New York Superintendent of Insurance James Wrynn announced a number of measures aimed at keeping the cost of coastal insurance affordable for residents of New York. The proposals include standard deductibles for windstorms, reducing the number of non-renewals insurers may issue and creating a catastrophe pool to stabilise premiums.
Wrynn says in his statement that homeowners pay a catastrophe load on their premiums each year but never receive that back if no catastrophes occur and it also doesn’t seem to be retained to pay for catastrophes in future years. So therefore his department are going to look into the viability of creating a pool (or some other plan) to create a facility where resources could be accumulated over time and thus reduce the need for large premium hikes after catastrophes occur.
New York ranks second only to Florida for the amount of insured coastal property in a state. That makes it a high risk area even though major storms or hurricanes are very rare that far north (although as we know, there is increased hurricane risk in the northeast this year).
Regulations in New York are restrictive and this could make formation of a pool difficult. It’s also likely to be fought by some insurers who do not want to lose the ability to book the catastrophe loading on a homeowners policy as profit when catastrophes don’t occur.
Perhaps insurers could look to the capital markets to create a product they can sell to investors which can return a profit/interest and there by cover the catastrophe loading that way?