Global Intermediaries just worked on a large county in the Northeast where the expiring carrier came back with a 33% increase due to loss activity. We eventually stimulated competition and brought the increase down to 17%, but it was still an increase. On the other hand, one of our recent Northwest accounts received an unsolicited quote from a newer market that didn’t even receive a submission!

The difference here is simple. Both public entities had different account profiles, specifically the loss ratios and the tort environments. It appears that the markets are gaining intelligence and cherry picking the “select”, loss free, accounts and going after them with gusto, whereas loss laden accounts are seeing increases. This new approach is a departure from our old thoughts of risk diversion and adverse selection, where markets applied the same rate to similar accounts, independent of loss ratios.

What does this mean for public entity insurance?

With the help of GIE, public entities and their brokers will need to determine if they fall into a “Select” program or a “loss laden” program. Select accounts will be largely loss free and will benefit from great coverage and a premium decrease. Loss laden accounts will have to work harder, with a more creative approach to the marketplace. No matter where your account stands, Global Intermediaries is here to help you and your agent plan the best marketing strategy; be it Select or Not So Select.

***One of the new items we’re working on is a stable rate product for Select accounts.  If you would be interested in such a product, please contact us and we’ll include your thoughts in our market approach.

In today’s volatile public entity insurance marketplace I find myself regularly answering this question. Everyone jumps to “stability”, and public entities believe stability means grabbing hold of your SIR and not letting go.

As insurance markets start to raise the self-insured retentions of large public entities, due to loss activity or the economy, many entities fight to keep their current SIR by sacrificing higher policy limits. At the same time, lawsuits are increasing in size and number in all coverage areas (View Settlements PDF). Many public entities are maintaining lower policy limits when the threat of high dollar lawsuits is actually increasing! Now here’s the kicker… Private equity firms are now financing these high dollar lawsuits in the hopes of receiving better investment returns. (Source Article) This information, recent inflation fears, and a possible turn in the insurance market make me wonder whether we should be fighting for the low SIR or a higher limit.

So What Can You Do?

First, determine the correct SIR for your account; it’s usually above the working (or frequency) layer. Positioning the SIR allows for the most cost effective transfer of risk, enabling you to keep premiums at a minimum while still achieving your goal of protection from market swings. SIR’s should be set to handle one large claim every 5 to 6 years.  If your current SIR is above or below that level, it may need to be reset. If you don’t know if your SIR is correctly positioned, call us, we analyze SIRs and loss histories for a living.

Second, determine what policy limits you might need. Many public entities in states with strong tort law buy lower limits as they feel comfortable with the tort protection. However, even in tort protected states, these entities are NOT protected from the Federal Claims found in Section 1983 and the claims associated with violating those laws. These claims are mostly EPLI and law enforcement related, so be sure to weigh your exposure in those areas. Keep in mind that tort statutes have been broken across the country. If your local tort statute is broken you’ll be vulnerable to all negligence based claims and that tort protection will no longer exist.

Odds are that your public entity can likely absorb an additional $500k to $1 million due to an increase in the SIR, but if your limits are too low can you handle another $10 million from a lawsuit gone bad? Imagine having to pay $5-$10 million in this economy because you didn’t take the time to consider the changing marketplace and the possibility of a large claim. Ultimately, the decision is up to you, but if you’re sacrificing limits for a lower SIR, then you may need to reconsider your choice!

“Placement Facility” is a term I hear all the time from brokerage firms these days. Some brokerages seem to think that wholesalers are only good for transacting business and correctly processing quotes, binders, and policies. What they’re missing is the expertise a niche wholesaler such as GIE provides; like the ability to help set retentions, identify problem areas, and then design solutions for those exposures. Our specialized focus allows us to design the perfect program for each public entity to solicit and present to the correct carrier. Add to that GIE’s constant drive for program creation and dedicated R & D and you’ll find that we’re more than just a “Placement Facility”. In fact, GIE would be one of the few players around if we could have patented all the coverage advances we’ve created or held captive all the companies we’ve introduced to the market. Instead, we released those into the marketplace to benefit public entities and their agents. This allows us to retain our independent status and true wholesale stance, proving our dedication to our agents and their accounts.

What gives Global Intermediaries this strong ability to push the public entity industry along is our robust history. We started as SIRPRO, an MGA for liability in 1993 and rapidly grew into a national powerhouse for self insured public entities. Over the hard market of 1999, we made a strategic decision to become a wholesaler, offering excess liability, excess workers compensation, med/mal, police professional, and property coverage for all companies to all agents. Since then, we’ve brought over 10 companies into the excess liability market and created many significant endorsements and coverage’s commonly used in this sector today.

So instead of using a “placement facility”, give GIE a call and allow us to help push your public entity programs forward!