1. How would you explain what the Beach Pool to someone who doesn’t have much knowledge of the insurance industry?

The Alabama Insurance Underwriting Association (AIUA), more commonly known as the "beach pool", was voluntarily formed in the early 1970's by Insurance Industry leaders in co-operation with the Alabama Department of Insurance. The purpose of the AIUA is to provide a market wherein owners of eligible property located in coastal areas of Baldwin and Mobile counties may obtain essential insurance when they are unable to obtain coverage in the private insurance market.

2. How is the beach pool of benefit to homeowners?

Eligible property owners may insure their property in the AIUA when no other markets are available. The availability of beach pool coverage allows property owners to obtain coverage as required by mortgage lenders, often helping the property owner avoid default on their mortgage. The availability of an AIUA policy, when no other coverage is available, often facilitates the buying and selling of homes and small businesses.

3. What advantages will they gain by taking out a policy?

Insurance coverage for their eligible property from a professionally managed and well-organized association that has a proven history of paying claims in a timely, fair manner and is backed by the financial strength of the Insurance Industry and regulated by the Alabama Department of Insurance.

4. Why is the beach pool referred to as a “last resort?”

By design, AIUA policies provide basic, no frills, coverage at rates that are generally 25% to 50% higher than the average rates offered in the private market for a policy providing broad coverage options. Typically, a property owner will seek an AIUA policy as a "last resort" because they have been unable to find better coverage at lower rates elsewhere.

5. Why are policies so expensive with the Beach Pool ?

Several factors including the average annual loss ("routine",non-storm losses), the Probable Maximum Loss (PML) that can be expected in the event of a catastrophic loss ( several different modeling algorithms are used in this process), and the routine operating expense of the AIUA, are used by independent actuaries (retained by the beach pool) to determine an actuarially sound rate sufficient to cover the cost of routine operating expenses, routine claims and the cost of purchasing reinsurance to cover the AIUA for catastrophic losses equivalent to a 1 in 100 year PML storm event. These rates are then filed with the Alabama Department of Insurance where they are carefully analyzed by the Department and often negotiated down-ward before they are approved and implemented.

6. What options does a homeowner have if they’ve been dropped by their insurance company?

The first thing the property owner should do is to immediately contact their agent for assistance in obtaining replacement coverage through some other insurance company/market. Most, if not all, agents have access to more than one company or market. Often the agent will be able to find replacement coverage in the private insurance market. However, if the agent is not successful or does not have any other markets in their agency, the agent will, on behalf of the property owner, apply for coverage with AIUA. It is important that the property owner respond immediately to any notice of dropped coverage in order to avoid a gap in their insurance protection.

7. What can homeowners do if they can’t afford rising premiums?

Most insurance companies, including the AIUA, offer higher deductible options which may reduce annual premiums substantially. Many insurance companies, including AIUA, now offer or will soon be offering, hefty premium discounts to property owners who build new homes to "fortified" standards or install (wind) loss mitigation features, such as hurricane wind resistive shingles, roof straps, impact resistant doors, windows and shudders etc… to their existing homes. Many agents offer property owners the opportunity to finance the cost of insurance premiums through "premium finance agreements". Property owners who are experiencing difficulty paying the full annual premium may want to consider one or more of these options.

8. Why do insurance companies participate at varying levels in the beach pool?

Participation in the AIUA is determined, generally, by the percentage of market share a company writes in coastal areas of Baldwin and Mobile compared to the percentage of market share that company writes in the entire State. A Company that voluntarily writes their share (or more) in the coastal areas (as compared to their state-wide market share) will generally have a smaller percentage or no share of participation in the AIUA. A detailed description of this process, including the formula and every company's current participation, can be found on AIUA's website at www.alabamabeachpool.org under the tab "ABOUT AIUA" .

9. Can all insurers be required to participate at the same percentage?

It is important to remember that Insurance is not an entitlement program. Insurance companies are in business to make a profit. As a private enterprise, they cannot be "required" to sell their services at a loss. Requiring all insurers to participate at the same percentage could lead to market chaos. Those insurers who are already writing their share or more on a voluntary basis (many of which are some of the largest insurers in the state) would no longer have any incentive to continue voluntarily doing so. They would likely curtail their writings further, causing even more property owners to be without coverage in the private markets. These companies would simply take the position of …if I have to participate in the AIUA, then I'll stop writing on a voluntary basis and take my chances on the "required" percentage…. Others companies may decide to withdraw from Alabama completely.

10. What advice can you give to new homeowners looking for insurance coverage?

Find a professional insurance agent with access to known, reputable insurance markets. Make sure your property is well-maintained and in insurable condition. Where feasible, retrofit your home to include wind loss mitigation features. Don't wait until the last minute to obtain coverage. Read your policy and all policy documentation carefully. Consider higher deductible options. Don't "low-ball" your coverage limit…it almost always cost more to repair or replace a home than most people plan for…Buy flood insurance equal to your fire and wind coverage. Most of the damage incurred during recent hurricanes was caused by flood, not wind. Flood is NOT COVERED under most policies including AIUA policies.