the school board of brevard county, fleagendatoc.brevardschools.org/04-23-2019 school board... ·...

The School Board of Brevard County, FL 2700 Judge Fran Jamieson Way, Viera, FL 32940 2019 Property Program Renewal Proposal Presented: April 1, 2019 Line(s) of Coverage: Property, Terrorism, Boiler & Machinery Coverage Effective: April 25, 2019 Judith A. Arenz, CPCU | Area Senior Vice President Tom Gill, MBA, CIC, CRM | Area Assistant Vice President Arthur J. Gallagher Risk Management Services, Inc. 2255 Glades Rd., Suite 200E Boca Raton, FL 33431 www.ajg.com

http://www.ajg.com/

2 2019 Arthur J. Gallagher & Co. All rights reserved. 18GGB17\29618W – Strat Rev

Table of Contents SECTION PAGE

Overview ............................................................................................................................................................... .3 State of the Market ............................................................................................................................................... 5 Exposure Update .................................................................................................................................................... 6 Catastrophic Wind Modeling ............................................................................................................................... 7 Renewal Strategy .................................................................................................................................................. 8 Current Program Structure .................................................................................................................................. 9 Insurance Premiums ............................................................................................................................................. 10 Your Team ........................................................................................................................................................... 11 Gallagher at a Glance .......................................................................................................................................... .12 Thank you for your Business ............................................................................................................................ 13


Overview Thank you for the opportunity to present this Strategic Review. The purpose of the report and this meeting is to set the stage for your upcoming Property Program renewal. The intent of our CORE360™ approach is to help you optimize your total cost of risk, thereby improving your profitability, and this discussion is critical to this evaluation. Arthur J. Gallagher Risk Management Services, Inc. and your Service Team have prepared this overview to discuss the renewal of your program effective April 25, 2019.

• Property • Boiler and Machinery • Terrorism

The report summarizes the key accomplishments from your last renewal (current program) and it examines the current marketplace, our past results and any changes to your organization or risk appetite. It also challenges our past work and suggests future improvements. We highlight each CORE360™ cost driver, beginning with Insurance Premiums and ending with Contractual Liability. This will not only organize the document, but also ensure we are deliberate in driving value to each of your six cost drivers, which represent your total cost of risk. This is an interactive process and we look forward to your strategic input to ensure a successful renewal. The results of this strategy will be summarized in the Executive Summary, which will accompany your renewal proposal. We know that you have a choice and we appreciate your business. Based on our past risk strategies and results, the current State of the Market and any changes of risk or risk appetite, the overriding goal of this meeting is to answer the following questions: • What is our go-to-market strategy by line of coverage? • Do we approach additional markets, and if so, which ones? • What are our renewal expectations or goals by cost driver? • What additional tools or resources do we need to implement?


State of the Market

Q4 Insurance Market Update The market continues to be both interesting and transitional. The events of Michael, Florence, and California wildfires throughout the year have racked up over $79B in Insured Loss estimates. Add this year’s $79B to the $150B we had in 2017 from Harvey, Irma, Maria and others and it quickly becomes apparent that the major insurers of the world are struggling to make a profit.


State of the Market – Continued

Some anticipated significant market tightening in response to the number of catastrophic events. Traditional insurance markets are pushing for pricing increases to continue based on these results. The industry continues to be impacted by major event losses, poor models, and a lack of rate adequacy. However, behind the curtain there is an industry that continues to be pumped with alternative capital. The insurance industry would not seem to be an attractive investment. However, the investment opportunity for alternative capital is more of a diversity play requiring a lower return. The money is not going away, the industry is well capitalized, and this is keeping markets more competitive than originally projected. As we move forward into 2019, we would expect the property market to continue to transition. There will be greater carrier focus on rates, terms, coverage conditions, and the broadness of manuscript forms. Overall property market pricing is expected to be up 2.5% - 7.5%. Accounts in the CAT exposed areas such as Florida will likely see rates increase 10%-15%+ range because of the impact of major hurricanes had on the industry. The accounts that have been adversely impacted by catastrophic events could see a higher increase.

