PUD projects first property insurance decrease in years

CHELAN COUNTY — Chelan County PUD commissioners authorized up to $8.2 million in insurance expenditures Monday as the utility continues working to replace wildfire coverage in a difficult liability market.

The board also approved up to $1.45 million to initiate the district's new protected cell captive insurance program, a tool staff said may help the utility manage wildfire coverage costs and maintain options as insurers reduce availability for power utilities.

Ron Gibbs, Chelan PUD’s Manager of Insurance and Risk Management, told commissioners the district is still negotiating with insurers ahead of its July 1 renewal date. Because the PUD works with more than 30 insurance companies, Gibbs said staff typically bring commissioners an estimated cost and a not-to-exceed amount before all final quotes are received.

The district is currently estimating combined insurance premiums of $8.02 million for the coming year, up from $7.641 million last year. That would represent a 5% increase compared to last year and would remain 1.6% under budget. Staff added a $180,000 buffer to account for uncertainty while final quotes are still pending.

Property insurance showed signs of improvement after several years of rising costs. Gibbs said the market has come out of a hardening cycle, creating more competition among insurers. The PUD has received quotes for about 65% of its property policies and is projecting a 3% decrease in property insurance premiums this year.

"We had significant increases from 2020 through 2024, and you can see now that they've leveled off and are even starting to go down," Gibbs said. "That's a good positive development."

Wildfire risk continues to drive liability insurance costs and availability. Gibbs said two carriers discontinued $25 million in wildfire coverage for power utilities this year, leaving the PUD searching for replacement coverage.

Insurance companies willing to cover utility wildfire risk often provide only small limits, he said. In 2025, it took 15 insurance companies for the district to reach its $150 million liability limit.

Gibbs said the district has identified companies that may provide a quote for $15 million of the lost $25 million in coverage, but the PUD is still searching for the remaining $10 million. If the full $25 million can be replaced, staff estimate liability premiums could increase by 5% to 10% this year.

The PUD has received four liability quotes representing about 50% of its coverage and still needs quotes from 11 other companies to reach the $150 million limit. Gibbs said liability premiums are currently estimated to increase 9.5%, though he hopes to improve that figure before returning to the board in July with final results.

Gibbs credited the district's wildfire mitigation program with helping preserve coverage options.

"We would be in a much more difficult position to keep our coverage if we hadn't developed a wildfire mitigation program," Gibbs said. "In fact, I doubt we'd be able to do that."

Asked what actions carry the most weight with insurers, Gibbs pointed to the district's public safety power shutoff program, which allows the PUD to de-energize lines during extreme wind conditions to reduce ignition risk. He also cited undergrounding and equipment changes designed to reduce fire risk during summer conditions.

The captive insurance program, created through Energy Risk Solutions, will operate similarly to an insurance company owned by the PUD but used only for PUD risk. Gibbs said the program can support negotiations, allow access to reinsurance markets and give the district another option if commercial wildfire coverage becomes unavailable.

The district plans to establish a $5 million captive insurance limit, primarily for wildfire coverage. Funding includes a $1 million one-time capitalization required by Washington state, a $357,000 annual premium calculated to fully fund the $5 million limit over 10 years, a $65,000 annual fee to Energy Risk Solutions and an estimated $10,000 in taxes to Washington state and North Carolina, where the captive is domiciled.

Gibbs said the total captive expenditure is estimated at $1.432 million, with all but $75,000 held in reserve for the PUD's benefit. The board authorized up to $1.45 million to allow for contingencies.

The motions passed unanimously.

Andrew Simpson: 509-433-7626 or andrew@ward.media