The city of Baltimore was spared the wrath of Katrina ? until now.
Rising insurance premiums have hit the city harder than a storm surge, leading the Board of Estimates to approve a 28 percent increase in premiums to insure city buildings against storm damage. Effective (retroactively) to July 1, the city approved a payment of $1.9 million for insurance coverage. Susan Shawver, the city risk manager, said the increase is due to a costly 2005 hurricane season with several catastrophic storms.
“It?s because of Katrina,” she said. “We?re feeling the brunt of what happened on the Gulf Coast last season.”
Shawver said the increase translates into 4 cents per $100 of insured property, from 3 cents. She said Baltimore?s proximity to the Chesapeake Bay puts the city in the same general risk category as cities such as New Orleans, which was devastated by Katrina.
“We are considered a coastal city, so they?re looking at the wind pushing up the bay and causing damage,” she said.
Baltimore City is not alone. Basic property insurance rates have risen between 20 percent and 40 percent in coastal areas since Hurricane Katrina, with some companies withdrawing from high-risk markets altogether. Experts say the tab from the 2005 hurricane season ? nearly $59 billion, according to the National Association of Insurance Commissioners ? is to blame. City Finance Director Edward Gallagher said the increase did not surprise him.
“The market is tighter this year because of the increase in payouts,” he said.
Shawver said the city tried to save money by locking in its rate now, rather than after the 2006 season had taken its toll on insurers.
“Our renewal date was Oct. 1, but it?s terribly difficult to negotiate after a bad season,” she said. “We worked with our broker to re-write the policy with a July 1 start date to try to get ahead of the season.”
Shawver?s timing may be good. Hurricane forecasters from the University of Colorado have predicted “another very active season for 2006.” The forecast estimated an 81 percent probability that another catastrophic storm would hit the U.S East Coast during the hurricane season. Shaver said that by acting now, the city might be able to avoid another steep rate increase.
“We try to get the best deal possible for the taxpayers by looking ahead,” she said.
