NORTH CAROLINA INSURANCE

UNDERWRITING ASSOCIATION - NCIUA

(Coastal Property Insurance Pool)

NORTH CAROLINA JOINT

UNDERWRITING ASSOCIATION - NCJUA

(FAIR Plan)

2

AGENDA

NCIUA – COASTAL PROPERTY INSURANCE POOL

(Commonly known as the Beach Plan)

NCJUA – FAIR PLAN

(Fair Access to Insurance Requirements)

MARKET SHARE INFORMATION

REINSURANCE STRUCTURE

2011 FISCAL YEAR FINANCIAL STATUS

3

PURPOSE AND MEMBERS OF THE NCIUA

NORTH CAROLINA GENERAL STATUTE 58-45-1(a)

Created in 1969 by the General Assembly

Provides an insurance market for residents in the beach and

coastal areas

Encouragement of economic development on the coast

Supported by nonrecoupable assessment to Member

Companies – up to $1B annually

NORTH CAROLINA GENERAL STATUTE 58-45-10

Member Companies are all those authorized to write business

within the State

Exceptions for Town and County Mutual Associations and

Assessable Mutual Companies

4

LEGISLATIVE HISTORY OF THE NCIUA

Created in 1969 to provide essential coverage in the beach area for

Dwelling Fire

Expanded in 1988 to provide Wind/Hail only coverage in the

beach area

Expanded in 1998 to additionally provide Wind/Hail only in the

coastal area

Expanded in 2003 to provide all inclusive Homeowner coverage in

the beach and coastal areas, also Homeowner Wind/Hail only was

introduced

5

GOVERNING BOARD OF THE NCIUA

NORTH CAROLINA GENERAL STATUTE 58-45-30(a)

Board of Directors determined by the Plan of Operation as

approved by the Commissioner of Insurance

Board of Directors consists of 14 Members

7 – Insurance Industry Members

4 – Agent Members

3 – Public Members

Commissioner of Insurance appoints all Agent and Public

Members

Insurance Industry Members are elected annually by the

Member Companies

6

RATE DETERMINATION OF THE NCIUA

NORTH CAROLINA GENERAL STATUTE 58-45-45(a)

Most recent Manual Rates or Loss Costs legally in effect

North Carolina Rate Bureau – Personal Insurance

Insurance Services Offices (ISO) – Commercial Insurance

The NCIUA does not set rates

7

APPLICABLE SURCHARGES OF THE NCIUA

NORTH CAROLINA

GENERAL STATUTE

58-45-45(a1)

Surcharges developed

to assist in

maintaining status as

Market of Last

Resort, General

Statue 58-45-1(c)

The NCIUA does not

set policy surcharges

Commercial Fire ISO Manual Rate

Commercial

Wind

ISO Manual Rate

Dwelling Fire NCRB Manual Rate

Dwelling Wind NCRB Manual Rate X

1.05 (5%)

Homeowner NCRB Manual Rate X

1.15 (15%)

Homeowner

Wind

NCRB Manual Rate X

1.05 (5%)

8

DETERMINATION OF POLICY FORMS FOR THE

NCIUA

NORTH CAROLINA GENERAL STATUTE 58-45-45(a)

Policy forms applicable are those most recently approved by

the Commissioner of Insurance

Insurance Services Office (ISO) for Personal and

Commercial business

North Carolina Rate Bureau for North Carolina specific

forms but published by Insurance Services Office (ISO)

Separate Wind Hail policy forms must be approved by the

Commissioner of Insurance and are modeled after Insurance

Services Office (ISO)

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MINIMUM POLICY DEDUCTIBLES FOR THE NCIUA

NORTH CAROLINA GENERAL STATUTE 58-45-45(a2)

Minimum of one percent (1%) of the insured value for Named

Storm*

Residential deductible options and rates are published by

the North Carolina Rate Bureau

Commercial deductible options and rates follow the

Insurance Services Office (ISO) rating plans

The NCIUA does not set deductible options or rating

*Named Storm includes hurricanes, tropical storms and tropical depressions

if so named

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MAXIMUM POLICY LIMITS FOR THE NCIUA

NORTH CAROLINA GENERAL STATUTE 58-45-41

Residential property building value $750,000

Residential property contents 40% of building limit

Commercial property building $3M per fire division subject to

$6M aggregate for multi-fire division structures

Excess coverage must be purchased to full value of the

property insured for any risk that exceeds these limitations

The NCIUA does not set coverage limitations

11

REGULATORY OVERSIGHT OF THE NCIUA

NORTH CAROLINA GENERAL STATUE 58-45-30

Plan of Operation outlining written rules, practices and

procedures as approved by the Commissioner of Insurance

Rules, practices and procedures not outlined in the Plan of

Operation are filed and approved by the Commissioner of

Insurance prior to implementation

12

PURPOSE AND MEMBERS OF THE NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-1(a)

Created in 1969 by the General Assembly

Provides a basic insurance market for residents outside the

“beach area” defined in GS 58-45-5(2)

