Feds Cushion Windpool Insurance Rate Hike - WLOX.com - The News for South Mississippi

Feds Cushion Windpool Insurance Rate Hike

Mississippi will use $50 million in federal grant money to ease the sticker shock of an anticipated rate increase for wind-pool coverage of homes in the hurricane zone, officials said Wednesday. Gov. Haley Barbour and Insurance Commissioner George Dale announced the plan during a news conference in Biloxi.

Barbour said that the U.S. Department of Housing and Urban Development has given the state permission to use $30 million this year and up to $20 million next year for the windpool expenses.

The federal money will go toward paying off the $42 million bank loan the windpool has already received to buy reinsurance. That's insurance for insurance companies.

"Instead of $42 million, you subtract $30 million from the 42, you're talking about $12 million that will be needed in the windpool," Dale said.

Residents will still pay more for coverage, but Dale said the government's bail-out cushions the increase. The Mississippi Windstorm Underwriting Association, commonly known as the windpool, has asked Dale to approve a 397.8 percent rate increase for thousands of coastal homes.

Barbour said the government is giving policyholders a big break. 

"I suspect there will be some increase, but nothing like what was going to be done because the federal government is allowing us to use some of these funds for this purpose."

The governor said this is an immediate solution in response to Hurricane Katrina. Barbour said he's not thinking about another storm right now. 

"This $50 million will help immensely in keeping insurance rates affordable for the next couple of years based on what happened with Katrina. If we have another really bad hurricane, we'll have to go back and look at it again," Barbour said.

Dale said the federal money buys the state some time, but he says changes need to be made to the windpool. He's asked for a joint legislative committee to help. 

"To look at all facets in the windpool to see if there's some changes that need to be made to the windpool, because we can't continue after every storm to run to Washington to try to get something to bail us out of the problems we have here."

Dale said it would be another two to three weeks before he knows just how much more windpool customers will pay for insurance.

The windpool was created by the Mississippi Legislature as the state struggled to recover from the devastation of Hurricane Camille in 1969. It is intended to provide insurance on property that individual companies won't cover.

Democratic State Reps. Diane Peranich of Pass Christian and Jamie Franks of Mooreville issued a news release Wednesday saying they'll file a bill next year that would earmark some of Mississippi's casino tax collections and put the money into the windpool.

It would not require an increase in the tax rate; rather, it would set aside some of the extra money collected as the gaming industry grows.

"There is very little construction activity occurring on the coast right now due to the fact that insurance premiums are so large,'' Franks said. "The insurance premiums will be larger than mortgages in many instances, and that will stymie residential growth.''

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