BOONE - Our annual parade of storms is well under way, already churning at sea. And a recent conference underscored how much havoc a major hurricane could create not just at the coast, but for anyone who buys homeowner's insurance in North Carolina.

A storm that depletes the reserves of the Beach Plan, the state's insurance pool for wind coverage at the coast, would result in massive charges to insurance companies and an almost certain rate increase for homeowners across the state. The state's Beach Plan needs to charge rates that more closely match the risk of coastal properties, and it needs to build reserves so that it is prepared for a catastrophe.

Even Insurance Commissioner Jim Long is worried. "We're going to get the big one some day," he said at the conference at Appalachian State University. "I hope it's after this season, when I'm no longer commissioner."

More than half the U.S. population now lives within 50 miles of our coasts. And forecasters agree that we are in a period of increased, more-severe hurricane activity that could last at least two more decades. One panel of international experts projected that a Category 3, 4 or 5 hurricane was 35 percent more likely to hit the U.S. coast over the next five years than long-term averages would suggest.

Despite these risks, we are building more high-end developments and gated communities at the coast. We are building bigger and bigger homes, and we are building them in the known paths of hurricanes.

In North Carolina, every company that offers homeowner's insurance has obligations to the state-mandated pool known as the Beach Plan, even if the company doesn't cover property at the coast. The Beach Plan provides coverage for wind damage in 18 coastal counties.

The Beach Plan has roughly $650 million in reserves -- enough, when combined with its current reinsurance arrangements, to pay as much as $2.5 billion in losses. But that's not nearly enough to cover the destruction a major storm could inflict on $75 billion worth of coastal property that the Beach Plan insures.

If the plan exhausts those resources, it would make assessments against insurance companies to recover its losses. Those assessments would lead to higher homeowner's rates statewide and potentially drive smaller insurers into bankruptcy, even if they don't insure so much as a doghouse at the coast.

Such a situation could make insurers even more reluctant to cover property in North Carolina or at its coast. This crisis would suppress economic development and make it even more difficult for homeowners to recover from a major storm.

Before state legislators adjourned this session, they ordered a study of how a Category 3, 4 or 5 hurricane could affect North Carolina's insurance market. We welcome such a study. The Beach Plan's problems did not develop overnight, and neither will the solutions -- they should be phased in over time.

We would encourage legislators and the insurance commissioner, who approves the Beach Plan's operating plan, to consider the following:

* Current law says the Beach Plan is the "market of last resort" for coastal property owners. But it has become the market of choice. It should return to its intended role as a safety net.

* Prices in the Beach Plan should more closely match the risk. Homeowners' rates in inland areas are already higher than they need to be so that coastal property owners pay less than they otherwise would. That shouldn't be the case.

* The Beach Plan's prices should be adequate to build sufficient reserves and buy reinsurance to address the catastrophic losses the plan will inevitably face. The plan should adopt coverage limits on par with other states' coastal plans.

* The state should strengthen building codes so that coastal structures are resistant to storms. Strong building codes that are vigorously enforced mean less damage to homes and less tax money spent to clean up debris after hurricanes.

We look forward to working with legislators on this issue, which affects property owners across North Carolina. And we encourage voters to challenge the candidates for insurance commissioner this fall to say what they will do to put the Beach Plan on firm ground.

(Joe Stewart is the executive director of the Insurance Federation of North Carolina, a trade association of the leading property and casualty insurers that do business in North Carolina.)

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