Risk managers for public entities continue to face difficult liability renewals as insurance companies raise prices, reduce capacity and limit coverage.
Concerns about increased legal disputes, such as historical claims of sexual harassment against educational institutions and municipalities, failure to educate claims and transgender people’s housing-related lawsuits against schools, and police and public officials’ liability claims against cities make it more difficult to place insurance programs, experts say.
While some new capacity becomes available, several insurance companies have withdrawn from a market that had already seen a reduction in capacity, they say.
To navigate the difficult environment, risk managers should start renewals early, make sure they have all the information required by insurance companies and consider new program structures, they say.
“Public entity is one of the most difficult and tight corners of the market,”; said Ben Merris, Essex, Connecticut-based senior vice president, director of public entity, at wholesale brokerage firm CRC Insurance Services Inc.
The market has improved slightly since 2021, but it’s still tough for buyers, says Megan Medrano, Los Angeles-based West Coast Region Vice President of Marsh LLC’s education and public placement team.
“We are still definitely challenged with fallout from the pandemic, from civil unrest and even from natural disasters,” she said.
Reduction of primary capacity has led buyers to rely more on overcapacity, which is more expensive.
“We tell people when we look at their renewals that they will definitely see in their primary liability limits 15% to 25% increases, and in the excess layers you can see anything from 30% to 40%,” she says. In Medrano.
Public entities that buy coverage in the private market are increasingly looking to switch to public entity pools to gain access to capacity, she said.
This year, prices are still rising, but unless an account has a significant problem, “chances are they will be moderate rather than ridiculous,” said Steve Levene, Greenwich, Connecticut-based broker at EPIC Insurance Brokers & Consultants, which focuses on large public units and pools.
Prices had previously increased more significantly as court settlements and judgments have risen, so a 10% increase this year comes in addition to sometimes a doubling of prices in recent years, he said.
In addition, concerns about the actions of police officers have led to the introduction of lower limits for police liability risks (see story) and allegations of sexual abuse and settlements have made it difficult to find cover for sexual abuse and harassment for public entities, Levene said.
The opening of resuscitation windows for abuse processes has led to an increase in claims for abuse, which in turn has led to large increases in the cost of coverage, said Mr. Merris from CRC.
Insurance companies are increasingly removing SAM coverage from general liability insurance and offering much lower limits for risk, said Medrano from Marsh.
In addition, the tight labor market, which has led to a reduction in experienced staff, has created problems with errors and omissions for school leaders, says Doug Manwaring, Cincinnati-based chief underwriting officer for public entities at Liberty Mutual Insurance Co., whose book is about 80% educational institutions and 20% government units.
“It takes time and resources and commitment to train new staff who come in to understand things like individual training programs and how to deal with them with parents,” said Mr. Manwaring.
In addition, frustrations with virtual learning environments during the pandemic and increased friction over transgender rights have led to more legal disputes with schools, he said.
“The environment creates more uncertainty, and the greater uncertainty puts pressure on pricing,” said Mr. Manwaring.
The insurance companies withdraw
Several insurance companies that previously included public entities have withdrawn from the market, while others have reduced capacity.
Last year, Trident Public Risk Solutions, a unit of Avon, Connecticut-based Paragon Insurance Holdings LLC, reduced its excess liability for public entities. The insurance company continues to offer primary coverage and “works with carriers and reinsurance partners to re-establish the capacity needed to meet the needs of our public entities,” a spokesman said in an email.
This year, Plymouth, Minnesota-based Intact Insurance Group USA LLC announced that they are not renewing operations in government entities.
In addition, Chicago-based Allied Public Risk LLC narrowed its coverage for public entities this year while making new agreements with reinsurers, sources said. Homesite Group Inc. now supports the Allied program, but that excludes police responsibility, they say. The companies did not respond to requests for comment.
In addition, other insurance companies have withdrawn capacity from certain states, such as California and Washington, where claims have escalated, sources say.
While some domestic surplus insurance companies – such as Upland Specialty Insurance Co. and Applied Underwriters Inc. – and insurance companies and reinsurance companies in London and Bermuda have entered the US corporate insurance market over the past two years, the inflow does not offset the withdrawal of the insurance company. capacity, say sources.
“There are some new players; But the amount of capacity they provide is not large enough to change the entire tower, says Mr. Merris from CRC.
Brokers always ask policyholders to provide renewal information early, but this year it is “critical,” Medrano said. Policyholders should also be aware that their program structures are likely to change because the market is so fluid, she said.
Buyers should also be able to show that they have policies and procedures in place to deal with problems, such as how they intervene with parents over potential failures in educating demands on schools, and that they have an organizational commitment to the policies, said Mr. Manwaring by Liberty Mutual.
Policyholders can also work their way through the difficult market by restructuring their programs to include additional self-insured retentions higher in their coverage towers, said Mr. Merris.
“We had a couple of placements in the last year where we put a maintained border shape on top of another maintained border shape,” he said.