AGENDA REPORT
Meeting Date:
Item Number:
To:
From:
Subject:
Attachments: 1. 2022 State of the Insurance Market
2. FY2022-23 City of Beverly Hills Renewal Presentation
RECOMMENDATION
Staff recommends the City Council authorize the Litigation Committee (Vice Mayor Dr.
Julian Gold and Councilmember Les Friedman) to make insurance procurement recommendations for FY 2022-23, authorize the City Manager to bind insurance coverage and approve the related purchase order for up to $11.7 million to Alliant Insurance Services for payment of insurance premiums and annual broker fees, and authorize appropriations of $1,685,250 and $14,750 for insurance premiums to the General Liability Fund and the Workers’ Compensation Fund, respectively.
June 21, 2022
D-6
Honorable Mayor & City Council
Shelley Ovrom, Director of Human Resources
Sharon L’Heureux Dressel, Risk Manager
AUTHORIZE THE LITIGATION COMMITTEE TO MAKE INSURANCE
PROCUREMENT RECOMMENDATIONS;
AUTHORIZE THE CITY MANAGER TO BIND INSURANCE
COVERAGE AND APPROVE A PURCHASE ORDER IN THE NOTTO-EXCEED AMOUNT OF $11.7 MILLION FOR INSURANCE PREMIUMS FOR FISCAL YEAR 2022-23; AND
AUTHORIZE AN APPROPRIATION OF $1,685,250 TO THE
GENERAL LIABILITY FUND AND $14,750 TO THE
WORKERS’ COMPENSATION FUND FOR INSURANCE PREMUIMS
FOR FISCAL YEAR 2022-23.
Meeting Date: June 21, 2022
INTRODUCTION
The Risk Management Division of Human Resources is responsible for identifying the City’s exposures and procuring and monitoring insurance coverage that will minimize financial loss to the City. The primary exposures include situations or conditions which may allege liability for injury or damages suffered by another party (e.g. employment practices liability, dangerous conditions, trip and falls, sewer backups and water main breaks); damage or loss of property from fire, theft, flood or earthquake; and losses associated with employee injury, disability, or death.
DISCUSSION
The City has consistently and without interruption purchased insurance for General Liability, Property, Earthquake, Workers’ Compensation and additional supplemental coverage including, but not limited to, Financial Protections, Medical Malpractice and Special Events. These policies renew annually with an effective date of July 1 and are procured through the City’s insurance broker Alliant Insurance Services.
In 2018, in preparation for presenting insurance renewal options to the City Council, Staff began the practice of meeting with the Litigation Liaison Committee to review marketing efforts, renewal options and recommendations. Continuing that practice, Staff met with the Committee on December 10, 2021 (renewal strategy and state of the market) and June 13, 2022 (FY 2022-23 renewal presentation). On June 13, 2022, the Committee evaluated the Fiscal Year 2022-23 proposals and pricing quoted below. Final pricing will be received upon binding following authority granted by the City Council on June 21, 2022.
Lines of Coverage Fiscal Year 2021-22 and Proposed Fiscal Year 2022-23 Line of Coverage 2021-22
Bound Rating
Basis
2021-22
Bound Cost
2022-23
Estimated
Rating Basis
2022-23
Quotes /
Estimates
Exposure
Change
Cost Change
Over 2021-22
% Change
$6,962,000
Property, Boiler &
Machinery
$1,027,085,360 $801,534 $1,109,252,189 $995,899 8% $194,365 24% Difference in Conditions $881,853,229 $2,947,650 $952,401,487 $3,400,000 8% $452,350 15% Excess Workers'
Compensation
$89,955,345 $174,027 $104,516,620 $209,000 16% $34,973 20% Med Mal (Fire) Application $14,688 Application $18,090 N/A $3,402 23% Financial Protections Application $87,439 Application $114,647 N/A $27,208 31% Total (including estimated subtotal) $8,559,245 $11,699,636 $3,140,391 37% City of Beverly Hills
2021-2022 Summary of Renewal Pricing
As of: June 15 2022
Excess Liability Application $4,533,907 Application N/A $2,428,093 54% The City’s insurance broker, Conor Boughey of Alliant Insurance Services, and Risk Manager Sharon Dressel presented the following marketing results, options and recommendations to the Committee for Fiscal Year 2022-23.
Meeting Date: June 21, 2022
Excess General Liability
Carriers’ concerns driven by increased large losses across the State, joint and several liability, medical costs, high value judgements, “social inflation”, law enforcement liability, and civil unrest have hardened the excess liability insurance market for California municipalities to historic levels. As a result, carriers are declining to insure California municipalities, and those that are continuing to offer terms have drastically reduced the limits they previously offered while also increasing rates. These conditions are producing rate increases for many in excess of 25% and exceeding 25% for those with a developing or unfavorable claims loss history.
The City currently purchases liability limits of $46,500,000 inclusive of the city’s $3,000,000 ($5,000,000 Loma Vista) self-insured retention (SIR). The Litigation Committee engaged in extensive review and discussion with the City’s broker about market and loss factors influencing the City’s FY 2022-23 liability renewal. The Committee provided direction to obtain coverage at, or in excess of, the expiring $46,500,000 (including SIR) and approved a total not to exceed amount of $7,000,000.
Year-over-Year Rate and Premium Comparison
July 1, 2021 to July 1, 2022 July 1, 2022 to July 1, 2023 Retention
$3,000,000 SIR
$5,000,000 Loma Vista SIR
$3,000,000 SIR
$5,000,000 Loma Vista SIR
Limit
$
46,500,000 $46,000,000 (Final Limit TBD)
Premium
$
4,533,907 Not to Exceed $7,000,000
Named Insureds for this policy include:
City of Beverly Hills
Beverly Hills Community Charitable Foundation
The Parking Authority of the City of Beverly Hills
Beverly Hills Public Financing Authority
Property Insurance
The City obtains its all-risk property insurance coverage through Alliant Property Insurance Program (APIP). All-Risk coverage protects property (real property, fine art, trees, personal property including City vehicles) against all-risks of physical damage or loss. It also includes coverage for related or resulting matters such as business interruption, debris removal, errors and omissions, pandemic, money and securities, and boilers and machinery. All-risk property coverage specifically excludes property damage resulting from an earthquake or flood, which is covered under the Difference in Conditions (DIC) coverage.
Renewal pricing for the City was primarily impacted by the continued hardening of the California property market (wild fires, catastrophic global events, social unrest) and the new values resulting from the property appraisals in December 2019. In 2020/21, the City was fortunate to have the underwriters agree to calculate the premium using only 60% ($884,727,232) of the new values ($1.028 Billion) prior to binding, and adding the remaining 40% of the new values after binding for no additional premium. After binding, Meeting Date: June 21, 2022
the City’s Total Insured Value (TIV) increased to $1.028 Billion and covered all locations up to the policy limit.
This year the City’s Total Insured Values total $1.083 Billion. The increase in TIV is due to the application of market trending for real property (structures) at 7.5% and content at 5%. These increases reflect inflationary pressures on labor, cost of goods, etc. which are higher than historical averages and reflect the current national discussions of inflation and material costs. The final 2022-23 pricing based upon existing coverage terms* came in with a 9% market rate increase resulting in a 14.89% cost increase over expiring for a total premium of $920,899 for $675,000,000 All Risk limit with a $25,000 deductible per occurrence.
