Facts about Coastal Alabamas Homeowners Insurance Crisis and The Solution. Its time to FIX this Crisis -- Not Dabble at it (Based on the hhii Best-Case Scenario)

Lets get a couple important facts out of the way, first.

Source: A.M. Best, ISO, Insurance Information Institute. * As of 6/30/11. Surplus is a measure of underwriting capacity. It is analogous to Owners Equity or Net Worth in non-insurance organizations ($ Billions) Surplus as of 6/30/11 was a near-record $559.1 down 1% from the record $564.7B as of 3/31/11, but up 27.9% ($122B) from the crisis trough of $437.1B at 3/31/09. Prior peak was $521.8 as of 9/30/07. Surplus as of 6/30/11 was 7.1% above 2007 peak. Despite the increase in natural disasters, the U.S. insurance industry was the richest it has ever been in March Dr. Robert Hartwig slide US Policyholder Surplus: 1975–2011*

Theyre nowhere near going broke. Another fact to get behind us...

All licensed insurers writing P&C coverage insurance in Alabama Current Members (Plan year 2011) 485 Companies 329 Exempt from participation 306 write no P & C in AL 156 Companies are subject to assessments ranging from.0001% up to % 69 Companies report voluntary written premium in eligible areas 23 voluntarily write sufficient coastal property to be exempt from AIUA assessments 11/21/2011 Alabama Insurance Underwriting Association Who are Plan Members? 156 Companies write Homeowners Insurance in Alabama. A lack of competition is not the problem

If Moneys not the Problem & And Competitions not the problem?... What is The Problem?

The Problem: An Alabama Department of Insurance (DOI) Lack of Information & Bias......that leads to unfair price Discrimination Against the Coastal Counties. The DOI assumes Alabamas Coastal Counties are more expensive to repair due to wind-and-hail than the rest of the state. Significantly more.

In 2006 When this Crisis Started the coastal counties Paid the State Average. The Alabama Average today is about $850 a year

ALABAMA HOMEOWNERS RATES Average Premium Relativity (with Wind) by City for a $200,000 Home: Birmingham (35242) = 100% Huntsville (35801) = 110% Montgomery (36117) = 111% Tuscaloosa (35401) = 120% Camden (36726) = 135% Gadsden (35901) = 136% Dothan (36301) = 139% Saraland (36571) = 263% Mobile (36608) = 294% Bay Minette (36507) = 300% Fairhope (36532) = 311% Gulf Shores (36542) = 328% Alabama Coastal Premiums today Are 250 to 325% Higher than other Parts of the State.

In 2006 (the time of abundant news about Global Warming) The DOI decided Alabamas coastal counties would be wildly more expensive to repair than the rest of the state. Warmer oceans would make hurricanes more frequent and damaging. The Alabama DOI allowed Insurance Companies to Introduce Wildly Experimental Hurricane Catastrophe Models

Coastal Insurance Prices skyrocketed 10,000s of Mobile and Baldwin Families were Dumped 10,000s of Coastal Families are Now Functionally Uninsured or have simply Dropped Their insurance Altogether. Some have Lost their Homes. $200 million premiums in excess of the State Average is siphoned out of our Two Counties each year. Thats a lot of Jobs.

Was the DOI right? Are Coastal Counties REALLY 300% more Expensive To Repair Than the Rest of the State? ?

In 2006 The Wildly Experimental Hurricane Catastrophe Models predicted $60 billion in US hurricane losses over the forthcoming 5 years (from 2006 – 2010)

Karen Clark – the Inventor of the Models – found that the actual losses were only $15 Billion. (The models overpredicted losses by $45 billion.)

Karen, -- The Inventor of the Hurricane Catastrophe Models -- Has Repudiated her Invention, And proposed a New Way.

In 2011 RMS A company that Predicted $67 Billion in Losses Dramatically Revised its Hurricane Catastrophe Model

Their colored map shows the effects of their revisions. The modeler Overstated the costs in Mobile & Baldwin counties 50%. & Understated the costs inland by as much as 400%.

