How do Coastal American Homeowners Benefit from the Multiple Peril Insurance Act?
The federal multiple peril insurance policy will spread coastal risk geographically in a much more efficient manner than the state pools. In Gulf and Atlantic Coast communities from Texas to New York, the private insurance market has collapsed. Insurers have dumped hundreds of billions of dollars of coastal risk into state wind pools and other insurers of last resort. Most of the state-sponsored plans are not able to spread risk efficiently and not able to build up sufficient reserves to cover a major hurricane. Single state pools concentrate risk so that a large portion of the pool could be affected by a single event. In order to account for the capital to pay for a major hurricane, the pools are forced to charge higher and higher premiums to cover the cost of purchasing more overpriced reinsurance.
