HomeMy WebLinkAboutItem No. 6 PPP 05-11-2022 Administration Committee - Alliant State of the Insurance Market 2022 - REVISED5/11/2022
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May 11, 2022
Presented by:
Alliant Insurance Services
State of the Public Entity Insurance Market & OC San Renewal Expectations
(THIS INFORMATION HAS BEEN CONSOLIDATED FROM VARIOUS INDUSTRY SOURCES)
Presentation Overview
Highlights
The New Reality – Evolving Risks
Toward the Future
Renewal Expectations
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Highlights
Global insured catastrophe losses in the year 2021 are expected to rise to $112 billion, the fourth highest on record, with Hurricane Ida being the main loss-making event, according to an estimate by Swiss Re Institute.
U.S. Wildfires, Storms, and ‘Social Inflation’ continue to create intense pressure on insurers, causing insured losses in the billions, and while COVID -19 has of course added new types of losses to the mix, more so, it created additional uncertainty which has added to an already challenging insurance marketplace.
Winter storm Uri caused an estimated USD $20 billion insured losses in the U.S., the highest ever recorded for this peril in the country.
Source: A.M. Best, ISO, Verisk, Property Casualty Insurers Association of America (PCI)
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Key Industry Metrics •The industry’s 2021 combined ratio of 99.6%deteriorated from 2020’s 98.4%.
•Policyholder surplus grew 13.6% in 2021 to $1 trillion. An all time high.
•The U.S. property and casualty insurance industry recorded a $4.1 billion net underwriting loss last year, as rising losses and underwriting expenses outweighed premium growth.
•The industry saw an 8.5% increase in net investment income and an additional $1.9 billion in other income.
Signs point to a healthy, yet unsettled, insurance market, due to the unknowns of COVID-19 Variants, inflation, weather extremes, sea level rise, wildfires, catastrophic losses, social inflation and investment earnings. All remain areas of concern for insurers.
Source: A.M. Best, ISO, Verisk, Property Casualty Insurers Association of America (PCI)
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Impact of Natural
Catastrophes
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Wildfires
“The total damage and cumulative economic loss for the 2021 wildfire season is
expected to be between $70 billion and $90 billion in the U.S. with $45 billion to
$55 billion of those damages to California alone.” (AccuWeather)
Insured losses from wildfires in the U.S. have exceeded $13 billion and economic
losses have topped $20 billion in three of the last four years, according to Aon.
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Earthquakes
Not to be overlooked, Earthquakes areinevitable and can happen at any time.
Economic impacts of an earthquake can bedevastating on first party property, andexpected business revenues.
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The New Normal
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The Landscape
Insurance Landscape:
1. Markets have contracted
2. Underwriting has become more conservative
3. Variability further challenges the market
Workforce:
1. Remote work: new normal for many
2. Job mobility
3. Vaccination/pandemic concerns
Society:
1. Polarization
2. Worldwide focus on climate impacts
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What are Risk Manager’s Concerns?
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Cyber Facts
Cyber ranks as the top business concern
Of 1,200 business leaders who participated in a national survey, 59% said they
worry some or a great deal about cyber, compared to medical cost inflation (53%)
and increasing employee benefit costs (53%).
2018
$8 Billion
2019
$11.5 Billion
2020
$20 Billion
Estimated global damage from ransomware.
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Minimum Privacy and Security Standards
•Multi Factor Authentication – 100% Implemented
•Endpoint protection, detection, and response product implemented enterprise
wide with 24/7/365 response
•Remote Desktop Protocol connections enabled
•Backups
•Planning and Training
•Critical and high severity patches installed within 1‐7 days
•Adequate end of life software
Without good controls, coverage is extremely limited!
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Aging Infrastructure - 2021
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Toward the Future
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Liability Renewal Outlook
•Excess liability market:
•Severity trends continue, which gives reason to expect continued hard market conditions with carriers providing lower limit options. •The market has hardened considerably for the past three renewal cycles, and at current premium levels the path forward is unclear and likely account specific (losses).
•Specific problem areas:
•Aggregate limits – pools should consider impact to shared risk layers with reinsurance
•Attachment point
•Overall capacity issues when trying to build a large limit program
•Underwriting focus:
•Law Enforcement
•Sexual Abuse & Molestation
•Wildfire Liability
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Property Renewal Outlook
•Continued scrutiny of client data (SOV, loss runs, COPE, etc.)
