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SALT LAKE CITY — Flooding and tornadoes in the Midwest, Missouri hurricanes and tsunamis in Japan are a marching line of global and national disasters that are contributing to an increasingly skittish insurance market when it comes to water structures such as canals, dams or treatment plants.
While it's typical to see fluctuations in the local market driven by events thousands of miles away, if not on another continent, some in the industry expect premiums for water districts and other water entities to be on the uptick for the foreseeable future.
"Beyond the complexity of the question that goes to who is at fault," when a dam, canal or major water system experiences a failure of sorts, broker Steve Handley said some carriers are getting a case of the jitters driven by a conservative market.
"There's concern about a catastrophic event, that maintenance and inspections could be falling behind" on aging infrastructure that needs repairs, Handley said.
The issue of increased worry over the insurability of water carriers came up this spring during a meeting of the Weber Basin Water Conservancy District's Board of Trustees, where Handley explained a 4 percent bump in rates in the renewal cycle.
The bottom line is that it is very common to run water over the spillways of dams. We do that at one point every year with at least some of them.
–Tage Flint
Weber Basin's district buys insurance from Glatfelter Public Practice, which is one of the largest carriers in the United States for entities that treat, distribute or store water.
Handley said the premium wasn't going up because of any claims issue or because the district is at greater risk, but simply because of the number of natural disasters unfolding and perceptions about adequate maintenance overall.
Weber's general manager Tage Flint said he wasn't surprised at the increase.
"Water districts are being viewed a little bit differently by insurance companies, not based on claims, but because we are a specialty item," Flint said. "We're singled out and at least reviewed more often because of that nature of specialty."
For insurance purposes, Flint's district is lumped into the same category as a small canal company with only a few dozen shareholders or with something as expansive as the Central Utah Water Conservancy District, a wholesale water supplier which is the largest water district in the state.
Handley said, too, there may have been some concern on the part of carriers because of Utah's record-breaking water year and how canals, aqueducts and other components of a water delivery system would fare with such increased flows.
Flint concedes this spring he encountered a repetitive concern voiced by the public over dams spilling or spillways overflowing and what, if any, bearing that may have on a dam's structural integrity.
"I've had more of that question come up lately than I have had in a long time," he said. "The bottom line is that it is very common to run water over the spillways of dams. We do that at one point every year with at least some of them."
Major maintenance and repairs are on a schedule determined by the money available under the U.S. Bureau of Reclamation's dam safety office.
The Weber district operates, but doesn't own reservoirs like Willard Bay or Pineview — the U.S. Bureau of Reclamation holds title — so any major repairs would be paid for by the federal government in the event of any failure.
Otherwise, the district insures treatment plants, well houses, irrigation pump stations, tanks and other related infrastructure.
What we have found is that districts our size seem to be well funded enough to stay ahead of the aging infrastructure fairly well and keep up to speed. Problems can come with small districts without enough funding.
–Flint
"What we have found is that districts our size seem to be well funded enough to stay ahead of the aging infrastructure fairly well and keep up to speed," he said. "Problems can come with small districts without enough funding."
The human and financial costs stemming from the failure of a water delivery or water storage system can be extremely high and play out for years.
Logan, a canal company and a state agency settled a wrongful death lawsuit after a canal failure and landslide that killed a mother and her two children in 2009. The city also bought up land around the landslide area at more than $500,000 and the federal government kicked in $19 million to help restore the delivery of water to 7,000 acres of farmland and several cities in Cache County.
Steve Cain, facilities and land manger with the Provo River Water Users Association, agrees with Flint that an aggressive maintenance schedule can go miles toward buying peace of mind, even in the face of a conservative insurance market.
"It can be a huge financial challenge, with the combination of the maintenance and insurance," he said. "If a water group or company or district is proactive, it's not so bad. If one does not stay on top of it, that can be a catastrophic thing."
Cain's Provo River association is a private entity that operates Deer Creek Reservoir and the Weber Provo Canal in Kamas.
His rates, like that of Jordan Valley Water Conservancy District, remained relatively flat, but both he and Jordan's Dave Martin know that can change depending on world and national circumstances.
"Carriers have paid out more in claims," said Martin, Jordan's chief financial officer and treasurer.
"Our broker has told us we might see an increase in the rate reflective on a national and global event basis because of flooding in the Midwest, tornadoes, hurricanes and earthquakes and tsunamis in Japan and New Zealand. Those are the kind of things that could cause our insurance to go up."
Email:aodonoghue@ksl.com
