Washington Cities Insurance Authority warns reinsurance costs and verdicts are straining city budgets

Harlan Steenches, claims manager for the Washington Cities Insurance Authority (WCIA), told the Torch Study Committee that municipal self-insurers and reinsurance markets are under severe pressure from rising claim severity and large verdicts.

Steenches said WCIA — a member-owned interlocal agency that self-insures roughly 165–170 cities, towns and special districts — has increased its retention (the portion it covers before reinsurance kicks in) from $4 million to $5 million because of limited market capacity. Reinsurance costs to purchase coverage that historically cost $2–$5 million now approach or exceed $15 million, he said, and the organization’s reinsurance cost rose roughly 750% in the past decade.

WCIA data presented to the committee showed average claim cost rising from around $17,000 in the mid-2010s to roughly $44,000 in the most recent three-year rolling average; total claims costs were quoted above $63 million in a recent year. Steenches attributed the trend to a rise in high-cost claims, ‘‘nuclear verdicts’’ and practices such as juries seeing billed medical charges rather than insurer-paid amounts. He gave an example of a matter tried in which WCIA’s share was found 35% at fault but the organization paid the full $8 million settlement because other defendants were insolvent.

Committee members asked whether frequency or severity is driving costs; Steenches said frequency was relatively steady but severity and large payouts have increased. Members also sought clarification about chart metrics; Steenches explained ‘‘claim costs’’ combined defense expenses and indemnity (settlement/verdict) amounts and that some coverages now include aggregate or sublimits.

Steenches warned that cities’ ability to provide local services is strained by insurance cost increases and statutory property-tax caps that limit revenue; he said WCIA passes rising costs on to members and that fewer reinsurers are willing to quote lower tower layers, leaving the organization to retain more risk.

The presentation underscored committee members’ repeated requests for more and standardized datasets; WCIA said it could provide slides and data upon request. No policy vote followed the presentation.