DECREASED COFFERS/
INCREASED RISKWHAT’S A PUBLIC
ENTITY TO DO?
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
Introductions
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
• 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
Recent Headlines
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
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
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
• 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?
Impact on Claims
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?
• 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?
Emerging Risk Management Strategies
• Present meaningful tort reform– Financial crisis – Questionable/unfair verdicts (and settlements)
• Use economies of scale for broad riskmanagement projects
Where Do We Go From Here?
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.
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.
Questions&
Answers
• Dan Howell
• Susan Kostro
• Sean Pattwell
• Bob Spolzino
• Tom Vance
Many thanks to …
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