BILOXI - South Mississippi residents will be spared an increase of up to 398 percent for wind-pool insurance because the federal government has decided $50 million in Katrina grant funds can be used to shore up the pool.
Gov. Haley Barbour and state Insurance Commissioner George Dale, whose offices worked to secure the money from grants Congress approved in December, joined in a news conference Wednesday at the Mississippi Coast Coliseum Convention Center to announce rate increases will be much less severe than anticipated.
Dale said a wind-pool rate increase is still coming for policies written or renewed as of July, but he did not have an amount or date because the numbers are still being reviewed.
Barbour, a Republican, and Dale, a Democrat, complimented one another for securing the money.
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Barbour said he appreciated Dale's "expertise and stick-to-it-ness," and Dale allowed, "We're glad to be able to work with a governor who has the know-how to get this done, to pull a rabbit out of the hat."
The federal support has for the moment alleviated concerns about the wind pool, the insurer of last resort, but Barbour and Dale acknowledged changes must be made to keep insurance affordable and available for Coast residents and businesses.
Those proposals will come from the Legislature, where ideas already are brewing. State Reps. Diane Peranich, D-DeLisle, and Jamie Franks, D-Mooreville, announced later Wednesday they plan to sponsor legislation in 2007 that would earmark a portion of gambling revenues for the pool.
But the structure of the pool, currently controlled by insurance companies, also could be up for debate. Insurance companies are responsible for pool losses based on the percentage of premiums each writes in Mississippi. The state's largest insurers bear less of the cost because they are credited for the wind insurance their companies write.
The Legislature created the wind pool in 1987 as the insurer of last resort for the six southernmost counties, never anticipating a storm Katrina's size, Dale said. He thinks changes to the pool are inevitable.
Dale said, "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."
The federal grant money will be used to offset the wind-pool's costs for reinsurance, which is basically insurance the pool buys to help cover its losses.
This year, $30 million in federal grants will be used to help cover $42 million the pool has borrowed to buy $350 million in reinsurance. Another $20 million in grant funds can go toward reinsurance in 2007.
When Katrina hit, the pool had only $175 million in reinsurance, which Dale said was eaten up in no time. The pool's losses for Katrina are estimated at $720 million.
"I don't want to mislead anybody," Barbour said. "This remedy is a remedy for what has happened to us because of Katrina. It is not going to affect insurance rates down the road. They will be more affected if a storm hits the state; and if it does, how bad is it."