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99065 |
Prepared by the North Dakota Legislative Council
staff for the Insurance and Health Care Committee |
HAIL SUPPRESSION - BACKGROUND MEMORANDUM
INTRODUCTION
House Concurrent Resolution No. 3043 directs the Legislative Council to study the feasibility and desirability of implementing hail suppression programs for the reduction of property damage in urban and rural areas and funding the programs through property and casualty line insurance premium taxes. A copy of House Concurrent Resolution No. 3043 is attached as Appendix "A".
NEIGHBORING STATES AND PROVINCE
In Alberta, Canada, insurance companies and brokers established the Alberta Severe Weather Management Society to administer a cloud seeding program. This program is for rural and urban areas. The society is private and not for profit. A copy of the society's brochure is attached as Appendix "B".
South Dakota Codified Laws Chapter 46-3A creates the South Dakota Water Management Board, which may perform hail suppression operations.
Montana Statutes Chapter 85-3 authorizes the Montana Department of Natural Resources and Conservation to perform hail suppression operations.
Although the Montana and South Dakota weather modification law was patterned on North Dakota weather modification law, neither state is active in weather modification. The Alberta project is the only known project addressing urban and rural hail suppression.
HAIL SUPPRESSION
BackgroundThe North Dakota Cloud Modification Project Operations Manual, published by the State Water Commission's Atmospheric Resource Board, describes operational cloud seeding in North Dakota as beginning in the 1950s when ground-based seeding began in the western portion of the state. In 1975 the North Dakota Weather Modification Board was created as a division of the Aeronautics Commission. State cost-sharing was made available in 1976. The six counties currently participating in the project are Ward, Mountrail, McKenzie, Hettinger, Slope, and Bowman. The two purposes of the program are to suppress hail and to enhance rainfall.
The article "An Exploratory Analysis of Crop Hail Insurance Data for Evidence of Cloud Seeding Effects in North Dakota" in the May 1997 issue of the Journal of Applied Meteorology refers to studies of the climatology of hail damage to crops which show North Dakota experiences the highest insurance dollar loss of any state in the United States and southwestern North Dakota has the highest ratio of damage claims paid to insured crop liability. The reduction in hail crop insurance loss ratios in the six program counties is estimated to be 45 percent. Specific statistics are not available for hail damage to property other than crops because most insurance companies do not classify property and casualty claims for hail-only damage.
North Dakota North Dakota Atmospheric Resource Board
North Dakota Century Code (NDCC) Chapter 61-04.1 relates to weather modification. Section 61-04.1-08 creates the North Dakota Atmospheric Resource Board as a division of the State Water Commission. Hail suppression falls within the definition of weather modification. The board may contract with any person, the federal government, or any county or group of counties to provide weather modification operations. Additionally, Section 58-03-07 authorizes township electors to use township funds for weather modification activities. Although the board has discretion in what it charges counties for providing weather modification services, the mill levy tax funds appropriated to the state weather modification fund by a county may not exceed seven mills upon the taxable valuation of property in the county. This mill levy may be levied in excess of the mill levy limit fixed by law for taxes for general county purposes.
Insurance Premium Taxes
North Dakota Century Code Section 26.1-03-17 provides a premium tax of two percent must be paid for life insurance, 1.75 percent for accident and health insurance, and 1.75 percent for all other lines of insurance. This money is deposited in the insurance tax distribution fund in an amount not to exceed one-half of the biennial amount appropriated for distribution by the Commissioner of Insurance.
North Dakota Century Code Chapter 18-04 provides for the distribution of a portion of the insurance premium tax to fire departments and fire districts. The amount appropriated to the insurance tax distribution fund for insurance tax payments to fire departments for the 1997-98 biennium is $5.2 million, the same amount as was appropriated for the 1995-96 biennium. The tax premium for fire departments has been a topic of discussion over the years. Section 8 of House Bill No. 1010 (1997) requires the Commissioner of Insurance to analyze fire district payments distributed during 1996, 1997, and 1998 and report to the Budget Section in December 1998. This report is funded with a $25,000 appropriation and requires the commissioner to also report the actions taken to stabilize the distribution of funds to each fire district.
STUDY APPROACH
This study can be broken down into two main issues. The first issue is whether a hail suppression program to reduce property damages is desired and, if so, if it is desired statewide. Implementation of a hail suppression program could be statewide, the western portion of the state, or through pilot projects. The logistics of cloud seeding is technical in nature, and there are a variety of resources to rely on to gather this information. Information regarding the amount of damage caused by hail in urban areas may be difficult to gather. Legislative action may be required to create this pool of data within the state insurance industry.
The second issue is if cloud seeding is determined by the committee to be a desired program, whether an appropriate funding source can be established. If an insurance premium tax is established, factors to consider include the cost of administering the program, how to deal with fluctuations in the amount of insurance premium tax moneys, and the impact an additional premium tax will have on the insurance industry within the state. Although the study resolution addresses funding the program through property and casualty line insurance premium taxes, the committee may want to consider whether other funding sources are available.
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