Is the Coast REALLY More Expensive to Repair than Inland? If not... then Coastal Alabama Should pay the State Average Like it always Paid In the Past $850 a year

Theres more...

As RMS figured out, When hurricanes strike Alabamas coastal counties, they dont stop at the county line. Hurricanes do significant inland damage, too.

FEMA declared 65 of Alabamas 67 counties Disasters after Hurricane Ivan Designated Counties for Alabama Hurricane Ivan Disaster Summary For FEMA-1549-DR, Alabama Declaration Date: September 15, 2004 Incident Type: Hurricane Ivan Incident Period: September 13, 2004 through September 30, 2004 Individual Assistance (Assistance to individuals and households): Public Assistance (Assistance to State and local governments for the repair or replacement of disaster-damaged public facilities): Autauga, Baldwin, Bibb, Bullock, Butler, Calhoun, Cherokee, Chilton, Choctaw, Clarke, Cleburne, Coffee, Colbert, Conecuh, Coosa, Covington, Crenshaw, Cullman, Dale, Dallas, Dekalb, Elmore, Escambia, Franklin, Geneva, Greene, Hale, Houston, Jackson, Jefferson, Lamar, Lawrence, Lee, Lowndes, Marengo, Marion, Marshall, Mobile, Monroe, Montgomery, Perry, Pickens, Pike, Shelby, Sumter, Talladega, Tallapoosa, Tuscaloosa, Washington, Wilcox, and Winston Counties for assistance for debris removal and emergency protective measures, including direct Federal assistance, at 100 percent Federal funding of the total eligible costs for a period of up to 72 hours. Hazard Mitigation Grant Program (Assistance to State and local governments for actions taken to prevent or reduce long term risk to life and property from natural hazards): All counties are eligible to apply for assistance under the Hazard Mitigation Grant Program. FEMA Disaster Summary For FEMA-1549-DR, Alabama Alabamas Disaster Counties after Hurricane Ivan Autauga, Baldwin, Barbour, Bibb, Blount, Bullock, Butler, Calhoun, Chambers, Chilton, Choctaw, Clarke, Clay, Coffee, Colbert, Coosa, Conecuh, Covington, Crenshaw, Cullman, Dale, Dallas, DeKalb, Elmore, Escambia, Etowah, Fayette, Franklin, Geneva, Greene, Hale, Henry, Houston, Jackson, Jefferson, Lamar, Lauderdale, Lawrence, Lee, Limestone, Lowndes, Macon, Madison, Marengo, Marshall, Marion, Mobile, Monroe, Montgomery, Morgan, Perry, Pickens, Pike, Randolph, Russell, Shelby, St. Clair, Sumter, Talladega, Tallapoosa, Tuscaloosa, Walker, Washington, Wilcox, and Winston Counties. Two-thirds of all claims after Ivan were made north of Mobile and Baldwin counties, according to a source cultivated by Alabama State Senator Trip Pittman.

Some hurricanes do more damage inland than on the coast. The eye of Hurricane Katrina, skipped Alabamas coastal counties, curved from the Mississippi Coast back east to clip the northwestern corner of Alabama, the only part of the state that the eye touched.

Your tax money being spent for Katrina Relief in Tuscaloosa.

8:50am Aug 24 – Landfall in FL 8:30am – Aug 26 – Landfall in LA Mid-day – Aug 28 – Began to Dissipate Hurricane Andrew behaved in a similar way

Hurricane data alone suggests inland Alabama incurs more wind losses than the models predict. And they just deal with Hurricanes alone. What about Other Kinds Of wind-and-hail events?

**Through Dec, 7, Source: PCS Division of ISO Catastrophic Homeowners* Claim Activity in Alabama, by Event** Date Perils Avg. Pmt $ Total $ Pd. # Claims HO $ % HO # % *Includes all categories of dwelling policies, such as home, condo and renters policies 2011 YTD Totals Event Total 2011:Q1 Total Event Total 2011:Q2 Total 2011:Q3 Total Event Total Alabama suffered Five Catastrophic Wind or Hail events in 2011 – not just one. Four others in addition to the April 27 Tragedy. It suffered significant wind damages in 2009, Too.