Encourage the improvement of properties

Arrest the decline of properties

Member Companies share in the expenses, income and losses

GS 58-46-5

NORTH CAROLINA GENERAL STATUTE 58-46-10

Member Companies are all those authorized to write basic

property coverage within the State

Exceptions for Town and County Mutual Associations and

Assessable Mutual Companies

13

GOVERNING BOARD OF THE NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-20

Board of Directors determined by the Plan of Operation as

approved by the Commissioner of Insurance

Board of Directors consists of 14 Members

7 – Insurance Industry Members

4 – Agent Members

3 – Public Members

Commissioner of Insurance appoints all Agent and Public

Members

Insurance Industry Members are elected annually by the

Member Companies

14

RATE DETERMINATION OF THE NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-55

Most recent Manual Rates or Loss Costs legally in effect

North Carolina Rate Bureau – Personal Insurance

Insurance Services Office (ISO) – Commercial Insurance

The NCJUA does not set rates

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APPLICABLE SURCHARGES OF THE NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-20

Substandard property conditions as outlined in the Plan of

Operation

Approved as the Substandard Rating Plan by the

Commissioner of Insurance

Surcharge(s) removed once the substandard condition(s) has

been corrected

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DETERMINATION OF POLICY FORMS FOR THE

NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-55

Policy forms applicable are those most recently approved by

the Commissioner of Insurance

Insurance Services Office (ISO) for Personal and

Commercial business

North Carolina Rate Bureau for North Carolina specific

forms but published by Insurance Services Office (ISO)

17

MINIMUM POLICY DEDUCTIBLES FOR THE NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-20

Minimum of one percent (1%) of the insured value for Named

Storm as outlined in the Plan of Operation approved by the

Commissioner of Insurance

Personal Lines applies in the coastal area

Commercial Lines applies statewide

Residential deductible options and rates are published

by the North Carolina Rate Bureau

Commercial deductible options and rates follow the

Insurance Services Office (ISO) rating plans

The NCJUA does not set deductible rating calculations

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MAXIMUM POLICY LIMITS FOR THE NCJUA

NORTH CAROLINA GENERAL STATUTE 58-46-20

Limits are defined in the Plan of Operation and approved by

the Commissioner of Insurance

Residential property building value of $750,000

Residential property contents 40% of building limit

Commercial property building $2.5M per fire division

subject to $6M aggregate for multi-fire division structures

Excess coverage must be purchased to full value of the

property insured for any risk that exceeds these limitations

The above limits were amended to be consistent with the

NCIUA maximum limits as defined by General Statute

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REGULATORY OVERSIGHT OF THE NCJUA

NORTH CAROLINA GENERAL STATUE 58-46-20

Plan of Operation outlining written rules, practices and

procedures as approved by the Commissioner of Insurance

Rules, practices and procedures not outlined in the Plan of

Operation are filed and approved by the Commissioner of

Insurance prior to implementation

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NCJUA/NCIUA POLICY COUNT

0

50,000

100,000

150,000

200,000

1996 1998 2003 2011

NCJUA NCIUA

21

NCJUA/NCIUA PREMIUMS

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

1996 1998 2003 2011

NCJUA NCIUA

22

NCJUA/NCIUA EXPOSURE

$0

$10,000,000,000

$20,000,000,000

$30,000,000,000

$40,000,000,000

$50,000,000,000

$60,000,000,000

$70,000,000,000

$80,000,000,000

1996 1998 2003 2011

NCJUA NCIUA

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NCJUA/NCIUA MARKET SHARE INFORMATION

BEACH AREA 71%*

COASTAL AREA 37%*

STATEWIDE 13%*

*Based on reported premium writings for calendar year 2010

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2011 REINSURANCE STRUCTURE

$4.0B TOTAL RISK FINANCING

$750M NCIUA Retained Earnings

$1B Member Company Non-Recoupable Assessments

$2.25B Purchased Reinsurance

$1.3B Attachment Point for Purchased Reinsurance

$750M NCIUA Retained Earnings

$550M Member Company Non-Recoupable

Assessments

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2011 FISCAL YEAR FINANCIAL STATUS

2011 FISCAL YEAR NCJUA NCIUA COMBINED

PREMIUMS $25,589,193 $303,724,266 $329,313,459

PAID LOSSES INCLUDING

EXPENSE

*Data as of 9/30/11

$(23,181,082) $(64,123,043) $(87,304,125)

OPERATING EXPENSE

AGENT COMMISSION

$(3,780,665) $(39,146,303) $(42,926,968)

OPERATING EXPENSE

NCJUA/NCIUA

OPERATIONS

$(2,400,687) $(5,056,555) $(7,457,241)

OPERATING EXPENSE

PREMIUM TAX

$(697,226) $(8,459,328) $(9,156,555)

REINSURANCE EXPENSE $(12,387,488) $(208,817,651) $(221,205,139)

PREMIUM REMAINING $(16,857,955) $(21,878,614) $(38,736,569)

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NCIUA NCJUA

END OF PRESENTATION