The Alabama Legislature is seeking to extend the work of a commission examining commercial insurance challenges along the state’s coast, while exploring additional state-level strategies to address affordability and availability concerns.
In a recently introduced House Joint Resolution, lawmakers highlighted the potential financial impact of severe weather events, estimating that catastrophic storms could result in more than $400 million in tax revenue losses over a two-year recovery period.
Citing the economic significance of the coastal region, the resolution notes that Alabama’s Gulf Coast attracts over 11 million visitors each year, supports nearly 100,000 jobs, and generates approximately $10 billion in annual tourism spending.
According to a report from AM Best, lawmakers said that rising insurance costs and limited market access for commercial properties threaten the resilience of businesses and the broader economic stability of the state.
To stabilize the market, the resolution proposes examining the feasibility of a state-backed reinsurance or risk-pooling initiative. The study would also evaluate the potential role of risk-sharing arrangements and catastrophe bonds to help distribute financial exposure associated with major weather events.
In 2024, the United States faced significant losses from natural catastrophes, with insured losses projected to exceed $135 billion. A substantial portion of these losses resulted from hurricanes and severe thunderstorms affecting the Gulf Coast region, including Alabama.
Specifically, Hurricane Helene made landfall on September 27, 2024, followed by Hurricane Milton on October 9, 2024. Combined insured losses from these hurricanes were estimated to be below $50 billion.
The frequency and severity of these natural disasters have led to increased home insurance premiums in Alabama. Reports indicate that the average annual home insurance rate in Atlantic and Gulf Coast states, including Alabama, was $2,994 in 2024, which is 26% higher than the 2023 national average of $2,377.
Other areas of focus include a possible expansion of the Alabama Insurance Underwriting Association’s wind pool to extend support to commercial properties. Lawmakers also suggested considering tax credits or grants for businesses undertaking mitigation measures, and establishing a state-administered contingency fund or loan program to accelerate post-disaster recovery.
The resolution calls for the Alabama Coastal Commercial Insurance Joint Interim Study Commission to continue its work and provide annual assessments of market conditions. The Alabama Department of Insurance has expressed support for the proposal and said it would continue its collaboration with the commission.
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