As Houston area school districts face funding challenges, many are juggling sharp increases in disaster insurance premiums with limited carrier options.
Conroe ISD received a non-renewal notice from Texas-based Affiliated Insurance Agents regarding its disaster insurance for facilities, Chief Financial Officer Darrin Rice said during a June 6 board of trustees meeting. District staff is currently exploring its options to find a new insurance plan, including reaching out to other districts of similar size.
Rice said the value of all district facilities is about $1.5 billion and the district’s current premium is $3.2 million with a $100,000 deductible per building per event.
“(Affiliated is) the only one that has bid our last two bids,” Rice said. “There are not a lot of carriers out there that are covering school districts at the current time.”
Districts face higher costs, fewer options
According to a May 18 Insurance Journal article, commercial property premiums increased more in the first quarter than they have in more than 20 years. Inflation and natural catastrophe risk were the main drivers of the first-quarter premium increase in commercial property. Supply chain issues are increasing repair costs as well.
“Most lines of coverage stayed consistent with years past, but coverage related to property have seen increases due to increased property values and fewer carriers providing these policies in the Texas Gulf Coast area,” said Pasadena ISD Director of Communication Arturo Del Barrio.
Del Barrio said the district has multiple carriers depending on the type of coverage. The Pasadena ISD board of trustees, he said, approved premiums of $13.4 million in May.
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Fort Bend and Cy-Fair school districts also use multiple carriers for different coverage.
“In order to provide adequate coverage limits, the district’s property insurance is comprised of 20 different insurance companies, each covering various percentages of coverage limits,” said Cy-Fair ISD Chief Financial Officer Karen Smith.
Fort Bend ISD Director of Strategic Communications Sherry Williams said the district’s premium increased from $5.5 million to $7.6 million for the upcoming school year.
While some districts use commercial insurance carriers, others like Magnolia, Montgomery and Willis opt to use coverage from the Texas Association of School Board’s Risk Management Fund.
According to information from TASB, the fund is the state’s largest provider of risk management services to educational entities. The fund is a self-insured, not-for-profit risk pool of more than 1,000 Texas public education organizations.
Established in January 1974, the fund has evolved to include auto, cybersecurity, liability, property, unemployment compensation, violent act and workers’ compensation.
Magnolia ISD Communications Director Denise Meyers said the district’s contribution to the fund is $726,764, which includes increases in insured values and rates.
“The cost of claims is outpacing the premiums collected by most carriers,” Meyers said.
Montgomery ISD Director of Communications Justin Marino and Willis ISD Director of Communications Jamie Fails said their districts pay about $600,000 and $375,868 respectively for property coverage through TASB.
Fails said Willis saw an increase in premiums and Marino said as of June 21, Montgomery did not have information on new rates.
Conroe ISD foresees big rate increase
Conroe ISD tends to have lower premiums because the district is roughly 90 miles inland from the Gulf Coast.
“Because we are just outside the hurricane zone, our premiums are probably half of the other districts,” Rice said.
Rice said inflation is a factor in growing premiums because the cost to replace a building is much higher now.
“I wouldn’t be surprised if we see a 30, 40 or even 50 percent increase on any renewal they have for us,” Rice said. “It’s a scary market out there right now.”
Superintendent Curtis Null said higher premiums and deductibles could mean the district would be assuming more risk in the future.
“We are going to have exposure we have never had,” Null said.
Rice said even though the district has filed claims on its disaster insurance, it has “traditionally been very low.”
The district filed claims after flooding at Caney Creek from Tropical Storm Imelda in September 2019 and from freeze damage in 2021 and 2022.
