NY State, City, County Management Association

1. NY State, City, County Management Association State of the Municipal Insurance Market: Coverages & Exposures Presented By: Susan O’Rorke, John Congdon & Bob Bambino NY Municipal Insurance Reciprocal

2. State of the Municipal Market • Industry Results Recap • Market Consolidation / Change in Players • Pricing Trends • Coverage Trends • “Alternative” Markets

3. Industry Results Recap

4. Industry Results Recap Property/Casualty Income/Loss • 1997: $36.6 Billion • 1998: $30.8 Billion • 1999: $21.9 Billion • 2000: $20.5 Billion • 2001: -$7.9 Billion

5. Market Consolidation / Change in Players • Thirteen years of rate decreases and deteriorating profits have driven many competitors from the field. • The opportunity to ride a wave of rate increases will entice new players to enter the market.

6. Pricing Trends 2003 Projections Property: 30-40% General Liability: 10-20% Auto Liability: 10-20% Excess / Umbrella: 30-50% Law Enforcement: 30-40% Workers’ Comp.: 25-35%

7. Coverage Trends Positive Developments • Liability Limits to $10M and more • Sudden and Accidental Pollution Liability • Zoning and Land Use Coverage • Flood Coverage - even in flood zones • Earthquake available • Terrorism no longer excluded

8. Coverage Trends Negative Developments • Windstorm Deductibles • EPL as a stand-alone policy • Deductibles that include expenses • Erosion of blanket property limits; specific • limits being used • Mold Exclusions • Coverage for skate parks??

9. “Alternative Markets” • NYMIR - New York Municipal Insurance Reciprocal • Workers’ Compensation Pools • Comp. Alliance - New York Workers’ Compensation Alliance • PERMA - Public Employer Risk Management Association • Self-Insurance

10. Service Cutbacks: • Risk Management/Loss Control Services • Customer Service • Claim Management Services

11. Claim Management • Litigation Strategy – companies more inclined to settle lawsuits? • First-Party Claims – tougher claims adjusting? • Attorney Assignment – less cases to outside firms? • Claim Investigator Assignment and Procedures – reduction in staff?

12. Purchasing Insurance • Bidding Your Insurance • Consultants - Pros and Cons • Carrier Options • Selecting a Broker

13. Bidding Your Insurance PROs • Create Competitive Environment • Understand the Marketplace • Eliminate the “politics” of insurance. CONs • Increased Costs • Loss of Potential Competitors • Loss of Stability

14. Consultants PROs • Objective Third Party • Eliminate the “politics” • Thorough professional review CONs • Objective Third Party? • Additional Costs

15. Carrier Options • Direct Writers • Agency Companies • Pools & Reciprocals

16. Selecting a Broker • Expertise – how many municipal clients? • Market Access • Volume • Value-Added Services

17. How to Stabilize your Premiums • Increase deductibles • Review coverage limits • Eliminate unnecessary coverages • Consider self-insured retentions • Practice aggressive risk management

18. Workers’ Compensation Alternatives • For-Profit Private Carriers • Individual Self-Insurance • Group Self-Insurance

19. For-Profit Private Carriers • Traditional Policy • Pay an annual premium • Post-expiration date premium audit • Potential coverage limitations & disputes • Carrier controls claims process & services • Carrier benefits from interest earned on funds set aside to pay future claims

20. Self-Insurance • Control - Annual funding - Claim processing - No coverage disputes - Capture interest income • Non-Profit Structure - Tax exempt • Stability

21. Individual Self-Insurance • Total Control of annual funding requirement • Total control of claims process • Assume entire risk • Assume all operational costs • Potential volatility

22. Group Self-Insurance • Shared control/determination of annual funding requirement • Shared control of claims process • Spread risk amongst members • Share operational costs • Stability

23. Loss Drivers EPL Snowplow Claims WC – Slip & Fall Claims Problems & Concerns Community Use of Facilities Skate Parks Construction Insurance Requirements Municipal Risk Management – Current Issues and Trends

24. Employment Practices Liability • Leading loss driver for the POL Policy • Our experience: Discrimination based on age, disability and sexual harassment • Not all allegations are covered by a POL Policy • U.S. workforce becoming more diversified - presents challenges and opportunities

25. Changes in US Workforce By 2020: • Hispanics will make-up 14% of the workforce • Asians – 6% • African-Americans – 11% • Women – 50% Employment Policy Foundation: The American Workplace, “A Century of Progress…A Century of Change” http://www.epf.org

26. Impact of these Changes • More workers in federally protected classes • Greater exposure for the POL policy • More complaints to the EEOC - Steady increase in national origin and race complaints - Large increase in payments made by the EEOC for national origin and race complaints

27. Seven Ways to Stay Out of the EPL Quagmire • Adopt Anti-Harassment and Discrimination Policies • Implement Workable Complaint Procedures • Supervise the “Supervisors” • Look for Informal Resolutions • Investigate Fairly • Train, Train and then Train Again • Prohibit, Prevent and Preclude Retaliation

28. Skating Dilemma • 7-10 million skateboarders • 8-10% annual increase in participation • Over 300 skate parks in use • Over 54,000 participant injuries; a 13% increase in injuries • Most common reason for injury – falls from irregular surfaces or debris on the riding surface • Very little litigation!

29. What do Underwriters Consider When Evaluating Skate Parks? • Size • Number of participants • Supervision • Type and number of ramps • Fencing/signage • Loss history • Use of waivers

30. Risk Control Methods • Building a Skating Facility • Check local ordinances • Arrange for adequate space - at least 9,000 sq. feet • Retain an experienced design professional & contractor. No national standards at this time • Get certificates of insurance • Specs should include the maximum number of skaters, ramp heights, signage, lighting, fencing & maintenance • Compliance with the ADA • Use waivers & require personal protective equipment – helmets, knee and elbow pads

31. Snowplow Claims • Section 1103 (b) of the MV & Traffic Law (“Hazardous Vehicle Doctrine”) • Defense for municipalities for accidents during snow removal operations • Doesn’t apply if actions were reckless

32. Community Use of Facilities • Use a use of facilities form • Require insurance coverage from most facility users • Address alcohol use

33. Construction Insurance Requirements • Should be reviewed by insurance representative • Municipality as an additional insured by specific endorsement • “Reasonable” limits • Non-admitted insurers