Year-over-Year Rate and Premium Comparison
City of Beverly Hills 2021-2022 2022-2023 Variance
Total Insurable Values (TIV): $ 1,028,085,360 $ 1,083,612,520 5.40% Property Annual Cost: $ 775,439 $ 869,219 12.09%
Cyber Liability Annual Cost: $ 18,842 $ 43,423 130.46%
Pollution Liability Annual Cost: $ 7,252 $ 8,255 13.83% Total Account Rate ($/100): 0.0779638 0.0849842 9.00%
Total Annual Cost: $ 801,534 $ 920,899 14.89%
*The following all-risk deductible options and limit increases were discussed:
1. Increase All Risk Deductible to $50K – Cost decrease of $20,000
2. Increase All Risk Deductible to $100K – Cost decrease of $40,086
2. Increase limits above current $675,000,000.
The Liaison Committee provided direction to maintain the current $25,000 deductible and increase policy limits by $75,000,000 for an additional $7,500 in premium for total coverage of $750,000,000. Once quoted this will increase the total premium to $928,399.
Named Insureds for the All-Risk Property policy include:
City of Beverly Hills
Beverly Hills Community Charitable Foundation
The Parking Authority of the City of Beverly Hills
Beverly Hills Public Financing Authority
Difference in Conditions – Earthquake (Includes $10 Million for Flood) The City currently purchases Earthquake limits of $200,000,000 with a 5% per unit/property deductible (minimum of $100,000) and a $5,000,000 maximum deductible per occurrence. This coverage also includes a $10,000,000 limit for Flood.
Similar to All Risk Property, the key renewal issue for Earthquake coverage is the increase in values. In 2020-21, Total Insured Values (TIV) increased from $475,121,081 to $881,853,229 as a result of 2019 property appraisals. The TIV for earthquake does Meeting Date: June 21, 2022
not match the TIV for property insurance because the values for autos, fine art and trees were removed, as they are covered under the All Risk policy.
The 2022-23 premium is based upon TIV of $930,026,781, which includes 7.5% trending for property values resulting in a 5.46% increase in values, leading to a quoted and estimated renewal premium of $3,400,000 with the same limits and terms as expiring.
Catastrophic incident modeling is utilized to help determine the likelihood of loss and severity of damage projected for scheduled and owned property locations. Catastrophic incident modeling or a “Probable Maximum Loss” (PML) study is an insurance industry tool used for determining earthquake and hurricane exposures. The modeling takes into consideration the property location, value, construction type, fault lines, soil condition and other factors that help evaluate the susceptibility to loss for the City’s owned properties.
Modeling conducted using the updated values supports a recommendation to continue to purchase limits at $200,000,000. We estimate that additional limits above $200,000,000 can be purchased for $38,000 per $10,000,000 of coverage. Using Catastrophic Modeling Software, the city’s portfolio of locations would expect to have an estimated $68,000,000 of damage every 250 years, $121,000,000 every 500 years, and $180,500,000 every 1000 years. These ranges are used as a guide to determine the appropriateness of the limit purchased.
Quoted premiums for Parametric earthquake coverage (supplement or replacement for traditional earthquake coverage) were provided for consideration. These options, in short, provide a fast payout of a limit based on an earthquake in the City’s region hitting a certain size, and does not depend on physical damage to scheduled locations. Cost to purchase a $1,000,000 limit is $58,830 in premiums, or $5,000,000 limit for a premium of $294,010.
The Liaison Committee indicated an interest in further discussing Parametric coverage in the future and provided direction to bind expiring coverage as proposed.
Named Insureds for this policy includes:
City of Beverly Hills
Beverly Hills Community Charitable Foundation
The Parking Authority of the City of Beverly Hills
Beverly Hills Public Financing Authority
Excess Workers’ Compensation
For the period July 1, 2003 - June 30, 2018, the City retained, without the benefit of any excess coverage, 100% of its workers’ compensation exposure. The City began purchasing excess workers’ compensation insurance from Safety National effective July 1, 2018.
The City continues to obtain statutory limits coverage through Safety National with a $1,000,000 (non-safety) and a $5,000,000 (safety) self-insured retention (SIR)*. Like Fiscal Year 2021-22, renewing coverage includes a negotiated reduction in minimum premium, which will allow the City to receive a rebate up to 10% of paid premium if the City experiences reduction in payroll during the policy year. Estimated pricing of Meeting Date: June 21, 2022
$209,000 for this year is the result of a 16% increase in payroll and reflects a 4% rate increase over expiring.
The Liaison Committee provided direction to maintain coverage per the expiring terms and recommends binding coverage in an amount not to exceed 10% of the estimated $190,000. Staff will need additional authority from the Liaison Committee if final quote exceeds $209,000.
Program Year SIR Non-Safety SIR Safety Premium
2020-21 $1,000,000 $5,000,000 $176,897
2021-22 $1,000,000 $5,000,000 $174,027
2022-23 $1,000,000 $5,000,000 $209,000
*A $1,000,000 self-insured retention is the minimum attachment point for an excess insurance carrier. If the City wanted to consider a lower attachment point, it would need to consider a Joint Powers Authority.
Financial Protections
The City’s Financial Protections coverage includes municipal crime and network protection coverage. Municipal crime coverage is provided through the Alliant Crime Insurance Program (ACIP) which is a group purchase program insured by Lexington. As a group purchase program there is no risk sharing and no possibility of assessment.
Coverage includes fraudulent instruction, employee and vendor theft, loss of third party property, impersonation fraud, and faithful performance of duty.
The ACIP renewal premium for Fiscal Year 2022-23 reflects a 5% decrease over the expiring policy resulting in a Fiscal Year 2022-23 premium of $17,147 for $5,000,000 in annual limits with a $25,000 deductible per claim.
Comparison 2021-22 2022-23
Annual Premium $18,050 $17,147
The Liaison Committee provided direction to apply for an increase in the fraudulent impersonation sublimit and otherwise bind coverage at expiring and as quoted. If approved, the fraudulent impersonation sublimit would increase from $250,000 to $500,000 for $7,500 in premium.
The Financial Protections line item on the Summary of Renewal Pricing also includes a network coverage increase of 25%, from $75,000 to $100,000. Quotes are still developing and more favorable terms may arise and be purchased within this budgeted allocation.
Named Insureds for these policies include:
City of Beverly Hills (existing)
Beverly Hills Community Charitable Foundation
The Parking Authority of the City of Beverly Hills
Beverly Hills Public Financing Authority
Meeting Date: June 21, 2022
Medical Malpractice (Nurse Practitioner Program Exposures) The City’s current excess liability coverage is limited to incidental medical malpractice related to emergency services and excludes coverage for nurse practitioners (NP) and the scope of the NP program. While each NP is required to carry their own coverage ($1M per occurrence/$3M aggregate) and name the City as an additional insured, the City is without coverage if sued for the professional acts of NP under the supervision of the Beverly Hills Fire Department.
This coverage will provide a $3,000,000 (with $5,000 deductible) limit above all NP in the program. Specifically, this option will cover the professional liability exposure to the City arising out of the acts of the nurse practitioners, excess of any insurance they obtain.
The City’s program has six nurse practitioners, and their professional acts under the supervision of the Beverly Hills Fire Department would be addressed by this placement.
The coverage terms are provided by two layers of insurance, for a total premium of $18,090.
