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Home My WebLink AboutAlliant Insurance Presentation 2020-04-22 as of 2020-04-16 V2.pdfBOARD OFDIRECTORSMEETING 2020-21 OperationalInsurance Renewals Presented by: Dennis Mulqueeney Senior Vice President April 22, 2020 Contents Insurance Industry Highlights Key Concerns of Commercial Insurers OCSD Program General Liability Workers Compensation Property Renewal Expectations Addressing OCSD Concerns Objectives: 2 While Global insured losses from catastrophes in 2019 are estimated to be $56 billion, which is down sharply from $93 billion in 2018 and was well below the annual average of $75 billion over the previous 10 years, and policy holder surplus (equity) is very strong on a historical basis…The industry has significant concerns going forward which is contributing to a very hard insurance market: Insurers’ combined ratio deteriorated to 98.0% for the 3rd Qtr 2019 from 97.5% in the prior-yearperiod. Private U.S. property/casualty insurers’net income slipped 0.2% to $49.5 billion during the first 9mos. of 2019. COVID-19 –Causing significant uncertainty Potential Federal regulation of the industry. “PRIA”, or “worse”…? Catastrophic Losses have not been adequately priced for based on standard industry models : Property: Weather extremes, hurricane, wildfires, earthquake,sea level rise,pandemic Liability: Social inflation (i.e. runaway jury awards) General: Investment Earnings. Economic meltdown Carriers are focused on bottom line profitability,not top line growth Insurance Industry Highlights Source: SwissRe, A.M. Best, ISO, Verisk, Property Casualty Insurers Association of America (PCI)3 U.S. Inflation-Adjusted Insured Cat Losses 2018 –Third worst year for U.S. Insured Catastrophe Losses. Average Insured Loss per Year for 1980-2018 is $19.3 B. *2018: Inflation-adjusted estimate, subject to change. 2010s is average of 2010 to 2018. All losses are Direct. Sources: Property Claims Service, a Verisk Analytics business; Insurance Information Institute. . Harvey, Irma,Maria* 40 37 79 104 48 1980s:$5 B 1990s: $15 B 2000s: $25 B 2010s: $34 B $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18* Bi l l i o n s , 2 0 1 8 $ Average for Decade HurricaneAndrew WTC Katrina,Rita, Wilma 4 5 Key Sources of P/C Insurer Profits 6 COVID-19 –as of 4/16/20 Status •642,000 Cases in the U.S. •28,000 Deaths Economic Devastation •22,000,000 Jobless Claims •Estimate -$340 billion of small business interruption a month •Total Global Equity of Insurers: $800BB as of Q3 2019 Key Concerns to Insurers: •Uncertainty •Potential Imposition of “retroactive” coverage •Moving Forward •Potential imposition of a so called “PRIA” modelled on “TRIA” •“Pandemic Risk Insurance Act” Impact Insurance Lines Highest:Workers Comp Moderate:Liability, D&O Lowest:Auto, Property, BI Wildfires Carr Fire, Redding, CA July 18, 2018 Photo courtesy of Cal Fire On average, more than 100,000 wildfires, also called wildland fires or forest fires, clear 4 million to 5 million acres of land in the U.S. every year. In recent years, wildfires have burned up to 9 million acres of land. Massive recent fires in Brazil and Australia continue the trend… 7 Hurricanes Potential threats from hurricanes include powerful winds, heavy rainfall, storm surges, coastal and inland flooding, rip currents, tornadoes, and landslides. Hurricane Dorianaffecting Bahamas & Eastern SeaboardSeptember 2019 8 The Alaska Earthquake of Nov 30, 2018 A magnitude (M) 7.0 earthquake struck north of Anchorage, Alaska, on November 30, 2018. Recent 5.7 Quake in Salt Lake City, and 6.5 Quake in Idaho Are serving as a “wake-up calls” for the Western U.S. 9 Social Inflation 10 EVOLVING:Ransomware The ransomware attacks onpublic entities in Texas, Florida,Maryland, Georgia andelsewhere this year have raisedquestions not only about payingransoms but also about the roleof insurance in helping thesetargets get back to serving thepublic. The FBI says organizations shouldnever pay ransom and, for themost part, local and stategovernments hit by ransomwareattacks this year appear to haveadhered to that policy.According to Barracuda, onlythree of the 55 governmententities attacked this year paidransoms. 