Fort Smith board to consider renewal of city auto and property insurance after premiums rise

The Fort Smith City Board of Directors on Feb. 11 moved to place a renewal of the city's auto and property insurance on the Feb. 18 agenda after staff reported significant premium increases and recommended staying with the Arkansas Municipal League (AML) risk pool.

The city's chief financial officer, Andy Richards, and insurance consultant Philip Merriere told the study session that a hard national insurance market and large catastrophe payouts have driven up rates. Merriere recommended remaining with AML because it retains a $10,000 per-occurrence deductible that the private market generally will not offer, and because AML is a risk-spreading pool across hundreds of municipalities.

Merriere said last year's auto premium totaled $774,006.94 and that property premiums were about $1.1 million; he said the property premium for the coming year will be north of $1.6 million, an increase of roughly a half million dollars. Merriere told the board the property rate has risen from $0.26 per $100 of value to $0.31 per $100, and he described AML as a pool serving roughly 496 cities. He warned that private carriers would likely require substantially higher deductibles, such as $100,000 per occurrence or a 2% wind-and-hail deductible, and that AML has indicated it may change how auto deductibles are handled (moving toward per-vehicle deductibles in some cases).

"AML is cost effective. At this time you cannot match the premium for the coverage provided," Merriere said. Andy Richards told the board the cost of the renewal would be allocated across city departments.

Directors asked about options to reduce premiums, such as excluding low-risk assets from scheduled values, and about protective measures for city vehicles. Merriere and Richards said staff is studying which assets are necessary to insure and where the city can safely self-insure or take higher deductibles. Merriere also recommended an additional study of flood coverage options because AML's flood offering is limited.

The board did not vote on the renewal on Feb. 11; instead a board member moved to place the insurance-renewal item on the Feb. 18 agenda and a second was recorded. That placement means the board will consider a formal renewal or other action at the Feb. 18 meeting.

If the board renews with AML, staff said the increased premium would be spread among departmental budgets and some internal reallocation or adjustment may be required.

Next steps: staff will return to the board with the formal renewal recommendation and the department-by-department cost allocations at the Feb. 18 meeting.