•Building materials
•Date of construction / building codes
•Environment
•Values Reporting and Trending
•Higher than average trend factors
•Labor shortages, material costs, supply chain interruption
•Increased retentions and caps on certain types of exposure
•Wildfire
•Silent Cyber
•Market Stabilizing
•Rates continue to be moderating, dependent on loss experience; along with the accepted values trending
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Cyber Renewal Outlook
•Continued Rate Pressure on Cyber placements
•Premium increases vary by industry segment.
•Push for increased retentions
•Expect sub‐limits, particularly for ransomware losses
•Underwriting scrutiny on network security
•Minimum standards.
•Many carriers will no longer write public entities or pools
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Workers Compensation Outlook
•Relatively stable, more stable than other lines
•Premium increases vary by industry segment and loss experience.
•Full impact of COVID has not reached this line of business
•While rate increases are still in the single digit range –we are beginning to carriers increase rates in the low double digit range
•Loss Data and reserving methods are more important than ever due to adverse development.
Coverage for damages to third
parties arising out of District
negligence or statutory obligations.
Includes:
General Liability
Automobile Liability
Marine Liability
Cyber Liability
Pollution Liability
Workers Compensation
Public Entity Errors and Omissions
$40MM Limit, $750,000 retention
Liability & Workers Comp.
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Property Insurance
Coverage for Districts’ property arising
from “all risk” perils. Includes:
Boiler and Machinery
Flood
Earthquake
Terrorism
Hull
Other Misc.
$800,000,000 in Limits
Various Sublimits
$500,000 deductible, generally
Overview of OC San’s Insurance Program
All coverage provided on an “Occurrence” Basis
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What Makes Alliant’s Life Easier
•Study & plans to harden facilities to earthquake and climate change
impacts (i.e., sea level rise).
•Dedicated procedures to minimize business interruption (i.e.
warehousing spare/vital parts)
•Top notch spill containment and “best in class” procedures
•Implementation of recommendations from Cyber audit
•Clear effort to properly mitigate risk by regular review of safety
protocols
Key Long-term Components for OC San’s Insurance Program
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General Liability Claims
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2022 Renewal Expectations
At expiring limits and deductible structure…
Generally, conservative numbers are delivered at this point in time, but unlike last year where the was a high degree of uncertainty about the outer limits of cost, these figures are safe “NTE” numbers in the current environment
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Excess Liability Total Cost 2021 Est. Cost 2022
Limit 40,000,000 40,000,000 - 0%
Self-Insured Rentention 750,000 750,000 - 0%$10MM - Great American 442,842 531,411 88,568 20%
$20MM - Berkley National 302,419 362,903 60,484 20%
Arch $5MM Part of $20MM 54,590 65,508 10,918 20%
$10MM - Great American Custom 87,500 105,000 17,500 20%
Total Cost 887,351 1,064,822 177,470 20%
Excess Workers' Comp Total Cost 2021 Est. Cost 2022
Payroll 79,958,707 81,881,299 1,922,592 2%
Limit Statutory Statutory N/A N/A
Rate Per $100 0.34 0.42 0.08 23%
Self-Insured Retention 1,000,000 1,000,000 - 0%
Total Cost 266,355 343,000 76,645 29%
Property (incl. B&M) Total Cost 2021 Est. Cost 2022
Values 2,222,240,711 2,378,199,811 155,959,100 7%
A/R Limit 800,000,000 800,000,000 - 0%
Flood Limits 25M/25M 25M/25M - 0%
A/R Deductible 500,000 500,000 - 0%
Flood Deductible 1,000,000 1,000,000 - 0%
Boiler Limit/Deductibles 100M/25k/Vrs 100M/25k/Vrs - 0%Rate Per $100 0.06 0.07 0.01 15%
Total Cost Including Rebated Comm.* 1,424,276 1,752,868 328,592 23%
Earthquake Total Cost 2021 Est. Cost 2022
Values 109,091,054 116,727,428 7,636,374 7%
Rate Per $100 0.10 0.11 0.01 10%
Deductibles 5% $5MM Min 5% $5MM Min N/A N/A
Total Cost 112,087 131,927 19,839 18%
Total Cost - Board Items 2,690,070 3,292,617 602,547 22%
Change - Dollars/Percent
Change - Dollars/Percent
Change - Dollars/Percent
Property
Estimated Year over Year Total Cost Results
Change - Dollars/Percent
As of 5-03-22
May 2022
Contacts for Questions:
dmulqueeney@alliant.com
Thank you!
Questions?
Please contact us if you would like a copy of this presentation.
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