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Premium Damage: Weather, Inflation More Than Double Cost of School CoverageLock Icon

5 min read

Tornadoes, hailstorms and pipe-bursting flash freezes hurtled Arkansas’ school property insurance programs into a crisis last fiscal year.

Underwriters recoiling from huge claims for extreme weather — including a record estimated $122 million claim for Wynne High School, wrecked by the killer March 31 tornado — more than doubled the cost of property coverage for the state’s 237 school districts.

Construction inflation compounded the blow, driving up the cost of rebuilding school facilities from about $200 per square foot a few years ago to nearly $350 per square foot. The governor and Legislature made an $11 million emergency appropriation to help school districts ride out the storm.

“It’s just almost unheard of what we’re seeing,” said Shannon Moore, who leads the Arkansas School Boards Association’s risk management program, which insures 177 public school districts, some educational cooperatives and charter schools.


A similar risk management program in the Arkansas Insurance Department covers about 80 school districts and entities that saw their premiums rise 140%-145%.

Both programs are self-insured up to a point, using premiums paid by the school districts to cover many claims.

But they buy reinsurance from layers of underwriters to cover major property damage, and the new cost of that coverage staggered them.

In fiscal year 2023, the ASBA’s reinsurance cost was $13.1 million. For fiscal 2024, the renewal cost nearly $31 million, Moore said. Claims have skyrocketed, too, from an average loss of about $4 million a year five years ago to $10.3 million in fiscal 2021, $21 million in fiscal 2022 and a whopping estimate of $146 million this last fiscal year. The fiscal year runs from July 1 to June 30. The ASBA and Insurance Department renew their coverage each year.

“It’s a really crazy time in the whole insurance world,” she said. “We are right now about $146 million [loss estimate] for [fiscal 2023], and we paid only $13.1 million for insurance. And now those carriers are probably going to pay out an estimated $135 million. It’s the worst year our program has ever experienced.”

Destruction in Wynne

The Wynne tornado, one of a series of twisters that killed five people in Arkansas and 25 others in six other states, devastated Wynne High and ripped the artificial turf off its football field.

The EF3 tornado, with winds up to 165 miles per hour, also demolished the First United Methodist Church and several businesses in the city center, including the offices of the Wynne Progress newspaper.


A March 31 tornado caused extensive damage at Wynne High School in Cross County. The twister, which will lead to the largest school property damage claim in state history, ripped roofs off buildings and tore the artificial turf from the Yellowjackets’ football field.
A March 31 tornado caused extensive damage at Wynne High School in Cross County. The twister, which will lead to the largest school property damage claim in state history, ripped roofs off buildings and tore the artificial turf from the Yellowjackets’ football field. (EagleView Technologies Inc.)


While the Wynne School District’s claim makes up about 83% of the ASBA system’s estimated 2023 loss, even the remaining $24 million would have made fiscal 2023 a horrible year. “Our total insured value is over $16 billion, so we’ve got a lot of property out there,” Moore said, adding that other weather events contributed.

Burst water pipes from a “flash freeze” in February 2021 foreshadowed an even worse freeze on Dec. 23, 2022. “We’re talking about $4 million in losses,” Moore said. “I had about 50 districts that had a loss from that.”


A tornado hit Jessieville schools in January, far from the typical tornado season, and damaging hailstorms have been hitting schools harder than ever, said Moore, who has been at the ASBA for 17 years.

“We would have a hailstorm with a $3 million to $4 million loss once every five years, but now we are seeing hail in every storm that happens,” she said. “You used to see hail like that in Texas, Oklahoma or Kansas, and insurance carriers really looked at that because of their exposures. Now we’re in that corridor of hail.”

Tornado Alley

The state is also now in “tornado alley,” said Russ Galbraith, Arkansas’ chief deputy insurance commissioner. “Rates have more than doubled, and that’s a shock to anybody,” he said.

“Convective storms are definitely a factor. When you have more frequent storms and sometimes more severe storms, it’s going to make a difference. The Wynne School District isn’t in our program, but it was still a factor [in the cost of the Insurance Department’s coverage renewal] because underwriters see that we’re subject to these types of storms.”

And weather isn’t the only factor, Galbraith and Moore said. “Inflation has caused a surge in the price of rebuilding, and it also changed the valuation of school buildings,” Galbraith said. “When all of those factors go up, they increase the risk and severity of a claim.”

The startling rise in claims and premiums led lawmakers and Gov. Sarah Huckabee Sanders to reimburse school districts with a little more than $11 million, 30% of the yearly renewal cost increase.

When the ASBA and the Insurance Department saw the looming renewal increase, “we approached legislators to let them know,” Moore said. “They got the governor involved, and they agreed to give 30% of the increase back to the districts, which was very, very helpful.”

But it was a one-time infusion, and Moore said school district budgeters are going to have to factor in inflation and higher insurance costs in the coming years.

Coping Mechanisms

Galbraith said insurance markets are cyclical, and that gives him hope.

“There have been hard markets in the past that have come around and softened up,” he said. “It’s hard to predict what this is going to look like next year. If there’s a quiet storm season, that might be the case, but I really don’t want to speculate.”


School leaders looking to hold down premiums might consider raising their “aggregate retention,” sort of like a deductible, Galbraith said. The aggregate retention in a policy sets a sum that losses are not likely to exceed in most years, and protects the policyholder against years with big claims.

“If a school’s deductible, or retention, was $5,000 or $10,000 last year, they may say, OK, we’ll go up to $25,000,” he said. “Sometimes that counters the rate increase.”

In the ASBA system, the school systems in fiscal 2023 paid in a total of about $18 million, with big school districts with more property paying more and smaller schools paying less. “That $18 million paid the premium — our insurance premium — and then paid claims out for the year.”

The system worked well until the reinsurance cost went from $13 million to $31 million.

“School insurance was pretty uneventful,” Moore said, “up until this past renewal, and I think it’s just a reflection on what the current market is doing.

“The property market right now is just, it’s crazy,” she said. “You’ve got big insurance companies pulling out of states. Allstate and State Farm are no longer writing new business in California. This is happening in Florida with hurricanes. And look at the Maui fire. And it’s not just national, but global. You’ve got floods and fires and earthquakes, and all of that plays a role in the process.”

She said she’ll be starting negotiations on another reinsurance renewal in March.

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