Raleigh

State legislators may well have had good reason when, a decade ago, they expanded the coastal territory of a state-backed homeowner insurance plan known as the Beach Plan.

They may have had fine motives when, in 2003, they allowed the Beach Plan to begin offering full homeownership policies rather than supplemental polices that covered only wind damage.

Legislators probably worried that without these moves homeowners in coastal counties, whether on the beach or 25 miles away from it, wouldn't be able to find affordable homeowners insurance.

The result, though, is that the value of property covered by the plan has increased from $17.8 billion to $69.8 billion since 2003. And with that added value comes much greater exposure to potential losses should another Hurricane Hazel or Hurricane Fran come calling.

Here's why North Carolina homeowners living hundreds of miles from the coast ought to be concerned: If the plan's losses should substantially exceed its assets -- $650 million in reserves and reinsurance that will cover another $1 billion in losses -- assessments will be passed along to all homeowners' insurance companies in the state.

Those companies will either pass along the costs to their customers, or they'll go belly up. In either case, homeowners from Murphy to Manteo will be paying higher homeowners' insurance premiums.

And, of course, worries about a major storm, or series of storms, can't be dismissed in a state with a history of big blows. Industry officials say it would take a storm causing something in the neighborhood of $4 billion in losses to bring the kind of stress to the program that concerns private insurers. But is that such a stretch?

A legislative study committee has begun considering changes to the plan to try to limit the exposure of homeowners who don't frolic in the sand in front of their $2 and $3 million beachfront homes.

Apparently, it's begun to dawn on some legislators that if that big storm were to come, and if people who own $100,000 houses far from the coast were forced to subsidize the losses suffered by multi-millionaires, there might be a little public backlash.

With pressure mounting, Beach Plan officials recently announced premium hikes and an increase in deductibles. Outgoing Insurance Commissioner Jim Long has apparently approved the changes, expected to take effect in February.

But it's not real clear whether these kinds of changes will really move the Beach Plan from insurer of first resort to insurer of last resort, as was intended when the state-backed plan was created in 1969.

And is it fair to raise the rates of working class homeowners in rural Brunwick or rural Hyde counties, far from the beach, mainly because of the risks caused by the proliferation of mega-beach houses along fragile barrier islands?

The plan now limits coverage to $1.5 million. Perhaps such a generous cap for a state-backed plan ought to be the real focus of policymakers.

Scott Mooneyham writes for Capitol Press Association. Contact him at smooneyh@ncinsider.com