Reinsurance for property could jump 15%-20%

TUSCUMBIA — Colbert County commissioners are being braced for what could be a 15% to 20% jump in the cost of property reinsurance coverage.

Reinsurance is basically insurance purchased by insurance providers to cover some of the cost of the claims they pay out.

Hurricanes, floods, wildfires, other natural disasters, and the claims that go along with them, are driving up the cost, County Administrator Roger Creekmore said.

Creekmore told commissioners the issue is not unique to Colbert County.

"It's a nationwide problem," he said.

He also said there are companies that provide reinsurance that are getting out of the business, at least the part that reinsures governmental entities.

"Now since the competition has dropped off, you only have very few people who do that," Creekmore said. "The price of that insurance suddenly shot up."

Colbert County purchases it's liability insurance from County Risk Management, an insurance pool associated with the Association of County Commissions of Alabama, he said.

He said County Risk Management invests some of the premiums county governments pay and then purchases reinsurance to help cover the claims they must pay.

"They're insuring their pool," Creekmore said.

He gave commissioners an example: If the Colbert County Courthouse burned to the ground, the claim could be in the neighborhood of $20 million. The reinsurance helps protect County Risk Management from claims of that nature.

He anticipates the cost of reinsurance could rise by 100% or more and that cost will trickle down to the county level where insurance rates could go up 15% to 20%.

Couple that with potential increases in vehicle insurance and health care insurance, there could be a six figure increase, Creekmore said.

"We've got to carefully consider that at budget time," he said. "We need to get those estimates as early as we can."

The county commission usually begins working on the budget in July. The commission must approve a balanced budget by Sept. 30, which is the end of the fiscal year.

"It's honestly a global issue," said Sonny Brasfield, executive director of the Association of County Commissions of Alabama. "There are a lot of factors that have come into play kind of at one time. There have been huge global losses in reinsurance in the past three years."

In addition to losses to governmental entities, Brasfield said there have been significant losses in the private sector as well.

A "good bit of it," he said, is storm related.

Tornadoes in Kentucky, Missouri and Arkansas this year will have an impact on insurance in Alabama, Brasfield said.

Like home and business owners, counties have to purchase insurance to protect their property.

According to Brasfield, there are 18 county associations similar to ACCA across the country that pool their resources and purchase reinsurance, which usually drives down the cost for all the members.

Brasfield said county administrators were updated on the issues during a recent ACCA conference.

He said administrators were warned that there will likely be some adjustments to the rates counties pay for reinsurance.