The Liaison Committee provided direction to bind coverage as proposed.
Named Insureds for this policy include:
City of Beverly Hills
Conclusion
Understanding the complexity and timing constraints associated with renewing the City’s policies (July 1, 2022 is the effective date of the insurance renewals and the insurance must be bound not later than June 30, 2022), the Committee recommended that staff provide Council with an overview of the insurance marketing strategy and program recommendations in order for Council to authorize the Committee to approve the recommendations regarding insurance coverage for Fiscal Year 2022-23.
FISCAL IMPACT
On June 14, 2022, as part of the City’s Fiscal Year 2022-23 Operating Budget, $10.0 million in insurance premiums were approved by the City Council as part of the Human Resources Budget. Subsequent to this, binding coverage premiums are now estimated at $11.7 million, resulting in the need for an appropriation of $1,685,250 million into the General Liability Fund (45000605-760320) and $14,750 into the Workers’ Compensation Fund (46000602-760320).
Jeff Muir,
Director of Finance
Shelley Ovrom,
Director of Human Resources
Approved By Approved By
ATTACHMENT 1
December 2021
Presented by:Conor BougheyState of the Public Entity Insurance Market & Evolving Risks (THIS INFORMATION HAS BEEN CONSOLIDATED FROM VARIOUS INDUSTRY SOURCES) Presentation
Overview
HighlightsProperty/Casualty Industry
PerformanceThe New Reality – Evolving Risks
Toward the Future
2 3
Highlights
Natural catastrophe insured losses totaled $42 billion globally during the first six months of 2021, says Swiss Re Institute’s preliminary sigma estimates. Insured losses this year are above the previous ten-year average of $33 billion and are the second-highest on record for a first-half period after 2011.
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 has created additional uncertainty which is adding to an already challenging insurance marketplace.
Winter storm Uri caused an estimated USD $15 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) 4 Key Industry Metrics • Insurers’ combined ratio was 96.9% for H1 2021; improving from prior year by 2.9%. • Policyholder surplus rose 7.2% from year end 2020 to $972.4B. • Net underwriting income for H1 2021 increased 27.9% from the prior period; as a 5.4% growth in net earned premiums and 55.3% decline in policyholder dividends offset the increases in incurred losses and loss adjustment and underwriting expenses.
Signs point to a healthy, yet unsettled, insurance market, due to the unknowns of COVID-19 Variants, weather extremes, sea level rise, wildfires, catastrophic losses, social inflation and investment earnings. All remain areas of concern for insurers.
Source: A.M. Best, ISO, Verisk, Property Casualty Insurers Association of America (PCI) 5 Property/Casualty Industry Performance
6 Q2 2021 U.S. commercial insurance prices continued increasing but at a lower pace Data for nearly all lines indicated significant price increases in the second quarter.
The largest price increase still comes from excess/umbrella liability which saw significantly accelerating prices over the previous six quarters.
Commercial auto saw reported price increases near or above double digits for the fifteenth consecutive quarter, while property coverage accelerated again and saw above double digit increases for the ninth consecutive quarter.
Source: Willis Towers Watson Commercial Lines Insurance Pricing Survey 7 Policyholder Surplus (Capacity), 2006:Q4–2021:Q1
Sources: ISO, A.M .Best; Risk and Uncertainty ManagementCenter, University of South Carolina. ($ Billions)
Financial
Crisis
(‐16.2%)
Drop due to near‐record
2011 CAT losses
(‐4.9%)
Policyholder Surplus is the industry’s financial cushion against large insured events, periods of economic stress and financial market volatility. It is also a source of capital to
underwrite new risks.
The P/C insurance industry entered the COVID‐19 pandemic from a position of strength and was able to withstand the 9.0% surplus decline in Q1 2020 (far less than during the Financial Crisis). 2020 ended with record surplus of $910B. (+7.4%)
$487.1
$496.6
$512.8
$521.8
$478.5
$455.6
$437.1
$463.0
$490.8
$511.5
$540.7
$530.5
$544.8
$559.2
$559.1
$538.6
$550.3
$567.8
$583.5
$586.9
$607.7
$614.0
$624.4
$653.4
$671.6
$673.9
$675.2
$674.2
$673.7
$676.3
$700.9
$717.0
$750.7
$781.5
$742.1
$779.5
$802.2
$812.2
$847.8
$771.3
$819.7
$865.1
$910.2
$934.9
$662.0
$566.5
$570.7
$505.0
$517.9
$515.6
$400$450$500$550$600$650$700$750$800$850$900$950
$1,000
06:Q4
07:Q1
07:Q2
07:Q3
07:Q4
08:Q1
08:Q2
08:Q3
08:Q4
09:Q1
09:Q2
09:Q3
09:Q4
10:Q1
10:Q2
10:Q3
10:Q4
11:Q1
11:Q2
11:Q3
11:Q4
12:Q1
12:Q2
12:Q3
12:Q4
13:Q1
13:Q2
13:Q3
13:Q4
14:Q1
14:Q2
14:Q3
14:Q4
15:Q2
15:Q4
16:Q1
16:Q4
17:Q2
17:Q4
18:Q3
18:Q4
19:Q1
19:Q2
19:Q3
19:Q4
20:Q1
20:Q2
20:Q3
20:Q4
21:Q1
Net Premium Growth (All P/C Lines):
Annual Change, 1971–2021F
(Percent)
1975-78 1984-87 2000-03
* **Pre/Post-COVID-19 forecast from A.M. Best Review & Preview (Feb. 2020, 2021). NOTE: Shaded areas denote “hard market” periods Sources: A.M. Best (1971-2013, 2021F), ISO (2014-19); Risk & Uncertainty Management Center, Univ. of South Carolina Net Written Premiums Fell 0.7%
in 2007 (First Decline Since
1943) by 2.0% in 2008, and 4.2%
in 2009, the First 3-Year Decline
Since 1930-33.
2021F: 4.6%*
2020: 1.8%
2020:Q3: 3.1%
2019: 3.6%
2018: 10.8%
2017: 4.6%2016: 2.7%2015: 3.5%
2014: 4.2
2013: 4.4%
2012: +4.2%
2020 Outlook
Pre-COVID: 3.8%
Actual: 1.8%**
8 -5%
0%5%
10%15%20%25%
71 72
73 74
75 76
77 78
79 80
81 82
83 84
85 86
87 88
89 90
91 92
93 94
95 96
97 98
99 00
01 02
03 04
05 06
07 08
09 10
11 12
13 14
15 16
17 18
19 20
21F
COVID’s Impact on NPW Growth for Largest P/C Lines: 2020 Percent Change
*Inland Marine figure is DPW though first 9-months of 2020 (A.M. Best).Sources: NAIC Annual Statement data, NCCI; Risk and Uncertainty Management Center, Univ. of South Carolina.
9.9%
13.1%
6.1%
-10.0%
-2.2% -1.7%
2.3% 2.3%
4.1%
-15%-10%
-5%
0%5%
10%15%
Workers
Comp
Inland
Marine*
Pvt. Pass.
Auto Liab
Commercial
Auto
All Lines Homeowners Fire & Allied Other
Liability
All Other
Lines (incl.