Tornado Tracks by Enhanced Fujita (EF) Scale, January – July /01/09 - 9pmeSlide – P6466 – The Financial Crisis and the Future of the P/C Source: NOAA at: Alabama averaged 59 tornadoes per year from , but 128 from Jan. – July 2011, the highest in the country AL had the highest concentration of EF-3, 4 and 5 storms in 2011 Alabama averaged 59 tornadoes each year from

Alabama averaged 1 Hurricane every 11 years during the 20 th Century 649 Tornadoes per Hurricane 59 (Tornadoes a Year) X 11 (Years between each Hurricane) =

Are the Coastal Counties REALLY More expensive to Repair Than the rest of the State? ?

Severe Weather Reports in Alabama, January 1December 5, 2011 Source: NOAA Storm Prediction Center; There were 1,288 severe weather reports in AL through Dec. 5 In 2011 alone, In Alabama alone, There were 217 severe Hail reports 170 Tornadoes 901 Other severe wind reports

Are the Coastal Counties REALLY More expensive ? How do we answer that question?

Simple Compare the costs to repair the coastal counties with the cost to repair inland counties. So. Why not do this?

Because the Alabama Department of Insurance does not collect data on a county-by-county basis.

Huh? The DOI suddenly allows Companies to charge Coastal Counties 300% more than the rest of the State, And... It does Not Have any of its own supportive, county-by-county historical data justifying this Unquestioning use of wildly experimental catastrophe models and huge change in price?

Is a Pattern Emerging?

The DOI allows companies to charge Coastal Counties more for... FIRE Insurance, Even though they know there is no actuarial justification for the difference.

Another suggestion of Bias In Governor Bentleys DOI

The DOI says the upstate tornado tragedy in 2011 was a 1-in-250 Year Event (The years 1761 to 2011 = 250) (If such events happen only once every 250 years, then there is no need for upstate to share in wind losses with the Coast) HOMEOWNERS RATE COMPONENTS The non-hurricane wind rate is developed from either the individual companys 20- or 30-year historical claims data for Alabama or from industry claims data for Alabama. The losses for the 20 years are compared to the premiums for those 20 years to develop a non-hurricane wind load, which is then added to the hurricane load developed from the models. In the case of the April, 2011 Alabama tornadoes, which may be considered a 1-in-250 year event, the DOI has announced that it will only permit 8% of these losses to be included in future rate filings. (8% / 20 years = 0.4% = 1/250).

The DOI says the 1-in-250 estimate was given to them by an independent company named AON But... What does AON say?

The incident is more likely a 50-year event. Model Miss: April, 2011 Storms DOI capping at 1:250 years based on countrywide model estimate Will this hurt availability? Is tornado/hail risk changing?

And what has Actually happened historically ? When was the last similar event?

Two of the worst tornado disasters in the state occurred on the same day as part of the famous Super Tornado Outbreak of April 3 and 4, 1974, which produced 148 tornadoes and affected 13 states across the south and midwest. On the evening of April 3, two F5 tornadoes on the Fujita Scale hit Tanner approximately 30 minutes apart and left 55 dead. Later that same evening, another F5 tornado hit Guin and left 23 dead. Other notable tornado disasters in Alabama include the Birmingham tornado of April 15, 1956 (25 deaths); the Huntsville tornado of November 15, 1989 (21 deaths); the Palm Sunday tornado that destroyed the Goshen United Methodist Church in Cherokee County on March 27, 1994 (20 deaths); and the Oak Grove tornado of April 8, 1998, (32 deaths). The 1974 Super Tornado Outbreak Left 78 Upstate Alabamaians dead Suggesting that – historically – these upstate events at a 1-in-37-Year Event

Why does the DOI -- fudges risk for upstate policy-holders -- publicly paints a minimalist upstate wind-and-hail picture... While subjecting the coast to extraordinarily experimental, sky-high pricing models? BIAS?