11 Overview of OCSD’sInsuranceProgram General (Public Entity)Liability Property (“Fire”, etc.) Earthquake Boiler & Machinery Workers’Compensation Miscellaneous Lines Pollution Cyber Liability Marine 12 Coverage for damages to third parties arising out of District negligence. Includes: General Liability Automobile Liability Public Entity Errors and Omissions −Professional Liability −Public Officials (Directors and Officers)Liability −Employment Practices Liability All coverage provided on an “Occurrence”Basis Public Entity General Liability 13 Limit $40MM -Per Occurrence and in the Annual Aggregate for General Liability, Automobile Liability, Errors and Omissions, Public Officials Liability and Employment Practices Liability Retention $500,000 –all claims Expiring Premium:$ 515,371 Public Entity Liability Policy Limits and Retentions 14 Total Insurable Value:$2,173,424,381 Policy Limit:$1,000,000,000 Key Sublimits Boiler & Machinery:$100,000,000 Business Interruption:$100,000,000 Flood Zones A&V:$150,000,000 Flood All Other Zones:$300,000,000 Course of Construction:$50,000,000 Terrorism $500,000,000 Deductible:$500,000 Expiring Premium $805,344 Property Insurance Overview 15 Current Coverage Coverage for key buildings located at both Plants 1 and 2 Values $105,392,597 Coverage up to $25,000,000 Deductible 5%/$5MM Minimum Expiring Premium: $86,585 EarthquakeOverview 16 Coverage for injuries to employees while in the course and scope of employment Limits Statutory Retention $1,000,000 Payroll $69,871,030 Expiring Premium $217,762 Excess Workers’Compensation 17 HistoricalRates 18 Key directives from OCSD Market the Major Lines of Coverage in a strategic fashion Provide Renewal With Existing Options at Various Retentions Investigate membership in CSRMA Remain Committed to EIA Excess Workers Compensation Program RenewalStrategy 19 Alternate SIRS – Claims History –Actuarial Work Insurance is designed to cover unlikely, but financially catastrophic events relative to the financial strength of the buyer …One cannot predict the future, but “low probability, high impact” events occur. Marketing Process General Liability –3 incumbent carriers –will approach over 10 Property -17 incumbent carriers –will approach over 30 Workers’ Comp –Stay with EIA, new rating plan working in District’s favor CSRMA considering OCSD as a member. Cyber Liability An important consideration this year. Currently buy in Alliant group purchase program,extremely cost effective,but limits of cover could be low relative to risk.Will obtain options for higher limit of cover for consideration Addressing Committee Questions 20 2020 RenewalExpectations At expiring limitsand deductiblestructure… Generally,conservativenumbers aredelivered at thispoint in time,butthesemay not beconservativeenoughin thecurrent environment 21 Excess Liability 2019 2020 Limit 40,000,000 40,000,000 -- Self-Insured Rentention 500,000 500,000 -- $10MM - Security National 337,271 438,452 101,181 30% $20MM - Berkley National 141,400 183,820 42,420 30% $10MM - Great American 36,700 47,710 11,010 30% Premium 515,371 669,982 154,611 30% Excess Workers' Comp 2019 2020 Payroll 69,871,030 73,639,437 3,768,407 5% Limit Statutory Statutory -- Rate Per $100 0.31 0.28 (0.03)-10% Self-Insured Retention 1,000,000 1,000,000 -0% Premium 217,762 207,000 -10,762 -5% Property (incl. B&M)2019 2020 Values 2,173,424,381 2,175,238,884 1,814,503 0% Deductible 500,000 500,000 -- Rate Per $100 0.04 0.05 0.0082 22% Premium 805,344 983,340 177,996 22% Earthquake 2019 2020 Values 105,392,597 106,186,166 793,569 1% Rate Per $100 0.08 0.09 0.01 10% Deductibles 5% $5MM Min 5% $5MM Min -0% Premium 86,585 95,960 9,376 11% Total Premium 1,625,062 1,956,283 331,221 20% Change - Dollars/Percent Change - Dollars/Percent Change - Dollars/Percent Change - Dollars/Percent QUESTIONS? THANK YOU!