Linn County deciding on private flood coverage

The Linn County supervisors will decide Wednesday between two wildly different quotes for flood insurance on the jail and sheriff’s office.

The Millhiser Smith Agency quoted the county an annual premium of $106,543 to insure $4.5 million worth of public building and contents. The Stamy Insurance Agency quoted a premium of $20,503.

Millhiser Smith was the first broker to submit an application to insurance companies that sell private flood insurance, so no other local company could get a quote.

Stamy got around this by going to a syndicate of investors at Lloyd’s of London. John Gruca, a Stamy agent, got three quotes. Two were for $125,000 per year, but one cost less than a fifth of Millhiser Smith’s quote.

Gruca said insurance overseas is “a wide-open marketplace.” He said he secured the low rate by pointing out to the syndicate that key mechanical equipment in the jail and sheriff’s office have been elevated, and that May’s Island is actually at a higher elevation than the ground on either side of the river.

“If what you’re getting at is, ‘Do you really have this much coverage for this price?’” Gruca said, “the answer is ‘Yes.’”

The county already pays for government flood insurance for the jail, sheriff’s office, courthouse and two other buildings near the Cedar River. But the National Flood Insurance Program won’t cover more than $500,000 in damage for the structure and $500,000 for the contents of a building.

To get coverage beyond those limits, the county must turn to private insurers that offer what’s called excess flood insurance.

“It’s a really small universe,” said Jim Kapsch, a vice president at insurance brokerage Holmes Murphy and Associates. “There’s not a whole lot of carriers out there.”

Kapsch estimates eight to 10 insurance companies carry excess flood insurance in America. When a business or government entity wants additional flood insurance, it turns to a local broker.

That broker goes to a wholesale broker, who typically submits applications to all eight to 10 companies, flooding the market and shutting it down for everyone else thanks to a sort of first-come, first-served policy those companies follow.

“The first broker — regardless of who they are — to get a submission to an insurance company is the broker of record for that submission,” Kapsch said.

County staff will check to make sure they fully understand each of the two quotes. Representatives from Millhiser Smith could not be reached for comment.

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