In 1979, a group of Alaska electric utilities in the Alaska Rural Electric Cooperative Association (known now as Alaska Power Association) formed a risk retention group known as the ARECA Self Insurance Fund. The 11 founding members are: Alaska Village Electric Cooperative, Cordova Electric Cooperative, Copper Valley Electric Association, Glacier Highway (now Alaska Electric Light & Power), Golden Valley Electric Association, Homer Electric Association, Kotzebue Electric Association, Tlingit-Haida Regional Electric Authority (now known as Inside Passage Electric Cooperative), Matanuska Electric Association, Naknek Electric Association, and Nushagak Cooperative.
Due to legislation being considered in the Alaska State Legislature in 1981 to 1982 and out of concern for the viability of the self-insurance fund, the ARECA Insurance Committee (comprising the founding members) considered several long-term options for the fund including forming a reciprocal or working to get state legislation passed to allow group self-insurance programs.
After careful consideration and analysis, it was clear to the committee that the best path forward was to become a reciprocal insurance exchange. According to Alaska Statutes 21.75.900, a reciprocal insurer is an unincorporated group of subscribers who operate together through an attorney-in-fact. ARECA’s attorney-in-fact is ARECA Insurance Management, Inc.
A reciprocal insurance exchange, also known as a reciprocal interinsurance exchange, is a type of insurance organization where members pool their resources to insure each other. Subscribers, or policyholders, own the reciprocal and assume each other’s risks by exchanging insurance contracts. Subscribers also contribute money to a common fund and share the risk of potential losses. In return, they receive coverage for their own risks and potential losses
On December 30, 1983, ARECA Insurance Exchange was formed. ARECA Insurance Management, Inc. obtained a Certificate of Authority from the State of Alaska to write insurance for the following lines: property, casualty, surety, marine, wet marine & transportation, and disability. The first policies issued were workers compensation, general liability, and auto liability.
ARECA began to grow substantially starting in 1986. The property program was added, and the subscribership expanded. Milestone achievements in 1993 included meeting the $10 million surplus goal and adding the boiler & machinery and excess lines of coverage. 3 years later, ARECA Insurance Exchange opened its official office, and the claims adjusting and loss control services were brought in-house. The rating structure was changed from a postage stamp rate to risk-based ratings. ARECA began insuring hydroelectric projects and significantly expanding its statewide reach.
ARECA Insurance Exchange has come a long way from its humble roots as a self-insurance fund. Today, it is the gold standard for Alaska-domiciled insurance exchanges. The organization has a large policyholder surplus, is backed by A+ reinsurers, specializes in the unique needs of Alaska electric utilities, and is rated a- Stable outlook by A.M. Best.