In early 2007, South Carolina created a new system for windstorm insurance: It expanded a long-existing state-run wind pool and introduced a number of tax credits to help individuals purchase policies in the private market and mitigate against storm damage while providing modest tax subsidies for private companies willing to write “full coverage” wind insurance. Relative to those implemented in other hurricane-prone states, this set of reforms seems more likely to unleash market forces in a way that makes insurance more affordable for much of the state’s population.
Nonetheless, it remains too early to assess the effectiveness of South Carolina’s reforms. In any case, the reforms are far from perfect; they represent little more than baby steps in the right direction, and, with poor regulatory authority, could actually end up harming the state. This paper describes the reforms and sketches out a plan to move towards a truly free market for wind insurance in South Carolina or elsewhere.