RMS Update: Property and Casualty Trust Updates

Isabella Mormando, Communications Associate

In the upcoming 2024–2025 renewal year, the Risk Management Services Board of Trustees decided to raise the Property and Casualty Trust overall rate by 17.5%. This increase is due to various factors such as severe weather events, fires, high liability verdicts and rises in reinsurance costs, all of which have led to more claims. By increasing rates now, the aim is to offset the higher risk of losses, thus improving the financial stability of the Trust. Ideally, this will prevent the need for larger rate hikes down the road.

For many lines of commercial insurance, there has been a soft market since the early 2000s. Premiums have remained low despite a significant number of natural disasters globally. How long can commercial carriers continue to sustain losses at this level? In 2023, the market began to harden. Premiums started to rise due to construction costs, and availability to purchase certain types of coverage has decreased.

This is exactly how the early 1980s started, and what led to the creation of self-insurance pools for local governments all over the United States. Commercial carriers viewed public entities as high risk and low profits, so issued non-renewal notices to the point many local governments could not find insurance. If they were lucky enough to find a carrier, the premiums were too high for their budgets. State leagues stepped up to manage the self-insurance pools and, in most cases, have successfully continued to support and protect local governments in this way for more than 40 years.

The hardening of the commercial market affects local government self-funded pools because the pools must purchase insurance or “reinsurance” to protect the assets of the pool. Those rates have increased, due in part to global natural disasters as well as school shootings, terrorist attacks and expensive lawsuits. Those increased rates get passed along to the general pool rates in turn.

Fortunately, the Property and Casualty pool rate increase is relatively low compared to the expected insurance market increases for 2024. For self-funded pools to continue to be a viable option for local governments into the future, they must be run as a business—something you can continue to count on the League to do.

Here’s a summary of the changes to expect:

The 17.5% increase will be spread across several coverage types that have seen more frequent or severe losses:

  • Auto Liability
  • Police Professional Liability
  • Property
  • Auto Physical Damage

To better align with market trends and feedback, and offer more expansive coverage with this rate increase, the Property & Casualty Trust has improved its coverage options this year. This includes clarifications, increased coverage limits and modernized protections, particularly related to law enforcement.

Some notable enhancements are:

  • Clearer coverage terms for computer equipment under inland marine insurance
  • Added rental reimbursements for property losses
  • Coverage for employee tools
  • Clarifications regarding losses from virtual currency or electronic payments
  • Additional coverage for airbag resets, towing and labor, transportation expenses and glass repair deductibles waiver
  • Increased coverage limits for various items like fire hydrants, newly constructed buildings, outdoor property and spoilage
  • Updates to Police Professional coverage to reflect the latest policy language

For some members, the rate change for specific coverage might differ due to factors like changes in risk exposure and past loss history.

Individual member renewal premiums may be higher or lower than the average 17.5% rate increase depending on the following factors:

  • Changes in risk exposure over the past year (adding or removing assets, changes in value, workforce size, etc.)
  • For newly added exposures during the year, you were only charged for the period they were active; however, on renewal, you’ll be charged for the entire year
  • Past loss experience
  • Any changes made to coverage limits or deductibles

“The upcoming rate changes can be of concern for members who had individual premium increases due to newly added exposures. This highlights the critical importance of incorporating proper risk management practices and controls to mitigate risk. Our NCLM risk control field staff are dedicated to working with members directly to address these concerns and are always accessible to assist with training, policies and a variety of best practices driven initiatives,” said NCLM Director of Risk Control & Public Safety Risk Management Tom Anderson.

Please reach out to your regional field staff representative or contact Tom Anderson directly for assistance or more information on risk control tips and training.