DECREASED COFFERS/ INCREASED RISK WHAT’S A PUBLIC ENTITY TO DO?

2. DECREASED COFFERS/ INCREASED RISKWHAT’S A PUBLICENTITY TO DO?

3. Introductions MODERATOR: • Robert A. Spolzino, Esq., Partner, Wilson Elser Moskowitz Edelman & Dicker LLP PANELISTS: • Daniel J. Howell, CPCU, ARM-P, Senior Executive Vice President, Managing Director, Specialty Group, Alliant Insurance Services, Inc. • Susan L. Kostro, MBA, Senior Vice President, Public Entity and Energy, Ironshore • Sean M. Pattwell, MS, Managing Director & Senior Vice President, Herbert L. Jamison & Co., L.L.C. & Jamison Special Risk, Inc. • Thomas L. Vance, MBA, ARM, Risk Manager, City of Anaheim

4. Agenda • Financial Challenges Facing Municipalities • Impact on Claims • The Economy and the Municipal Insurance Market • Emerging Risk Management Strategies • Where Do We Go From Here? • Q&A

5. Recent Headlines • Nassau Police Precinct Closures Eyed, October 10, 2011 • Chicago Transit Authority to Cut More than 200 Jobs to Save $22 Million, October 10, 2011 • Many Cities Imposing Broad Cuts as Revenue Shrinks, September 27, 2011

6. Some Stats • Cities' general fund revenues declined 3.8% from 2009 to 2010 and are expected to decline another 2.3% in 2011. • Their expenditures went down 4.4% from 2009 to 2010 and are expected to decrease by another 1.9% in 2011. • Sales tax receipts declined 8.4% in 2010. • 72% of cities planned to deal with the financial situation by making personnel cuts. Source: National League of Cities Report dated September 2011

7. Some Stats • 550,000 jobs in local government have been lost nationally since 2008. • 60% would be delaying or cancelling capitalinfrastructure projects. • 30% planned to reduce employee health benefits. • ??? planned to reduce insurance expenditures. Source: National League of Cities Report dated September 2011

8. Financial ChallengesFacing Municipalities • Decreased revenues; decreased reserves • Cutbacks, holdbacks, and cost-shifting • Restrictions on of local taxing authority • Diminished ability to raise fees • Labor-intensive governments • Greater demands for social services

9. Impact on Claims • Employment practices claims • Employees less likely to sue? • Are insured's doing a better job terminating employees? • Likely trend when economy improves? • Are other exposures similarly impacted? • Outsourcing implications?

10. The Economy and the Municipal Insurance Market • Downward pressure on premiums • New markets; available capacity • Insurance purchasing behavior • Alternative financing • Have governmental entities mortgaged their future?

11. Emerging Risk Management Strategies • JIFs/pools – part of the answer or part of the problem? • Packaged coverage vs. stand-alone? • Training and post-loss advice – valuable strategies? • Evaluating increased risk in expenditure reduction strategies? • Using the economy to expand defenses? • What else?

12. Where Do We Go From Here? • Present meaningful tort reform • Financial crisis • Questionable/unfair verdicts (and settlements) • Use economies of scale for broad riskmanagement projects

13. Key Take-Aways • Public Sector would argue that financial pressures have not measurably increased claims. • Primary Excess Pools report faster claims development and greater willingness to settle clear liability claims. • Legal environment has not worsened, but juries continue to award staggering verdicts against public entities.

14. Key Take-Aways • Immunities from professional liability claims are available in most states, but insurers (and brokers looking for a value-added service) need to educate their public entity insured's (clients) on how they can act within those immunities. • Professional Liability Market participants must be prepared to offer new products and services to a public entity client base that is seeing radical changes.

15. Questions & Answers

16. Many thanks to … • Dan Howell • Susan Kostro • Sean Pattwell • Bob Spolzino • Tom Vance