Alabama, one of the five Gulf Coast states regularly exposed to significant hurricane risk, is trying to cobble together legislation that would give state residents access to affordable windstorm insurance.   

In the wake of back-to-back April tornadoes that produced over $2.45 billion in damage, Alabama Gov. Robert Bentley created the 32-member Affordable Homeowners Insurance Commission (AHIC) to tackle the problem of homeowners' insurance availability on the coast and find ways to make insurance more readily available and affordable to catastrophe prone coastal regions.

Bentley, who owns a coastal summer home in Fort Morgan in Mobile County, promised during his 2010 campaign to address the rising costs and declining availability of homeowners insurance in Mobile and Baldwin, the state's two coastal counties.

"We need to lower the cost of home insurance in this state, whether it's at the coast or wherever it may be in the state of Alabama,'' Bentley said during an AHIC forum in September.

But Alabama's gulf coast residents are getting frustrated with the state's lack of progress after the governor promised to address and solve the coastal windstorm insurance issue when he took office in 2010.

While the Alabama State Legislature opened its 2012 session on Feb. 7, officials familiar with the state's coastal windstorm insurance issue say it's unlikely legislation will be drafted right away this year.
Other officials remain optimistic.  

"The insurance commission needs to give hope to Alabama citizens that insurance will live up to its calling to provide the way through a catastrophe,'' said Michelle Kurtz, an AHIC member and member of the Homeowners' Hurricane Insurance Initiative (HHII), a southern Alabama-based grass roots citizens' group that's pushing for insurance industry oversight by the state and lower insurance rates. HHII representatives are asking the state to force insurance companies to be more transparent and provide facts and figures on how they calculate their rates, and to offer coastal citizens reduced insurance rates.

Alabama state Sen. Ben Brooks said that a key component to any proposed legislation is a bill that would force insurance companies to publicly disclose the number of policies that they write, the premiums that they charge and the loses they incur in the state.

Insurance companies that operate in the state have said they will oppose the inclusion of any such disclosure riders in any proposed insurance bill.

Alabama legislators and the AHIC are also weighing the creation of an insurance authority for Alabama's two coastal counties that would help cover windstorm deductibles for homeowners. Probate Judge Tim Russell, who chairs the commission, said such an authority would have the power to issue catastrophe bonds to cover catastrophic events.

Meanwhile, neighboring Texas, which also has its own state-supported windstorm insurance plan, is now pushing for an inter-state approach, where several coastal states would pool their resources.

State-subsidized windstorm insurance programs in Gulf Coast states, called insurers of last resort, have in the past decade faced explosive growth and continued uncertainty over whether the funds could sustain another multi-billion-dollar hit. The Texas association is funded through policyholder premiums, assessments on property insurance providers, reinsurance and a catastrophe reserve trust fund, according to the department.

Presently, the Alabama Insurance Underwriting Association, also known as the "Alabama Beach Pool," provides coastal windstorm coverage to those who cannot receive coverage elsewhere. According to its Web site, the number of policies in force has risen from just under 3,000 in 2004 to over 22,000 in 2011. The total insured value of the properties has risen from $337 million in 2004 to $3.9 billion in 2011.  
Texas' proposed plan would spread the risk among all coastal states to ensure the next storm doesn't cause a major economic catastrophe. Lawmakers also are exploring ways to strong-arm private insurance companies into covering coastal property and other areas they withdrew from after costly storms.

The idea of combining risk has its supporters in the Texas, Louisiana and Mississippi state legislatures. Alabama's legislature to date has not expressed an interest in joining.

-Jim McConville