IM)
Workers Comp, Inland
Marine and PP Auto
Liability have
experienced the
largest decline in DPW
Down $4.2B
Personal Auto insurers
returned $8B to
policyholders in 2020, but
net change in NPW was
just $4.2B (same as WC)
9 Personal Auto Claim Frequency & Severity Impacted by COVID:
12 Months Ending Q1 2021 vs. 12 Months ending Q1 2020Year-over-Year Change Source: ISO/PCI Fast Track data for Q1 2021; Risk and Uncertainty Management Center, Univ. of South Carolina.
9.6% 12.4%
2.5%
-32.0%
-25.0% -23.9% -21.8%
-12.1%
10.8% 13.4%
-35%-30%-25%-20%-15%-10%
-5%
0%5%
10%15%20%
Prop. Damage
Liability
PIP Collision Bodily Injury
Liability
Comprehensive
Frequency Severity
PD Liability claims plunged
by nearly 1/3
Auto Claims Fell Sharply During the Pandemic, though
Claim Severities Rose Materially
10 Commercial Auto Combined Ratio: 1993–2021F
Sources: A.M. Best (1990-2021F); Center for Risk and Uncertainty Management, University of South Carolina. 112.1
112.0
113.0
115.9
102.7
95.2 92.9
92.1 92.4
94.1 96.8
99.1 97.8
103.4
106.8
106.7
103.3
108.8
110.5
111.1
108.0
109.4
104.7
108.1
118.1
115.7
116.2
80859095
100105110115120125
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 2021F Commercial Auto Results Are Challenged as Rate Gains Have Yet to Fully Offset Adverse Frequency and Severity Trends; 2020 Improvement Driven in Part by Reduced Claim Frequency During COVID-19 Pandemic 11 Change in Commercial Rate Renewals,
by Line: 2021:Q2Percentage Change (%)
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantiallySource: Council of Insurance Agents and Brokers; USC Center for Risk and Uncertainty Management.
5.4% 6.0% 6.4% 6.7% 6.8%
8.9% 9.9%
13.4%
17.4%
25.5%
0.3% 1.8% 1.9%
3.7% 4.0% 4.5%
0.0%5.0%
10.0%15.0%20.0%25.0%30.0%
Workers
Comp
Surety
Terrorsim
Broker E&O
Marine
Flood
Med Mal
General
Liability
Construction
Business
Interruption
Commercial
Auto
EPL
Commercial
Property
D&O
Umbrella
Cyber
Cyber is seeing record increase, in
response to major breaches in 2020
and 2021, overtaking Commercial
Umbrella
All major commercial
lines experienced
increases in Q2 2021
12 P/C Industry Net Income After Taxes, 1991–2021:Q1*
*2021 is through Q1. ROE figures are GAAP; 1Return on avg. surplus. Excludes Mortgage & Financial Guaranty insurers for years (2009‐2014).
Sources: A.M. Best, ISO.
$14,178
$5,840
$19,316
$10,870
$20,598
$24,404
$36,819
$30,773
$21,865
$3,046
$30,029
$62,496
$3,043
$35,204
$19,456
$33,522
$63,784
$55,870
$56,826
$42,924
$36,813
$63,032
$60,700
$20,021
$38,501
$20,559
$44,155
$65,777
-$6,970
$28,672
-$10,000
$0
$10,000$20,000$30,000$40,000$50,000$60,000$70,000$80,000 91 92
93 94
95 96
97 98
99 00
01 02
03 04
05 06
07 08
09 10
11 12
13 14
15 16
17 18
20 21*
2005 ROE= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 5.9% 2013 ROAS1 = 10.2% 2014 ROAS1 = 8.4% 2015 ROAS = 8.4% 2016 ROAS = 6.2% 2017 ROAS =5.0% 2018 ROAS = 8.0% 2019: ROAS = 7.7% 2020: ROAS = 6.8% 2021: ROAS = 8.7%* $ Millions
COVID’s impact on net income
was more modest than
anticipated, a decline of 3.7%
13 P/C Insurance Industry Combined Ratio, 2001-2021F**
*Excludes Mortgage & Financial Guaranty insurers 2008–2014.**2021 forecast from A.M. Best Review and Preview (Feb. 2021). Sources: A.M. Best, ISO (2014-2019). 14
95.7 99.3
101.1
106.5
102.5
96.4 97.097.8
100.7
98.0 98.9 99.8
103.7
99.2 101.0
92.6 100.8
98.4 100.1
107.5
115.8
90 100110120
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21** As Recently as 2001,
Insurers Paid Out
Nearly $1.16 for Every
$1 in Earned
Premiums
Heavy Use of
Reinsurance
Lowered Net
Losses
Relatively
Low CAT
Losses,
Reserve
Releases
Relatively
Low CAT
Losses,
Reserve
Releases
Best
Combined
Ratio Since
1949 (87.6)
Cyclical
Deterioration
Higher
CAT
Losses,
Shrinking
Reserve
Releases,
Toll of
Soft
Market
Avg. CAT
Losses,
More
Reserve
Releases
Lower
CAT
Losses
Sandy
Impacts
Sharply
higher CATs
are driving
large
underwriting
losses and
pricing
pressure
Pre-COVID 2020
Combined Ratio Est.
99.1 (A.M. Best)
Actual = 98
COVID-19 has
had no
discernable
net impact on
pre-COVID
expectations
for the
combined
ratio in 2020;
-7.5 pts. due
to CATs vs.
4.1 in 2019
(about twice
avg.)
15 Take Aways
• California has unique challenges, underwriting
scrutiny due to continued liability loss development.
• Policyholder surplus continues to rebound from an initial dip related to COVID-19 and has rebounded to historic highs. Signifies overall market health. • COVID-19 claim impacts are not fully developed, but
clearly adversely impact society, financial institutions and insurance markets. Inflationary trends arise. • Combine ratio remains close to 100 despite increased
rates, leading to financial and underwriting pressure to continue increasing rates.
15 Impact of
Natural Catastrophes
16 U.S. Inflation-Adjusted Cat Losses
Sources: Property Claims Service, a Verisk Analytics business (1980-2019); 2020 figure from Munich Re; Insurance Information Institute; University of South Carolina, Risk & Uncertainty Management Center.
Average Insured Loss per Year for 1980-2020 is $22.2 Billion 40 37
79 104
53 1980s:$5 B
1990s: $15 B
2000s: $25 B
2010s: $35 B
$0
$10$20$30$40$50$60$70$80$90
$100
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Billions, 2018 $
Average for Decade
Hurricane
Andrew WTC
Katrina, Rita,
Wilma
19 2
0 36
Harvey,
Irma, Maria
67 30 named
storms,
wildfires,
riots
2021 is off to an ominous start with ~$30B
in estimated insured losses through H1
and another ~20B for Ida in Q3
2020 CAT
losses in the
US totaled
$67B from a
record 71
PCS events
(not including
COVID-related
losses)
17 18
Six most severe Cat Loss Years on Record (all recent)
19 Climate Change & Catastrophic Loss
• Heat Waves ‐‐ Extreme heat waves, such as the deadly one that occurred in the Pacific Northwest and Canada earlier this summer, are already about five times more likely to occurwith our current warming of just over 1 degree Celsius.
• Droughts ‐‐ Climate change is increasing the frequency and severity of droughts ‐‐ such as the current drought plaguing the Western United States.
• Flooding ‐‐ Climate change is intensifying the water cycle on both sides. While more intense evaporation will lead to more droughts, warmer air can hold more water vapor to produce extreme rainfall.
