STONE HARBOR – A representative of the Atlantic County Municipal Joint Insurance Fund told the Borough Council that a hardening of the market for reinsurance coverage is driving up insurance costs for state municipalities.
In a presentation before the council July 2, Kamini Patel, deputy executive director of the joint insurance fund, addressed the rising costs of insurance. A presentation is an annual event for municipalities that participate in a JIF as part of the renewal process.
In New Jersey, joint insurance funds represent an alternative to commercial insurance. They allow public entities to pool resources for property, liability and workers compensation coverage.
Starting with seven founding members of the fund in 1987, the Atlantic County JIF has grown to include 42 municipalities in Atlantic and Cape May counties.
What Is a JIF?
New Jersey JIFs were formed in the 1980s in response to a hardening insurance market that was driving up costs. One message from Patel’s presentation was that municipalities are seeing yet another hardening of the market, this time for reinsurance coverage, that is impacting coverage costs.
Patel spoke of a worldwide insurance crisis driven in large part by the realities and projections of loss due to climate change-related events. This situation is particularly affecting the ability of insurance entities like the JIF to obtain reasonable pricing from reinsurance carriers, she said.
A reinsurer is an insurance company that provides insurance to other insurance companies as a way for primary insurers to transfer some of their risk to a reinsurer. They also represent a way for JIFs to get access to excess insurance to cover large claims.
In New Jersey, most municipal JIFs are affiliated with the Municipal Excess Liability fund for this purpose. The New Jersey fund has grown to include 398 municipalities, along with housing authorities, fire districts and sewer utilities, among others.
What Is Driving the Hardening Market?
Patel pointed to 28 loss events of $1 billion or more in the United States since 2022. Global warming-related losses were augmented by rising costs of repair, disrupted supply chains and the increasing costs of materials and labor.
She also noted the lingering impact of the pandemic, rising workers compensation claims, inflation — especially medical cost inflation — and a tendency for juries to make large awards in cases of municipal liability, especially police misconduct.
Patel’s mission was to convince the council that renewal of its contract with the JIF is the best way to address the uncertainties in the insurance market. She spoke of the JIF’s record for risk management, its incentive programs for increasing worker safety, including its online safety institute with more than 200 courses, and its strong commitment to shared governance with its member municipalities.
She also spoke of the commitment of the Atlantic County JIF to reduce cyber risks with its Cyber Risk Management Fund and its concern for environmental issues through its membership in the New Jersey Environmental Risk Management Fund.
Patel pointed to the return of certain excess funds to member municipalities, noting that Stone Harbor has received a total of $620,000 from the JIF in annual dividends over the years.
Her overall message was to urge the borough to stay with a JIF that she said has demonstrated stability in an uncertain world. The council thanked her for the presentation.
No action was taken, as the renewal of the JIF contract was not part of the formal agenda. There was no discussion of the JIF fee structure for a 2025 renewal; that will be a part of any renewal resolution when considered by the council. A JIF report shows that in 2024 member payments to the JIF totaled $24 million.
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
