Barney & Barney - SDBJ 2016 Economic Trends

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ECONOMIC TRENDS Commercial Insurance Outlook Trindl Reeves Principal, Chief Sales Officer January 7, 2016

Transcript of Barney & Barney - SDBJ 2016 Economic Trends

Page 1: Barney & Barney - SDBJ 2016 Economic Trends

ECONOMIC TRENDSCommercial Insurance Outlook

Trindl ReevesPrincipal, Chief Sales OfficerJanuary 7, 2016

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MARSH & McLENNAN INSURANCE AGENCY LLC • BARNEY & BARNEY 2

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MARSH & McLENNAN INSURANCE AGENCY LLC • BARNEY & BARNEY

• Decreases average 4% across all lines• Incumbents don’t want to lose business• Carriers will fight to keep good clients• Excess capacity• Merger activity (Chubb/ACE, XL/Catlin,

Tokyo/HCC)• Social Engineering

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• Auto going up 5–10%– More expensive to repair cars

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EMPLOYMENT PRACTICES LIABILITY• California remains difficult• Significant claim activity• No coverage for Wage & Hour

DIRECTORS & OFFICERS LIABILITY• Improving market• Distinguishing risk profile is key• Coverage for investigations on rise

(public companies)• Cyber exclusions (?)

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STILL A HOT TOPIC• Interest by Boards of Directors• More companies buying coverage

– 5–10% of clients have coverage– Existing buyers increasing limits

BREACH FATIGUE!

• Who owns it

• Resource allocation issues

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• First created in 2002 and renewed 2015 as TRIPRA

• Provides re-insurance coverage to insurers in the event of a certified terrorist attack

• Automatically included in workers’ compensation

• Property take up rates are approximately 60% depending on the size of company

• Stand alone coverage – longer term contracts and avoid requirement that Congress must certify an act of terror

• Underwriting considerations:– Concentration (employees, property values)– Location of risk– Current capacity from the insurer

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CYBER TERRORISM• Now excluded from TRIPRA• Review your cyber policy for coverage

(expressly granted or silent)

POLITICAL VIOLENCE COVERAGE • Global corporations• Strikes, riots civil commotion, rebellion,

revolution, war and insurrection

ACTIVE SHOOTER COVERAGE• Covers an employer’s expenses related to the

attack (counseling services, public relations, etc.)

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Calendar Year Combined Loss and Expense Ratios

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

50%

100%

150%

103 10294 94

80

6254

4553

6473 74 74 76 72 68

20 1612 12

11

1011

1314

17

21 20 25 18 1918

2220

18 16

15

1414

1618

20

22 2323

20 1818

145138

124 122

106

8679

74

85

101

116 117122

114109

104

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Industry Average Charged Rate per $100 of Payroll

1996 1998 2000 2002 07/03-12/03

01/04-06/04

07/04-12/04

01/05-06/05

07/05-12/05

01/06-06/06

07/06-12/06

01/07-06/07

07/07-12/07

2008 2009 2010 2011 01/12-06-12

07/12-12/12

2013 2014 01/15-06/15

0.00

2.00

4.00

6.00

8.00

2.562.33

2.69

4.66

6.296.05

5.49

4.96

4.36

3.50

2.85 2.752.30 2.15 2.10 2.25 2.32 2.47 2.59

2.88 2.97 3.01

Dollars

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SB863 (passed 09/2012)

• $770M net savings to CA Workers Compensation system so far

– Reduced physician/surgery costs– Reduced number of liens– Increased IMRs, cumulative trauma, attorneys

EXPERIENCE MODIFICATION CALCULATION CHANGES

• 2016 – Using expected loss rates resulting in Experience Modifications being issued faster

• 2017 – Changes in “split point” to consider size of employer; more emphasis on frequency

RATES ARE GOING DOWN• 2% rate reduction approved for January 1, 2016• 10.2% rate reduction approved for July 7, 2016

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This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Insurance Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change. CA Insurance Lic: 0H18131