• Hurricanes ‐‐ Hurricanes are growing stronger and producing more rain as global temperatures increase. It has already been observed that, globally,
a higher percentage of storms are
reaching the highest categories (categories 3,
4 and 5) in recent decades.
• Sea level rise‐‐ Sea level is rising around the world, and the rate is increasing. This is worsening high‐tide flooding and storm surge.
Key takeaways from the UN report on the climate crisis:
20 21
Hurricane Trivia
Naming Conventions• Storms are given short, distinctive names to avoid confusion and streamline communications
• In 1953, the United States began using female names for storms and, by 1978 both male and female names were used to identify storms.
• For Atlantic hurricanes, there is a list of names which are used on a six‐year rotation.
• The only time that there is a change is if a storm is so deadly or costly that the future use of its name on a different storm would be inappropriate. 22 HurricanesPotential threats from hurricanes include powerful winds, heavy rainfall, storm surges, coastal and inland flooding, rip currents, tornadoes, and landslides.
Hurricane Laura affecting Gulf Coast
August 2020
Hurricane Ida affecting Louisiana
August 2021
23 2021 Hurricane Season
The extremely active 2020 Atlantic hurricaneseason closed with a record‐breaking 30 named storms and 12 landfalling storms in
the continental United States.
For the 2021 season, 20 named storms are
now in the forecast, with nine becominghurricane and four major hurricanes.
The 1981 to 2010 average has been 12.1
named storms, with 6.4 hurricanes and 2.7major hurricanes.
Top 20 Most Costly Disasters in U.S. History
24 25
Wildfires
As of September 2021, there are 9 active, large fires burning in California and they are burning 1,906,725 acres. To date, 7,618 wildfires have burned more than 2.4 million acres this year.The 2020 season was a record-setting one for the state of California and the United States as a whole. NIFC reported that as of Nov. 27 there were 52,113 wildfires that had burned 8,889,297 acres in 2020. This is almost double the acreage burned in the 2019 season.
26 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. 27 Droughts
Much of California has received less than half of average rain and snowfall since October of 2020, with some areas seeing as little as a quarter. For most of Northern California, the past two years have been the second driest on record.
Drought is characterized by deficit — of rainfall, snow, runoff into rivers, storage in reservoirs and more. And all of these factors are in dire shape this year.
28 Droughts & Desalination
Desalination is the process of converting seawater into drinking water by removing its salt content.
California currently has 12 seawater desalination facilities in operation.
The Alameda County Water District built the Newark desalination facility to treat groundwater near the San Francisco Bay that had been contaminated with bay water. Whereas before it would just pump out the saltier water, now it treats it and produces about 12 million gallons per day, or about 25% of the overall water supply for the Southern Alameda County area.
29 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.
Take Aways
30 • Catastrophic events have been occurring with greater intensity and frequency. Insurance markets are reacting with underwriting and pricing changes. • Risk modeling continues to lead underwriting focus
and climate impacts have worsened the outlook for wet and dry lands. • California’s exposure to catastrophic property
losses from wildfire has upended the property market. Fires continue to increase in size and frequency, a troubling trend.
31 The New Normal
32 The Landscape
Insurance Landscape:
1. Markets have contracted2. Underwriting has become more conservative3. Variability further challenges the market Workforce:
1. Remote work: new normal for many2. Job mobility3. Vaccination/pandemic concerns Society:
1. Polarization 2. Worldwide focus on climate impacts
33 Changing Liability Landscape: “Nuclear Outcomes”
Litigation financing/funding is where a third party provides the financial resources to enable costlylitigation or arbitration cases to proceed. The litigant obtains all or part of the financing to cover its legal costs from a private commercial litigation funder, who has no direct interest in the proceedings. “The lawsuit finance industry is largely unsupervised and is not regulated at all at the federal level.” “Plaintiffs can exponentially increase the potential for favorable outcomes by funding additional surgeries and medical treatments and hiring expensive experts who work to inflate damage models.” “When medical damages trend upward, the non‐economic damages (pain and suffering) follow. The outcome is that higher indemnity dollars are required to dispose of the case, whether by settlement or by verdict.”
34 Societal Views Affect Businesses and Bring About New Risk 35 Workplace Interruptions Every Day
Remote Work
1. Boosts Efficiency
2. Increases Morale and Decreases Stress
3. Lowers Cost
4. Helps the Environment
5. Attracts Younger Employees, Retains Older Employees
36 5 Proven Benefits Of Remote Work For Companies
From Casbah.net
Remote Work
1. Risk: Disconnected EmployeeAccording to a Harvard Business Review study, remote employees have reported feeling disconnected from their co‐ workers because of the lack of physical interaction with them. This weaken bonds and lowers trust between colleagues, making collaboration difficult.
Solution: Develop a Check In Schedule
2. Risk: Distracted Employee
Many employers fear that their employees may become less productive if they’re not confined to constant, unchanging environment. While there is validity to this concern, there are methods to overcome it.
Solution: Set Your Standards
3. Risk: Dated Employees
Some mobile employees are still using obsolete tech devices when working out of office. This limits the capabilities they have to do their jobs correctly and can inhibit necessary communication between co‐workers and superiors.
Solution: Get Updated Technology
37 3 Risks of Remote Employees
From Casbah.net
38 Social Inflation, a continued trend
From 2015 to 2020, the median cost of a jury award over $10 million increased by 35%, from $20 million to $27 million, according to Advisen’s loss database.
Homelessness in America
39 Source: Right: endhomelessness.org Left: sfgov.org
Mass Shootings
40 New York Times
41 Cyber FactsCyber 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%).
The results mark a return to the top spot for cyber, which also ranked first in 2019. 42 Multi-Factor Authentication & PhishingMulti‐Factor Authentication (MFA) adds another layer of protection, in addition to your passwords. It requires that a user provides multiple credentials (factors) to validate his or her identity.
MFA is now commonly a minimum requirement for cyber insurance from most carriers. MFA for remote networks reduces the potential for a network security breach caused by a cracked, lost, or stolen password.
MFA for email reduces the potential for access and control of corporate email accounts.
Phishing is an attempt to trick you into providing personal or financial information by pretending to be from a legitimate entity or person.
Usually through emails disguised as legitimate communication from reputable sources (i.e. an employee of your own company).
More than $3 billion has been lost to targeted spear phishing over the past 3 years. 43 Aging Infrastructure - 2021
44 America’s Aging Infrastructure Gets C-Minus On Its Report Card Aviation (D+), Bridges (C), Dams (D),
Drinking Water (C‐), Hazardous Waste
(D+), Inland Waterways (D+), Levees
(D), Public Parks (D+), Ports (B‐), Rail
(B), Roads (D), Schools (D+), SolidWaste (C+), Stormwater (D), Transit (D‐), Wastewater (D+) and, my
favorite, Energy (C‐).
American Society of Civil Engineers
45 Take Aways
• Challenges and uncertainties resulting from the
ongoing COVID-19 pandemic response.
• Is your entity prepared for further financial insecurity?• Cyber Security: “Not if, but When” your entity will suffer a data breach. Are you prepared?
• Aging infrastructure… Who’s footing the bill?