https://www.ncdc.noaa.gov/monitoring-content/billions/images/2018-billion-dollar-disaster-map.png


Exposures – Statement of Values

Description 2017-2018 2018-2019 2019-2020

Real Property Values includes: • Buildings • Portables

$1,552,497,369 $1,552,924,576 $1,552,924,576

Personal Property /Contents Values includes:

• Contents of the portables • Property at Off-Site Storage Facilities • Personal Property of officers and

employees while on the premises of the insured

• Property in Care, Custody, Control • Valuable Papers and Records • Fine Arts (Owned & Non Owned) • EDP Equipment/Hardware (including file

servers, telephone systems and other computer systems)

• EDP Media/Software (including printed material, audio visual, and tapes)

$197,420,610 $197,420,610 $197,420,610

Land Improvements includes: • Playground Equipment • Backstops • Bleachers/Grandstands • Scoreboards • Covered Walkways

$111,171,700 $111,171,700 $111,171,700

Business Income/Extra Expense $4,000,000 $4,000,000 $4,000,000

Automobile Fleet Values $2,757,290 $2,757,290 $2,757,290

Bus Fleet Values $25,860,102 $25,860,102 $25,860,102

Equipment Included Included Included

Above Ground Storage Tanks $254,435 $254,435 $254,435

Combined Values/Totals $1,893,961,506 $1,894,388,713 $1,894,388,713


Catastrophic Wind Modeling PML (PROBABLE MAXIMUM LOSS) RESULTS

MUNICIPALITY RESULTS

2019 RMS v18.0 Hurricane: The School Board of Brevard County has approximately $1.9 Billion in values exposed to hurricane related events in the State of Florida. Figure 1-1 illustrates the probability of ground up losses exceeding various amounts due to one event in a given year, as described by the Occurrence Exceedance Probability (OEP). The 100 year event loss probability is commonly used by the insurance marketplace as a gauge for insurance pricing.

Variance from expiring model RMS v17.0

2018 2019 Modeling Results

Critical Prob. Return Period Ground Up Loss Ground Up Loss % Change

0.10% 1,000 $321,318,659 $294,011,941 - 8.50%

0.20% 500 $240,380,039 $219,644,472 - 8.63% 0.40% 250 $171,395,954 $155,362,936 - 9.35%

1.00% 100 $97,814,518 $87,899,706 - 10.14% Average Annual Loss (AAL) $4,139,970 $3,743,909 - 9.57%


Program Accomplishments – 5 Years

Property: • Increased Named Wind limits from $70M to $120M. • Increased All Other Peril property limits from $100M to $150M. • Implemented a maximum cap on the Named Wind Deductible at $15M in 2015. • Improved the Named Windstorm Deductible Cap to $10M in 2016. • Lowered the Named Windstorm Deductible to 2% - much lower than the benchmark. • Mitigated pricing increased based on pressure from market losses.

Terrorism: • Standalone coverage was purchased in 2015. • We marketed this coverage last year and secured aggressive pricing.

Boiler and Machinery: • This policy was placed through an AJG exclusive program that offers broader coverage

than standard Boiler policy.

2019 Program Objectives and Strategy

Property: • Property Go To Market Strategy – Negotiate with property markets, including the

incumbents. There is sufficient capacity should any of the current markets not match the target pricing

• Our goal is to keep the aggressive deductible terms in place. • We will provide options as follows:

o terms and conditions as expiring o premium as expiring

Terrorism: • Our target for this line is a flat premium. Boiler and Machinery: • This placement is through an exclusive program and we are targeting a flat premium.


