Municipalities insure properties, such as town halls, water and wastewater treatment plants and recreational facilities, through risk sharing pools, such as the Municipal Association’s South Carolina Municipal Insurance and Risk Financing Fund. Municipalities may also self-insure or purchase commercial insurance to insure this risk. To provide continuity of city operations, it is important that a city or town insure against property losses from events such as fires, floods, hurricanes and lightning damage. Because such losses can have very large costs, insurers routinely purchase reinsurance to protect municipalities and the financial integrity of the insurer, against catastrophic or other large losses.

The increasing frequency and volatility of events, such as hurricanes, severe convective storms, wildfires and floods has resulted in increased property claims not only in South Carolina, but worldwide. A recent PropertyCasualty360 article noted that the definition of natural catastrophes has expanded to events such as winter freezes, like the one experienced in December 2022 during Winter Storm Elliott.

Increased claims, along with increased building values and inflationary pressures, has resulted in skyrocketing costs to repair or rebuild damaged properties. Unfortunately, increased claims activity and inflationary pressures continues to increase the cost to provide property insurance for municipalities.

Some insurers are expected to experience an increase of potentially 50% in reinsurance costs, or possibly a greater amount, during the 2024 renewals. Heather Ricard, director of the Association’s risk management programs, noted that SCMIRF has already experienced significant growth in reinsurance costs and expects further increases during the January 1, 2024, renewal.

In order to help reduce property claims and better manage reinsurance cost, Ricard encourages municipalities to take action now, such as regularly inspecting and maintaining properties; installing leak detection systems; and installing lightning arrestors. Proactive measures such as these help programs such as SCMIRF manage reinsurance costs.

“Reinsurers consider a number of factors, such as condition of buildings, property locations, as well as overall history, in setting future reinsurance rates, so preventing claims is critical in managing this cost,” Ricard said.  

For more information about SCMIRF, contact Heather Ricard at hricard@masc.sc or 803.933.1258.