46 Toward the Future
46 47
Liability Renewal Outlook
• Excess liability market:
• Severity trends continue, which gives reason to expect continued hard market conditions with carriers providing lower limit options. • Higher excess layers seeking disproportionately high percentage increases. • 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 48 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
• Early signs of premium increases in moderate range
49 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 50 Parting Thoughts
The past 18 months have been a wild ride… looking forward• Overall the insurance market is in a strong financial position. • California risks face challenges for Liability and Property, and there will be pressure on rates to increase.
• Loss leaders will continue to see significant increases and the marketplace for coverage will continue to retract.
• Insurance coverage for Sexual Abuse and Molestation will continue to face pricing and coverage pressures.
• Police Reforms and Qualified Immunity will have ramifications on the insurance market.
• Workers’ Compensation remains relatively stable.
December 2021
Contacts for Questions:[email protected]
Thank you! Questions?Please contact us if you would like a copy of this presentation. 52 Wildfires
Record-breaking wildfires are occurring more often. The top seven of the 10 largest fires in California history have occurred since 2020. Within the first three days of igniting in July 2021, the massive Dixie fire became the second largest fire in the state's history.
ATTACHMENT 2
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
City of Beverly Hills Litigation Committee Presentation FY 2022/23 Insurance Renewals
Presented by Conor Boughey
Excess Liability
The City of Beverly Hills currently purchases liability limits of $43,500,000 with various participating carriers, excess of a $3,000,000 SIR ($5M LV). This involves domestic insurance carriers who write follow form excess liability over the Munich policy, as well as one Lloyds of London placement at the top of the tower that has some additional coverage restrictions in the top $5M of coverage.
The excess liability continues to be very difficult, with a frequency of large losses against California Public Entities resulting in restricting insurance capacity and increased coverage costs. In the late 1980’s a similar market existed, which was why many Liability JPAs were formed – coverage simply wasn’t available at any reasonable cost.
This year we are seeing more stable pricing, compared to last year when we saw a rapid change in the market with 50-100% increases. The primary challenges for municipalities are joint and several liability (Prop 51), large medical cost claims, dangerous condition claims, law enforcement liability and runaway juries. Carriers continue to only provide low limit layers of coverage ($10M to $5M) and seeking continued rate increases. We see some markets completely leaving the state, and no new coverage providers stepping in.
These carrier concerns are driven by recent large losses, as well as increased concerns over law enforcement liability. The City has experienced some large losses in recent years, and the last two renewals were very challenging, but we brought coverage options and there was plenty of limit capacity.
This year, the City received a fair renewal from the lead excess carrier Munich, increasing at 12%. The layers in excess of Munich are seeking larger increases due to loss trends and city losses.
The following are the key discussion points for this renewal:
1. Attachment point is currently $3M / $5M for Loma Vista:
a. City could change the SIR to $5M and reduce premiums $500,000 b. Higher SIR also allows slightly higher limit, and a restructuring of the program may benefit overall pricing.
2. Discuss Allied World / APR, minimum attachment points.
3. Desired Coverage Limit:
a. Large losses continue to emerge.
b. London Markets: Additional capacity available, but no coverage for Sexual Misconduct Liability (SML), single aggregate.
4. Markets and JPA Participation:
a. Great American / ANML
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
b. Reviewed with City staff, rates in pools are competitive and limit is available.
Excess Liability SIR Options & Renewal Budget
The following figures are budgeted, and are not quoted. The figures below aim to provide a framework for renewal strategy.
2021-2022 - Bound Program
Layers Carrier Aggregate Application
Premium
(inc TRIA) PPM Relativity
SL Taxes and
fees
Total with
TRIA and Taxes
and Fees
Layer 1
5m x 3m SIR
(5m xs 5m SIR Loma Vista) PESLIC (Munich Re) 2x each LOB (GL/AL unaggregated) $2,015,354 $ 403,071 N/A $ 65,499 $ 2,080,853 Layer 2
3.5m x 8m
(1.5m x 10m Loma Vista) Gemini Insurance Company
2x Where Applicable except for GL
being aggregated
2x Loma Vista Dr. $ 953,603 $ 272,458 68% $ 30,992 $ 984,595 Layer 3 10m x 11.5m Allied World National Ins Co 2x Where Applicable $ 515,000 $ 51,500 19% $ 16,738 $ 531,738 Layer 4 10m x 21.5m Navigators Specialty Ins Co 1x Where Applicable $ 396,550 $ 39,655 77% $ 12,888 $ 409,438 Layer 5 5m x 31.5m Hallmark Specialty Ins Co 1x Where Applicable $ 188,700 $ 37,740 95% $ 6,133 $ 194,833 Layer 6 5m x 36.5m Allied World National Ins Co 1x Where Applicable $ 183,500 $ 36,700 97% $ 5,964 $ 189,464 Layer 7 5m x 41.5m Lloyds (Inigo) Retailer Direct $ 150,000 $ 30,000 82% $ 4,875 $ 154,875 $4,402,707 $ 143,088 $ 4,545,795
2022-2023 - Using Munich's Option 1
Layers Carrier Aggregate Application
Premium
(inc TRIA) PPM Relativity
SL Taxes and
fees
Total with
TRIA and Taxes
and Fees
Change over
Expiring
Layer 1
5m x 3m SIR
(5m xs 5m SIR Loma Vista) PESLIC (Munich Re) 2x each LOB (GL/AL unaggregated) $2,258,655 $ 451,731 N/A $ 73,406 $ 2,332,061 12% Layer 2
3.5m x 8m
(1.5m x 10m Loma Vista) Gemini Insurance Company
2x Where Applicable except for GL
being aggregated
2x Loma Vista Dr. $1,181,834 $ 337,667 75% $ 38,410 $ 1,220,244 24% Layer 3 10m x 11.5m Allied World National Ins Co $20m Where Applicable $1,500,000 $ 150,000 44% TBD $ 1,500,000 182% Layer 4 10m x 21.5m Navigators Specialty Ins Co $10m Where Applicable $1,000,000 $ 100,000 67% TBD $ 1,000,000 144% Layer 5 5m x 31.5m Hallmark Specialty Ins Co $5m Where Applicable $ 400,000 $ 80,000 80% TBD $ 400,000 105% Layer 6 5m x 36.5m Allied World National Ins Co $5m Where Applicable $ 350,000 $ 70,000 88% TBD $ 350,000 85% Layer 7 5m x 41.5m Lloyds (Inigo) Retailer Direct $ 185,000 $ 37,000 53% TBD $ 185,000 19% $6,690,489 $ 111,816 $ 6,802,305 50%
2022-2023 - Using Munich's Option 2
Layers Carrier Aggregate Application
Premium
(inc TRIA) PPM Relativity
SL Taxes and
fees
Total with
TRIA and Taxes
and Fees
Change over
Expiring
Layer 1 5m x 5m SIR PESLIC (Munich Re) 2x each LOB (GL/AL unaggregated) $1,777,500 $ 355,500 N/A $ 57,769 $ 1,835,269 -12% Layer 2 TBD TBD TBD TBD $ -
Layer 3 $ -
Layer 4 $ -
Layer 5 $ -
Layer 6 $ -
Layer 7 $ -
$1,777,500 $ 57,769 $ 1,835,269 -60%
Color Key
Formal Quote
Indication
Estimate/Placeholder
Totals
Totals
Totals
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Workers Compensation
The City of Beverly Hills purchases excess workers compensation coverage from Safety National. The workers compensation market is rather limited for California Public Entities with Safety officers. Safety National provides a very competitive coverage offering, and continues to partner with the City. A $1,000,000 self-insured retention is the minimum attachment point to an insurance carrier, if the City would like to consider lower attachment options, PRISM (formerly CSAC-EIA) is the most viable market.
