EBR school insurance rises
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The East Baton Rouge Parish school system is heading into the hurricane season with property insurance costing much more and covering much less than it did last year when Hurricane Gustav blew through Baton Rouge.
The School Board’s Finance Committee on Wednesday recommended hiring Lexington Insurance Co. for a premium of almost $1.2 million a year to insure property against damage. That’s about half-a-million dollars more than the school system spent on premiums last year with Great American Insurance Co.
The full School Board will consider hiring Lexington at its June 18 meeting.
Lexington offered a less-expensive and more-generous bid than Lloyd’s of London, the other main bidder.
David Daniel, an insurance consultant with Daniel & Eustis in Baton Rouge, told the committee that in the wake of Gustav, all property insurance in Louisiana is getting more expensive and restrictive.
He said hurricanes Gustav and Ike caused more than $2 billion in insured losses in Louisiana. The East Baton Rouge Parish school system alone sustained more than $8 million in property damage.
“It’s the single largest insurance claim that, to my knowledge, this system has ever had,” Daniel said.
Lexington offered four options, and the committee recommended the cheapest one.
Many of the terms remain the same as in the past. The school system would continue to pay a $250,000 deductible for most damage claims, including for fires, and the maximum payout is $150 million.
Lexington, however, is being much stingier when it comes to named hurricanes such as Gustav.
So if a big hurricane hit again, the school system would pay 3 percent of the insured value in question as its deductible and could collect no more than $25 million from Lexington.
Daniel also alerted the committee that Lexington is a subsidiary of the embattled American Insurance Group, or AIG, which the federal government has bailed out with tens of billions of dollars.
Daniel said AIG’s traditional property and casualty insurance arm has remained well run and profitable — the finance division is where the problems were — and he said he thinks the federal government won’t let the company fail because of the negative impact its failure would have on the world economy.
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