Insurance Premiums EFFECTIVE 4/25/2019

2019 RENEWAL – UPDATE AS OF 4/1/19

2014-2015 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020

As of 4/1/19

Property Limits

Municipal Property • All Other Perils • Named Wind

$100 Million $70 Million






Named Windstorm Deductible

3% $500,000 Minimum

No Maximum

3% $500,000 Minimum

$15 Million Maximum

2% $500,000 Minimum

$10 Million Maximum

2% $500,000 Minimum

$10 Million Maximum

2% $500,000 Minimum

$10 Million Maximum

2% $500,000 Minimum

$10 Million Maximum

Premiums (including taxes, fees, assessments)

Property $4,632,000.00 $4,617,370.00 $4,614,150.00 $4,601,650.00 $4,709,223.00 $4,917,763.00 • Taxes, fees & surcharges $106,572.00 $46,252.70 $92.00 $100.00 $100.00 $100.00

Terrorism N/A $60,000.00 $53,970.00 $48,578.00 $43,000.00 $43,000.00 Boiler & Machinery $30,675.71 $28,430.00 $28,410.00 $28,410.00 $28,985.00 $28,985.00 TOTAL COST $4,769,247.71 $4,752,052.70 $4,696,622.00 $4,678,738.00 $4,781,308.00 $4,989,848.00

COST VARIANCE TO EXPIRING ($17,195.01) -0.4%

($55,430.74) -1.2%

($17,984.00) - 0.4%

$102,570.00 + 2.2%

$208,540.00 + 4.4%

Program Notes

Property: • Initial market feedback was a 7.8 % premium increase and we are currently negotiating and have managed the increase to 4.4%. • The terms and conditions will remain as expiring. • Berkshire includes a two-year policy with a rate guarantee that mitigated the increase. • Some market partners have changed based on pricing targets and revised appetite. Other LInes: • Terrorism and Boiler underwriters have confirmed renewals are “flat” no change in premium from the prior term.

2019 Arthur J. Gallagher & Co. All rights reserved. 18GGB17\29618W – Strat Rev

10

Program Structure

2019–2020 Proposed Carrier Participation

LIMITS $150M All Perils / $120M Named Storm

NAMED WINDSTORM DEDUCTIBLE

2% Subject to $500,000 Minimum and $10 Million Maximum


11

Your Team Judith A. Arenz has primary service responsibility for your company. Your Gallagher team is a true partner. We have the expertise to understand your business and we are here to service and stay alongside you, every step of the way. Your Service Team consists of:

Name/Title Phone Email Role

Primary Service Team Judith A. Arenz, CPCU Area Senior Vice President

561.998.6780 c.561.719.2085

[email protected]

Producer

Tom Gill Area Assistant Vice President

561.998-6812 c.561.866.0574 [email protected]

Account Executive

Agnes Polom Senior Account Manager

561-998.6799 [email protected] Account Manager

Melissa Jimenez Client Service Associate

561.998.6771 [email protected] Technical Assistant

Claims & Loss Control Andrea Tomasek Claims Advocate 561.998.6757 [email protected] Claims

Advocate Senior Resources Dave Marcus Area Chairman 561.998.6800 [email protected] Surplus Lines

Broker Zeb Holt Regional Executive Vice President – Florida

305.639.3113 [email protected] AJG Leadership

Wholesale Market Partners – Risk Placement Services (RPS) Rep Plasencia Area Senior Vice President

561.241.9757 [email protected] Wholesale Broker

Jeff McNatt Executive Vice President

321.872.7631 [email protected] Wholesale Broker

Susan Flemming Area Vice President 321.872.7632 [email protected] Wholesale

Broker

mailto:[email protected]







12


13

Thank You for Your Business We have enjoyed our partnership and we appreciate the continued time, support and confidence you have placed in us as your risk management team. This past year has been successful as evidenced by your scorecard and we look to continue this trend. Our strategy for this upcoming renewal continues to focus on ways to improve this positive impact on your total cost of risk and profitability. Thank you

Legal Disclaimer

Gallagher provides insurance and risk management advice that is tailored to our clients’ risk transfer needs. Our review can include evaluation of insurance premium, risk transfer options, finance agreements, insurance limits, indemnification obligations, and contracts to ascertain appropriate coverage. We do emphasize that any risk management advice, insurance analysis, and limited review of contract terms and conditions, is only provided from an insurance/risk management perspective and is NOT legal advice. We do not provide legal advice and always recommend that our clients seek advice from legal counsel to become fully apprised of all legal implications from their business transactions.

the school board of brevard county, fleagendatoc.brevardschools.org/04-23-2019 school board... ·...

Documents