Insurer bids beaches bye-bye.

• Position: Eastern

Coastal homeowners have long lived in fear that a big storm could force them from their seaside sanctuaries. Now some are starting to fear the fear itself--manifested by insurance rate hikes of almost 30% and a major insurer pulling out of the market. "We had taxpayers calling us saying, 'We're not going to be able to live here anymore with this going on,'" Dare County Manager Robert Outten says.

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Worries persist despite the legislature's overhaul of a state-backed insurance plan for high-risk coastal properties--commonly called the Beach Plan--in which companies pool assets and share risk, profits and losses. It was intended to be an insurer of last resort, but its low rates have made it increasingly popular. A legislative committee last year said the plan, now called the Coastal Property Insurance Pool, didn't have enough money to cover potential losses. Prodded by warnings that fear of those losses might cause insurance companies to leave the state, the legislature last August capped potential costs to insurers and put every property owner in the state on the hook for a disastrous hurricane season. Seven days after the law passed, AAA Carolinas announced that it would begin offering homeowner insurance throughout North Carolina.

Not everyone was convinced. Blooming-ton, III.-based State Farm Insurance Cos. announced in January that it would not renew policies on homes on North Carolina's barrier islands after May 1. Spokesman Russ Dubisky...