Photo: Kim Brent / The Enterprise
Hurricanes and floods locally, combined with tornadoes and hail storms elsewhere, will take a $363,995 toll on Beaumont taxpayers this year.
Increased insurance claims by the municipal government and other clients here and afar are contributing to the largest single-year increase to the city’s insurance premium over the past decade. The bill is up 31% from last year, to more than $1.5 million.
City Chief Financial Office Todd Simoneaux said the increase was to be expected, thanks to inflation and claims from Tropical Storm Harvey and Tropical Depression Imelda.
Rates could go even higher.
“The other thing that’s going to affect the future is that the size and amount of damage Harvey, Ike and Imelda caused were significantly greater than anything I can remember,” said the city’s broker, Ted Moor.
“The insurance providers are asking if this is a blip in the time frame or if this is going to be a trend. And if it’s going to be a trend, rates will increase.”
On the upside, Moor said, this year’s bill equates to less than what the city was paying per $100 in value in 2013, the last time premiums were this high.
The city today has a total insured value of nearly $250 million, City Manager Kyle Hayes said.
The city saw its second-largest premium increase last year, when it rose by 11%.
Together, rates have risen nearly 46% over the past two years.
Beaumont is not the only governmental body paying the price of catastrophic weather events.
Since 2000, the national cost of flood-related disasters is $845 billion. That number has increased each decade, said Laura Lightbody, project director of the Pew Charitable Trust Flood-Prepared Communities Initiative.
Across the nation, insurance customers have seen their premiums increase an average of 10% this year, she said.
“There used to be a perception that, ‘Disasters don’t happen to me. They happen in those other coastal places,’” she said. “But we’re seeing it more in Colorado, it’s flooding in Michigan right now. We see flooding in Minnesota, Indiana. Every state has had a major flood disaster in the past 10 years.”
Insurance brokers look at these disasters and the claims associated with them when evaluating the risk of ensuring each customer.
One way to decrease the cost of the premium would be to raise the deductible. Councilman Mike Getz asked at a recent meeting whether the city could explore that option.
Decreasing the city’s deductible by 1% would save the city about $102,000 for the premium, but Moor advised against that because the Federal Emergency Management Agency will pay only for damage to buildings that the agency hasn’t covered before.
“Back in the days where they would reimburse you, that might have made sense,” he told the council. “But enough of your buildings have been damaged that they’re not going to pay you back anymore or pay any of your deductibles anymore.”
Instead, state and federal agencies are more inclined to put money into flood mitigation, rather than simply pay for damages. The Texas General Land Office is directing more Harvey disaster money to mitigation projects, for example.
Lightbody wasn’t sure if the federal government is offering buyout-like grants for moving city or county buildings. But private buyouts done in a coordinated manner, floodplain restoration and other mitigation efforts can ultimately decrease the risk of flooding to a community.
“There are calls by federal agencies to reduce the cost of disasters because it’s simply not sustainable for the federal government and for states and communities,” she said. “Research has shown that by investing a dollar in mitigation activities … there’s an on-average savings to society of roughly $6.”
But that can force local governments without a grant to invest in disaster-resistant materials or programs to make hard budget decisions.
Do they, for example, spend $30,000 extra for a metal roof that might last longer and give better insurance rates or settle for a lower-quality roof that meets code and has a smaller immediate budget impact?
“Whether it’s a business of the city or whatever, if you can provide a roof that will last however long and meets all the minimum requirements and saves some money, they’re probably going to do that instead of paying the extra $30,000,” Moor said.
Lightbody said community engagement and education can build consensus on the long-term savings of paying for mitigation projects.
The city of Beaumont is looking into several measures that could decrease its susceptibility to flood damage. Among them, a new raw-water pump station would decrease the likelihood that the water system be damaged or knocked out by a future storm.
The city is also looking at drainage system upgrades of more than $270.7 million.
It’s unclear at this point how much insurance rates and other costs to deal with floods and other disasters will continue to increase.
But Moor said we can be assured that, in the wake of two 1,000-year flood events in two years, “all the big wigs in the insurance world are probably trying to figure out the odds of that happening again.”