One more example

Governor Bentleys Affordable Homeowners Insurance Commission is heavily stacked with insurance people. It has a strong presence of people from upstate. At one of its meetings, Senator Ben Brooks listed all the bills that hes pushing, and then asked all members of the commission if they saw a single one that would cause premiums to increase upstate. They saw none. NOT ONE Governor Bentleys Commissioner of Insurance – Jim Ridling – is a member of this commission

Yet a couple months later, Governor Bentleys Commissioner Ridling told the Associated Press...

Panel still studying ways to reduce insurance rates 12:49 PM, Mar. 26, 2012 | Comments Print Share A Republican Sen. Ben Brooks is a member of the governors Affordable Homeowners Insurance Commission. / AP Written by Phillip Rawls The Associated Press Filed Under News Alabama Robert Bentley GOV. ROBERT BENTLEY HAS NOT YET KEPT A CAMPAIGN PROMISE HE MADE IN 2010 TO HAVE THE LEGISLATURE ADDRESS THE RISING COST AND DECLINING AVAILABILITY OF HOMEOWNERS INSURANCE IN ALABAMA. ALMOST A YEAR HAS PASSED SINCE HE ANNOUNCED THE CREATION OF A COMMISSION TO STUDY THE INSURANCE ISSUE, AND HES STILL WAITING ON THE GROUPS RECOMMENDATIONS. Panel still studying ways to reduce insurance rates DOI Commissioner Jim Riddling: What the people on the coast want is for me and the governor to cut their rates and raise the rates for everybody else in the state. I dont have the ability to do that, and I dont think the governor does, Commissioner Jim Ridling said. Associated Press Montgomery Advertiser March 26, 2012

The governors official insurance cabinet member persisted in telling upstate legislators and residents that all we on the coast want is... to cut (our) rates and raise the rates for everybody else in the state

Cheaper fire premiums upstate Tornado modeling the emphasizes Event minimalism Governor Bentleys cabinet-level Commissioner of Insurance telling the rest of the state that all we want is a free ride

Is the governors state regulatory agency BIASED? YOU Study the evidence and tell us.

Meanwhile What next?

ALABAMA RATE STATUTES Alabama statute says that rates must not be: * Excessive * Inadequate * Unfairly discriminatory Alabama Law & Policy requires that the DOI insure fair pricing practices.

Its time to require that the DOI follow the law It must quit Guessing That the Coastal Counties are more expensive than the rest of the state. It must quit Discriminating against the Coastal Counties. Its time that the DOI treat all Alabamians fairly. Like the law requires.

Whats needed is the The Clarity Bill. It allows us to do the math. It requires the DOI to collect, Aggregate, and publish on- line, by zip code and peril: a) dollar amount of claims b) dollar amount of premiums c) total number of Policies And d) to use this historical data as a guide when determining fair premiums statewide.

With this data we can compare actual losses around the state. It will serve as a plumb line to check the wildly experimental models.

Texas Does It

Are we really more expensive than the rest of the state... Lets quit guessing And Do the Math

What you can do... Before the Coastal Counties can speak persuasively to the rest of the state, The Coastal Population and Leaders must be united behind the Solutions. Presently our leaders – from elected officials, to civic club officers, to chambers, to pastors, to media – are all over the map regarding solutions. This must change. YOU have to require it.

What you can do... Get on the HHII list and stay informed. Pay close attention to proposed solutions and decide if your legislators and state officials are proposing something that fixes the crisis... Or only dabbling at it Repudiate the Governors Affordable Homeowners Insurance Commission, if it does not deliver a solution. Make your repuidation loud and clear. Occasionally come to hhii meetings in your area.

-- Especially come to public meetings when HHII brings in people who have the power to make change. -- Get on a committee. Sign up tonight. What else you can do...

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