The deal between state regulators and the insurance industry calls for an average 15% increase by mid-2026. But many coastal areas will see much steeper increases.
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N.C. Insurance Commissioner Mike Causey recently announced his department and the state's insurance companies had reached a legal settlement over how much the companies will be allowed to raise homeowner insurance rates over the next two years.
Industry had asked for an average statewide increase of 42%, with some areas around Wilmington seeing their rates double. The settlement calls for an average of 15% over the next two years, 7.5% this year and and another 7.5% next year, with areas along the N.C. coast seeing double that.
Causey hailed the deal as a victory for consumers and a fair settlement for the industry, which has been hammered by a series of natural disasters on both ends of the state in recent years.
“The insurance companies wanted to raise our homeowners’ rates up to 99.4% in some areas and an average 42.2% statewide in a single year,” Causey said in a statement. “I fought for consumers and knocked them back to 7.5% increases over two years with a maximum of 35% in any territory. We consider this settlement a big win for both homeowners and North Carolina.”
But property owners, especially in and around Wilmington, will still have to dig deeper into their pocketbooks to pay for insurance − and industry officials have said the deal doesn't solve the underlying problems that are driving insurance companies to seek steeper and steeper rate increases.
So is it a good deal? Let's dig into the facts.
How did we get here?
In January 2024, the N.C. Rate Bureau, a 14-member board that represents the industry, submitted a proposal to raise homeowner insurance premiums by 42% statewide and an eyewatering 99% in beach and coastal areas around Wilmington.
Since North Carolina is a regulated insurance market, industry needs to win state approval to raise rates.
The proposal, after a public hearing, was swiftly and vocally rejected by N.C. Insurance Commissioner Mike Causey.
The commissioner's action triggered a judicial hearing, which started in October and wrapped up late last year. Causey then had 45 days to announce his decision.
Why such a big proposed increase?
The N.C. Rate Bureau cited two main factors for the surprisingly large rate increase proposal. First, is the rising cost of pretty much everything, including labor and potential repairs, driven by inflation and the lingering impacts of labor and material shortages tied to the COVID-19 pandemic.
The other is climate change, which is causing more frequent and widespread property destruction, particularly tied to bigger and stronger hurricanes, as the warming climate fuels more severe weather events. Damages in North Carolina tied to 2018's Hurricane Florence, for example, were estimated to top $22 billion, with much of that hitting inland areas.
Other factors that are playing a role in the proposed substantial increase include the moratorium that was put into place during the pandemic on any rate increases and the cost of reinsurance − basically insurance for the insurance companies themselves in case a large-scale disaster stretches their financial ability to respond.
While a regulated market, theoretically meaning North Carolina just be ring-fenced from some of the issues hammering insurance markets in other states, notably Florida, Louisiana and California, reinsurance operates on a global scale. That means increasing costs of insurance for companies operating, say, in California due to massive wildfire payouts and exposure will be felt by companies operating in North Carolina.
What does the settlement call for?
The deal calls for an average statewide increase of 7.5% this year, effective June 1, and 7.5% next year in homeowner insurance rates.
But not all parts of the state are being treated equally.
Here's the breakdown for the Wilmington area and some other N.C. regions.
Why does the coast look like it's getting singled out?
Like many things, rate increases lag the big disasters that prompted the industry to re-examine its exposure and business model.
In an interview this fall, Causey said this rate increase request was mostly tied to the industry's costs and payouts associated with the spate of natural disasters, including 2018's Hurricane Florence, North Carolina saw several years ago. He added that his office is still dealing with claims tied to Florence, having recently paid one out to the University of North Carolina Wilmington (UNCW) tied to that devastating storm.
“It takes years from the time a storm hits for the rates to catch up,” Causey said.
That means damage from September's unnamed storm, which dropped historic amounts of rain on parts of the Cape Fear region, and losses associated with Tropical Storm Debby and any from Hurricane Helene aren't taken into account with this rate filing.
Ditto for the devastation Helene caused in Western North Carolina and why this rate increase is heavily weighted toward the coast and Eastern N.C.
With some damage estimates for Helene in the mountains pushing $60 billion, that will likely change when the rate bureau asks for its next increase.
Wait, another increase?
According to the settlement, the insurance industry can't ask for another increase until June 2027.
Causey said that is a fair compromise for all parties.
“These rates are sufficient to make sure that insurance companies, who have paid out large sums due to natural disasters and face increasing reinsurance costs due to national catastrophes, have adequate funds on hand to pay claims," he said in a statement.
But industry officials made it clear that they didn't get everything they wanted.
In a statement, Jarred Chappell, chief operating officer with the rate bureau, said the approved rate increase isn't "adequate."
"It’s a step in the right direction, but the North Carolina Rate Bureau asked for a larger increase because that’s what recent claims data called for," he said. "Storms have gotten stronger and more damaging, more people are living in disaster-prone areas, inflation in the construction industry has been particularly high and reinsurance costs have exploded.
"All these cost drivers remain an issue."
With little to forecast that any of those factors will change or even slow down in the coming years, especially with greenhouse gas emissions, the primary source of climate change, still on the rise globally, Chappell said the state and the insurance industry could find themselves at loggerheads again in just a few years.
"Unfortunately, when the two years covered by this settlement are up, we will almost certainly be in a similar position, calling for a significant increase to keep the North Carolina market strong and to encourage as many carriers as possible to compete here for customers," he said.
Reporter Gareth McGrath can be reached at [email protected] or @GarethMcGrathSN on X/Twitter. This story was produced with financial support from the Green South Foundation and the Prentice Foundation. The USA TODAY Network maintains full editorial control of the work.