New Insurance Program for Arkansas Schools Set to Launch in 2025
Introduction
Beginning in the 2025-2026 school year, Arkansas will implement a new property and casualty insurance system aimed at addressing soaring costs and ensuring stability for schools, institutions of higher education, and state-owned properties. This initiative, known as the State Captive Insurance Program (SCIP), is a response to the growing crisis in the insurance market, especially highlighted by recent severe weather events.
What is SCIP?
SCIP stands for the State Captive Insurance Program, established through legislation enacted in 2023 under Act 779. This program will create a new Office of Property Risk, tasked with managing insurance for educational institutions and state properties. Legislators, school administrators, and officials from the state Insurance Department collaborated extensively to develop this transformative bill, with the aim of transitioning schools seamlessly into this new insurance framework.
Why was SCIP Established?
The Insurance Crisis
Arkansas schools have been grappling with a significant increase in insurance premiums over the past few years, with some costs tripling between 2021 and 2024. In 2023 alone, the state offered nearly $11 million to assist school districts with their insurance premiums due to a lack of viable options in the private insurance marketplace.
According to a consultant for the legislature, existing property insurance programs were deemed to be in a state of crisis, necessitating a long-term solution to ensure financial stability.
Impact of Natural Disasters
The initiation of SCIP is largely attributed to the effects of natural disasters on the insurance landscape. These events have dramatically affected the availability and affordability of insurance for schools and state agencies. The legislation aims to restructure and unify the insurance programs that historically served schools, colleges, and universities.
Changes to Deductibles
Current Deductibles
For the upcoming school year, the deductible for most school districts is set at $25,000 per occurrence. However, districts with a total insured value exceeding $100 million will face a higher deductible of $50,000.
Future Adjustments
The director of the new Office of Property Risk emphasized that the goal is to find an optimal balance between deductibles and premium prices, indicating that lower deductibles will result in higher premiums. Evaluations are ongoing, and schools can expect potential adjustments in minimum deductibles over the next few years.
Reappraisal of Institutional Properties
Under-Valued Assets
Many higher education institutions in Arkansas have long had undervalued properties that require reappraisal by independent adjusters. For instance, the deductible for athletic facilities at the University of Arkansas at Fayetteville will increase significantly—from $250,000 to $1 million per occurrence. Remarkably, if one natural disaster damages multiple facilities, the university will only pay a single deductible.
Expansion of the Office of Property Risk
In August, the Legislative Council approved the addition of seven new positions within the new Office of Property Risk, which operates under the Department of Shared Services. These new roles will offer salaries ranging from $58,000 to $87,000 per year, underlining the state’s commitment to enhancing its risk management capabilities.
Conclusion
The introduction of SCIP marks a pivotal step in addressing the critical insurance challenges faced by Arkansas schools and educational institutions. By providing a centralized management system and facilitating financial stability, this program aims to uplift the property insurance landscape, ensuring that educational facilities can withstand the impacts of natural disasters while securing their assets for the future.
Focus Keyword: Arkansas SCIP Insurance Program
This article details the essential updates regarding the new State Captive Insurance Program, which is poised to reshape insurance for Arkansas schools and state properties.
