Insurance claims in other parts of the country are driving up the cost of doing business for the Alexandria incinerator that turns garbage into energy, with some of those costs being passed on to customers.
Pope/Douglas Solid Waste Management is one of four county-owned waste-to-energy facilities looking to secure insurance for 2021, but likely at a higher cost than in the past, because of those claims.
Through no fault of their own, other counties including Becker, Otter Tail, Wadena, Clay and Todd, which own another one of the other three facilities in Minnesota, are in the same boat.
Stever Vrchota, director of Pope/Douglas Solid Waste Management, said there was a big shift in 2020 in the insurance industry on property loss, and because of large losses at a few facilities across the U.S., property insurance and re-insurance is either very hard to get and/or very expensive for the incinerators.
He explained that the insurance fees for the Pope/Douglas facility could go up by more than $300,000 for 2021, which he said they have budgeted for.
“Our tipping fee is increasing for 2021 from $82.28 to $86.61 to cover operational cost increases and this is a part of that,” he said. “We are actively working with MCIT to find more cost effective insurance based on our actual history of claims and our risk management strategies.”
MCIT refers to Minnesota Counties Intergovernmental Trust, a joint powers entity made up of Minnesota counties and others that pool resources to provide property, casualty and workers’ compensation coverage to members. MCIT also offers risk management and loss control services.
“For the first time I can remember, waste-to-energy operations have become a difficult business for anybody to reinsure,” said Robyn Sykes, who has been executive director of the Minnesota Counties Intergovernmental Trust since 1999.
Since 1979, the system has worked well, but this year, for some reason, it had a terrible time getting property insurance coverage for the county-owned waste-to-energy facilities in Minnesota.
Sykes said the four county-owned facilities are well-run operations with 20 years worth of good track records and low claims histories – but MCIT’s reinsurance provider flat-out refused to cover them this year.
Reinsurance companies provide deep-pocket insurance to insurers. For example, MCIT has a $1 million deductible, and its reinsurance provider picks up everything over that, Sykes said.
That could theoretically get expensive: The combined value of all four waste-to energy facilities in Minnesota is about $135 million, she said.
But the move by the reinsurance provider caught MCIT off guard.
“We thought ‘why don’t they want us? We’re well-run,” Sykes said.
The answer seems to lie in major claims facing insurance companies in other parts of the country, leaving reinsurers shell shocked. Minnesota just got caught in the crossfire, she said.
Fair or not, that left MCIT to shop in the expensive specialized reinsurance market to find coverage for the four waste-to-energy plants.
For the Pope/Douglas facility, Verchota said, “We are aggressively looking at our options for 2021 and beyond.”
About the facility
Pope/Douglas Solid Waste Management began processing waste in 1987. Since that time, it has added a recycling program, a household hazardous waste facility, an ash landfill and an organics recycling program.
Steam generated from the plant is sold to Douglas County Hospital, Alexandria Technical and Community College and 3M.
The facility serves the counties of Douglas, Pope, Grant, Stevens, Stearns, Benton and Sherburne.
Nathan Bowe from the Detroit Lakes Tribune contributed to this story.