The City retains the first $1,000,000/$5,000,000 of each claim, and Safety National provides Statutory limits coverage.
Discussion Points:
1. Stable market environment.
2. Wildfire response, occurrence trigger.
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Property and B&M Coverage
The City of Beverly Hills purchases its Property and B&M coverage through the Alliant Property Insurance Program (APIP). APIP is joint purchase program designed for municipalities and has grown to be the largest single property placement in the world, the primary insurance participant remains Lexington/AIG. The ‘shared and layered’ structure of APIP’s coverage tower provides a high limit program, broad coverage form, and competitive pricing.
As we began warning early in the year, the property insurance market continues to push higher rates and policy language restrictions. We are in a hard market cycle, meaning that terms and options are more limited, and there are significant pressures to increase rates due to risk modeling results for California risks, in short this comes down to climactic changes in California that lead to greater likelihood of large property losses. Further market information is available in Alliant’s State of the Market presentation if desired.
You will see that the rate increases this year are less than last year, this is a good sign of a stabling market, albeit at a higher rate than years past. Last year we were dealing with rate increases near 40% (BH 18%), and this year rates are increasing at roughly 15% (BH 9%). We hope these rate increases continue to decline, and ultimately, we hope to provide rate reductions soon. Also, you will find additional detail in the chart below, and likely see that some of this premium increase is being driven by the increased cost of financial protections liability coverage, which continues to be a problem area in the market, seeking large percentage increases.
In the stand-alone traditional property market, renewals have faced greater challenges, with carriers offering less limit, non-renewing, and seeking very large increases. Market competition is lacking, and APIP continues to provide market leading coverage options.
APIP’s structure promotes carrier competition, and we expect favorable renewal terms from Lexington, the primary carrier participant. In addition to rate concerns, the City’s insured values are increasing due to schedule changes and annual trending. This year, Alliant is not using Marshall & Swift Trending Factors, which are currently 19.72% (due to the increased cost of materials, labor shortages and supply chain interruption). The average for the last 5 years has been 2.4% for real property and 1.9% for personal property.
Based on discussions with the City, we applied the following trended factors to your locations: 7.5% for real property and 5.0% for personal property.
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Please see the following table:
Year-over-Year Rate and Premium Comparison
City of Beverly Hills 2021-2022 2022-2023 Variance
Total Insurable Values (TIV): $ 1,028,085,360 $ 1,083,612,520 5.40% Property Annual Cost: $ 775,439 $ 869,219 12.09%
Financial Protection Annual
Cost:
$ 18,842 $ 43,423 130.46%
Pollution Liability Annual Cost: $ 7,252 $ 8,255 13.83% Total Account Rate ($/100): 0.0779638 0.0849842 9.00%
Total Annual Cost: $ 801,534 $ 920,899 14.89%
Discussion Points:
The City’s current all-risk deductible is $25,000. We requested the following all-risk deductible options for the renewal:
$25,000 – Quoted $920,899.21
$50,000 – Quoted $900,905.70
$100,000 – Quoted $880,913.19
Current limit is $675,000,000, does the city want a higher limit? o $1,000 per $1M limit, to a $1B limit would cost $325,000 Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Difference in Conditions
The City of Beverly Hills currently purchases Earthquake limits of $200M with a 5% per Unit Deductible (Minimum $100K), and a $5,000,000 maximum deductible. This coverage also includes a $10,000,000 limit for Flood.
Many participating carriers have quoted, but some have quoted significant rate increases, and we are in the process of remarketing several layers of coverage and are awaiting final terms.
Past Updates to the policy:
Coverage was previously placed by separate policies for separate locations a. Coverage is now one tower, reducing costs and improving coverage
2. Coverage was previously written as stated value on some key policies a. Coverage is now blanket (limit can be applied to any location)
3. First year we reduced premium from $1,769,529 to $992,178, while making changes noted above.
4. Since then, we have been increasing the values reported significantly, and trying to limit the associated premium increases.
5. Values do not match the property placement due to Autos, Fine Arts and Trees, which have coverage through APIP, but not the EQ placement.
Renewal Options:
1. We anticipated a year over year cost increase of 14-19% due to underwriting pressures and increased values. The budget outline below should serve as a not to exceed, and we anticipate improvement from the numbers shown. The numbers below include commission, which will be rebated.
2. Parametric EQ Option: If the City would like to supplement or replace this placement, we could place a parametric policy. These options, in short, provide a fast payout of a limit based on an earthquake in your region hitting a certain size, and does not depend on physical damage to your locations. a. $1,000,000 limit, $58,830 premium.
b. $5,000,000 limit, $294,010 premium.
c. No premium falloff with higher limits, ‘rate on line’ At-A-Glance
2021 vs 2022
Term 7/1/21 -
7/1/22
7/1/22 -
7/1/23
Percentage
Change
Exposure $881,853,229 $930,026,781 5.46%
Limit $200,000,000 $200,000,000 0.00%
Premium $3,154,487 $3,772,150 19.58%
Rate 0.3577% 0.4056% 13.39%
If premiums include commission, it will be rebated back to insured.
