Portwood, who is also a member of the wind pool’s board. “It was actually making the residential rates subsidize private business.”

The wind pool sells insurance against damage from hurricanes, hail and other windstorms to people who can’t buy it elsewhere in George, Hancock, Harrison, Jackson, Pearl River and Stone counties. Most policies are concentrated close to the coast.

Businesses and governments bought policies from the pool that covered the first $1 million in wind losses with a deductible of only $20,000, or 2 percent. One policy could insure a $50 million condominium building or 30 government buildings valued at $250 million.

Major businesses and governments have always looked to the private market for coverage beyond the $1 million limit, but that meant the wind pool took the first hit for wind losses.

Now, the wind pool will base the deductible on property’s total value, so a policy insuring $50 million in property would have a $1 million deductible. The rule went into effect almost a year ago for new commercial and government policies. It begins Oct. 1 for renewals.

The wind pool buys insurance of its own – called reinsurance – to cover catastrophic losses from hurricanes. Director Joe Shumaker said removing expensive commercial and government buildings from the pool should drive down the cost of reinsurance, and thus should cut the premiums paid by the typical policyholder.

Mississippi coast government and business customers are likely to look to the commercial market for coverage instead.

“We will put together programs for them that, depending on the locations and schedules, they’re going to be looking at higher deductibles and premiums,” said John “Shorty” Sneed, president emeritus of Stewart, Sneed, Hewes. “But the (wind pool) consumer is the ultimate winner, there’s no doubt about that.”

Mississippi Coast Coliseum director Bill Holmes just learned what the changes will mean for that property.

Two wind pool policies – one for the coliseum and a second for the convention center – currently cost $44,000 a year. That same $2 million in coverage is estimated to cost $175,000 a year with a $250,000 deductible on the private market. The total value of the buildings is $146 million, meaning an insurer is likely to pay policy limits of $2 million if a major hurricane hits.