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Editorial: Risks with public entities reach new levels



Risk managers for public entities have as much difficulty as all insurance buyers when preparing for renewals. A combination of market-wide trends and sector-specific challenges has created insurance and risk management problems that would test even the most experienced risk professionals.

As we report starting on page 32, in recent years, the most notable problem that municipalities have faced is the responsibility of the police. Highlighted by the frightening recording of the murder of George Floyd 2020, the police’s misconduct is documented graphically with much more frequency than just a few years ago. The inevitable increase in lawsuits and claims against police departments led to severe capacity constraints when insurance companies and reinsurers cut boundaries or left the market.

Other liability problems also test buyers ̵

6;and brokers’ ability to find adequate coverage for municipalities and school districts. Increased friction between parents and teachers as a result of virtual lessons during the pandemic, fights over social issues such as the treatment of transgender people and the emergence of historical allegations of sexual abuse make already cautious insurance companies even more concerned about the limits they offer and prices. they charge.

On the real estate side, it’s not much better. As people continue to move from parts of the Northeast and Midwest to areas of the country that are more vulnerable to windstorms, such as Texas and Florida, the public units and school districts in those states will inevitably grow larger and occupy more buildings. The increase in cases of costly hurricane losses over the last three decades has been markedly acute in the public sector sector, and looking ahead, it is unlikely that the situation will improve any time soon (see chart).

Although there are some signs that the real estate / accident market can be stabilized, given the economic environment, there is no reason to believe that there is no more uncertainty to face in the coming years.

To address the problems, public sector risk managers and their brokers must be inventive in the way they approach their insurance programs and the resources they turn to. Like buyers in the private and publicly owned sector, they can to some extent turn to self-insurance facilities. While captives are not as attractive to public entities as to private companies because they do not see the same tax benefits, municipal risk pools and other structures are increasing in popularity in the hard market.

If there is an upside to the troubled market, it would be that risk managers are likely to get more attention when trying to implement policies that help avoid losses in the first place. Changes in police records, policies to intervene in controversial school conflicts, and improvements in property resilience should all be considered more seriously as ways to improve security and save taxpayers’ money in the long run.


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