North Carolina's massive state-run fire insurance fund has problems, its leader says, asking for reforms

A prison laundry room catching fire in Sampson County. A boiler exploding at NCA&T University in Greensboro. Flooding at a medical research facility at UNC-Chapel Hill.

Those are just some of the expensive losses involving state government property in the past few years that have been causing a conundrum for the Office of the State Fire Marshal, which is charged with insuring state property against such damage.

“We’re $30 (million) to $40 million in the hole,” said Rob Roegner, the chief deputy state fire marshal, in a legislative oversight committee hearing Tuesday. “And that’s not including the $10 million we still owe UNC-Wilmington.”

The coastal campus is still awaiting money for damages incurred during Hurricane Florence in 2018.

Roegner’s office runs the State Property Fire Insurance Fund, which he said used to have a large reserve that it could dip into during years with heavier-than-expected losses — until too many of those years happened back to back, leaving the fund in the red.

He was at the legislature Tuesday to propose several options that lawmakers might consider to fix the problems.

Two options involve simply giving the fund more money in the next state budget, to be written once the next legislative session kicks off in April. The legislature could either create a separate emergency fund for the fire insurance program, Roegner said, or could simply boost its general funding with directions that anything they don’t use should get invested to create a new reserve.

The state could also mandate something called “all perils” coverage for its properties, which Roegner said would be more comprehensive than just fire and flooding coverage without adding too much to the price tag. But doing so would also mean that state agencies and departments would no longer get the coverage for free, having to pay deductibles moving forward.

There’s also the option to just scrap the whole existing system and instead let the state-run insurance operate like a private company. Roegner said that would solve his funding shortfalls, by giving the fund more flexibility as well as the ability to charge for its services.

“We become an insurance company,” he proposed. “Free coverage is over, and that’s it. Nobody gets free coverage anymore. Everybody’s going to get a co-deductible.”

That would also give his office more power, he said, to take state agencies and “make them responsible for their behavior. Make them responsible for looking at their facilities and mitigating the hazards involved.”

Either way, he said, he doesn't think the current system isn’t working — at least not with the level of funding the legislature has provided in recent years, which has now left the fire insurance fund short by tens of millions of dollars. “We don’t have the long-term investments any longer, to cover those losses like we used to,” he said.

Sen. Mary Wills Bode, D-Granville, asked if any other states have ever allowed their fire insurance funds to operate like a private insurance company, and if there could be legal hurdles to doing so.

Roegner said he wasn’t aware of it ever being attempted: “We are forging new ground here.”

Even if other states might have done such a program, he added, none would be dealing with anything like what exists in North Carolina. The state-run fund is the fifth-largest insurance portfolio in the world, Roegner told Bode.

“That’s not out of just, like, municipalities,” he said. “That’s out of all privately held businesses. Xerox, Apple, all of them. We are big.”