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Named Insured City of Beverly Hills
Effective Date 7/1/21 - 7/1/22
Perils Earthquake & Flood Participation &
TIV $881,853,229
Deductible 5% Per Unit ($100,000 MPO) *$5,000,000 Maximum Per Occurrence Limits $200,000,000 Per Occurrence and Annual Aggregate as respects Earthquake $10,000,000 Per Occurrence and Annual Aggregate as respects Flood $10,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate National Fire & Marine Insurance Company (Berkshire) A++ XV $10,000,000 100% $950,000 $0 $30,875.00 $980,875.00 0.1077% Totals $10,000,000 100% $950,000 $0 $30,875.00 $980,875.00 0.1077% $15,000,000 x/s $10,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Colony Insurance Company (Colony) A- XIV $2,500,000 16.66% $75,000 $250 $2,445.63 $77,695.63 0.0085% Ironshore Specialty Insurance Company (Ironshore) A XV $5,000,000 33.3% $154,545 $0 $5,022.71 $159,567.71 0.0175% Homesite Insurance Company (Vikco) A XV $2,500,000 16.66% $82,500 $300 $2,691.00 $85,491.00 0.0094% Endurance American Specialty Insurance Company (Sompo) A+ XV $5,000,000 33.3% $146,666 $0 $4,766.65 $151,432.65 0.0166% Totals $15,000,000 100% $458,711 $550 $14,925.98 $474,186.98 0.0520% $75,000,000 x/s $25,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Various (SRU) Various $7,500,000 10% $98,200 $500 $3,207.75 $101,907.75 0.0111% Scottsdale Insurance Company (Paragon) A+ XV $13,750,000 18.3% $192,500 $250 $6,264.38 $199,014.38 0.0218% Totals $21,250,000 28.3% $290,700 $750 $9,472.13 $300,922.13 0.0330% $10,000,000 x/s $25,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Landmark American Insurance Company (RSUI) A+ XIV $5,166,666 51.6% $107,075 $0 $3,479.94 $110,554.94 0.0121% Totals $5,166,666 51.6% $107,075 $0 $3,479.94 $110,554.94 0.0121% $15,000,000 x/s $35,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Homesite Insurance Company (Vikco) A XV $5,000,000 33.3% $84,030 $150 $2,735.85 $86,915.85 0.0095% Trisura Specialty Insurance Company (Vikco) A- VIII $2,750,000 18.3% $46,170 $300 $1,510.28 $47,980.28 0.0052% Totals $7,750,000 51.6% $130,200 $450 $4,246.13 $134,896.13 0.0148% $25,000,000 x/s $25,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Various (Velocity) A XV, A+ XV, A X $5,000,000 20% $110,955 $500 $3,622.29 $115,077.29 0.0126% Totals $5,000,000 20% $110,955 $500 $3,622.29 $115,077.29 0.0126% $50,000,000 x/s $50,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Axis Surplus Insurance Company (Axis) A XV $5,000,000 10% $75,000 $0 $2,437.50 $77,437.50 0.0085% Lexington Insurance Company (Lexington) A XV $10,000,000 20% $53,277 $0 $1,731.50 $55,008.50 0.0060% Totals $15,000,000 30% $128,277 $0 $4,169.00 $132,446.00 0.0145% $25,000,000 x/s $50,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Aspen Specialty Insurance Company (Aspen) A XV $5,000,000 20% $51,515 $0 $1,674.24 $53,189.24 0.0058% Trisura Specialty Insurance Company (Vikco) A- VIII $5,416,666 21.6% $62,833 $0 $2,042.07 $64,875.07 0.0071% Totals $10,416,666 41.6% $114,348 $0 $3,716.31 $118,064.31 0.0130% $25,000,000 x/s $75,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Arch Specialty Insurance Company (Arch) A+ XV $10,416,666 41.6% $127,084 $0 $4,130.23 $131,214.23 0.0144% Totals $10,416,666 41.6% $127,084 $0 $4,130.23 $131,214.23 0.0144% $25,000,000 x/s $100,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Various (SRU) Various $3,750,000 15% $40,950 $0 $1,330.88 $42,280.88 0.0046% General Security Indemnity Company of Arizona (Arrowhead) A+ XV $5,312,500 21.25% $61,359 $300 $2,003.92 $63,662.92 0.0070% CUMIS Specialty Insurance Company, Inc. (Arrowhead) A XII $10,000,000 40% $115,503 $300 $3,763.60 $119,566.60 0.0131% Palomar Excess and Surplus Insurance Company (Arrowhead) A- IX $5,937,500 23.75% $68,575 $300 $2,238.44 $71,113.44 0.0078% Totals $25,000,000 100% $286,387 $900 $9,336.83 $296,623.83 0.0325% $25,000,000 x/s $125,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Lloyd's of London (Arrowhead) A XV $5,000,000 20% $47,250 $300 $1,545.38 $49,095.38 0.0054% General Security Indemnity Company of Arizona (Arrowhead) A+ XV $6,250,000 25% $59,062 $300 $1,929.27 $61,291.27 0.0067% Steadfast Insurance Company (Arrowhead) A+ XV $6,875,000 27.5% $64,969 $300 $2,121.24 $67,390.24 0.0074% Palomar Excess and Surplus Insurance Company (Arrowhead) A- IX $6,875,000 27.5% $64,969 $300 $2,121.24 $67,390.24 0.0074% Totals $25,000,000 100% $236,250 $1,200 $7,717.13 $245,167.13 0.0268% $25,000,000 x/s $150,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Lloyd's of London (Arrowhead) A XV $5,000,000 20% $31,500 $300 $1,033.50 $32,833.50 0.0036% General Security Indemnity Company of Arizona (Arrowhead) A+ XV $3,750,000 15% $23,626 $300 $777.60 $24,703.60 0.0027% Steadfast Insurance Company (Arrowhead) A+ XV $6,250,000 25% $39,374 $300 $1,289.41 $40,963.41 0.0045% Evanston Insurance Company (Markel) A XV $10,000,000 40% $52,500 $0 $1,706.25 $54,206.25 0.0060% Totals $25,000,000 100% $147,000 $900 $4,806.75 $152,706.75 0.0167% $25,000,000 x/s $175,000,000
Company A.M. Best Rating Limit Participation Premium Market Fees CA SL Taxes Total Rate Various (North Shore) A XV $25,000,000 100% $67,500 $350 $2,205.13 $70,055.13 0.0077% Totals $25,000,000 100% $67,500 $350 $2,205.13 $70,055.13 0.0077% Program Totals $3,154,487 $5,600 $102,702.83 $3,262,789.83 0.3577% Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Financial Protection Policies
The City of Beverly Hills currently obtains its crime coverage through the Alliant Crime Insurance Program (ACIP) which is a group purchase Beverly program insured by National Union Fire (AM Best Rating AXV-Excellent). Attached is the renewal proposal. Please note the current policy will be extended by endorsement, policy number will remain the same.
Past Updates to the policy:
Moved coverage from Lexington to ACIP program.
1. Reduced premium from $32K when assigned BOR.
2. Reduced deductible from $50K to $25K
3. Maintained $5M limit
4. Increased coverages broadly, adding coverages such as Fraudulent Instruction, inside/outside premises theft.
5. Added named insureds:
City of Beverly Hills (existed)
Beverly Hills Community Charitable Foundation
The Parking Authority of the City of Beverly Hills
Beverly Hills Public Financing Authority
Comparison 21-22 22-23
Annual Premium $18,050 $17,147
You may request an increase to your Impersonation Fraud limit from $250,000 to $500,000 subject to underwriter review and approval of a completed Impersonation Fraud Questionnaire. If approved by the underwriter, an additional premium of 18.75% subject to a $7,500 minimum premium will apply. We only need the questionnaire completed if a member is interested in increasing the limit.
In order to secure coverage, we will need the signed and dated Request to Bind Coverage page from the proposal by 6/20.
The City of Beverly Hills currently purchases Excess Financial Protection Limits of $2,000,000 Excess of $2,000,000. These premiums were historically low compared to other lines of coverage, but the number of claims developments still continue to impact premiums. Consequently, the markets are continuing to reel. Markets are experiencing dramatic increases in notice of loss events and paid losses continue to increase. While many different types of losses occur, the major issues are attributed to ransomware attacks. Premiums are included in the Financial Protections line item on the Summary of Renewal Pricing. This year coverage increased 25%, to $100,000.
Alliant Insurance Services, Inc.
License No. 0C36861 * alliantinsurance.com
Professional Liability
The City of Beverly Hills purchases a Professional Liability Policy for the Fire Department Nurse Practitioner Program. This is the second year of coverage purchased for this program, and it is claims made coverage. Because the policy exposure is still developing, a premium increase has been expected, but is reasonable considering the overall market environment.
Renewal Update:
1. We have bindable terms for $3,000,000 of med mal limits for the program $18,090
a. Claims Made Coverage, retro date will be set for acts after binding b. Premium will increase over time, as exposure increases (claims made) c. Premiums will taper off if claims don’t develop, and years of purchase are fully developed, about 3-4 years.
d. Terms presented by Landmark American Insurance Agency - lead $2M, General Star Indemnity Company excess $1M
Comparison 21-22 22-23
Annual Premium $ 14,687 $18,090