The Alternative to Pools
The private insurance market offers several significant advantages over pooled risk programs. These advantages include:
1. SPREAD OF RISK - LAW OF LARGE NUMBERS
Rather than rely on a small, regional group of clients, the private market insures thousands of public agencies throughout the United States. This provides needed risk diversification for insurance carriers, ensuring that regional catastrophic property claims, or localized liability trends do not affect all clients.
Pools often have significant, unaddressed catastrophic exposure, where a single catastrophic event could erode the assets of the entire pool. Often, pools provide a ‘shared-limit’ for catastrophic property exposures, (e.g. $100 million earthquake limit), while this limit may seem significant, it may not be adequate for all pool members that have collective insured values of several billion dollars. This could leave individual pool members short of funds necessary to replace or repair their damaged properties in the event of a catastrophic claim.
Pools often have significant, unaddressed catastrophic exposure, where a single catastrophic event could erode the assets of the entire pool. Often, pools provide a ‘shared-limit’ for catastrophic property exposures, (e.g. $100 million earthquake limit), while this limit may seem significant, it may not be adequate for all pool members that have collective insured values of several billion dollars. This could leave individual pool members short of funds necessary to replace or repair their damaged properties in the event of a catastrophic claim.
2. FINANCIAL STABILITY
With billions in written premium, and tens of billions in policy holder surplus, private market insurance carriers are positioned for the long-term stability, and the capacity to respond to all types of loss.
All of our private market insurance partners receive the highest ratings from the ratings agencies – AM Best, Moodys, and Standard & Poors. This provides an assurance that they will be able to respond in the event of a major claim now, and in the future.
Pools often present the ratings of their reinsurers as their own, however this only represents security for the credit risk the pools bear, when the pass the cost of high value claims to reinsurers. This is markedly different from the private market carriers. While the reinsurers of pools are generally rated, they will not ‘drop-down’ to respond to claims, in the event of a pool insolvency. Heavy reliance of pools on reinsurers can create difficulties if a claim accepted by a pool does not have reinsurance support – leaving the pool to deny the claim, or attempt to settle the claim without reinsurance support. The pool will also have greater volatility as the capacity and appetite of reinsurers changes, based on natural disasters and other major loss events.
Since pools are not fully regulated or rated, they may develop an aggregation of risk with unfavorable loss development. This may impair their ability to respond to claims.
All of our private market insurance partners receive the highest ratings from the ratings agencies – AM Best, Moodys, and Standard & Poors. This provides an assurance that they will be able to respond in the event of a major claim now, and in the future.
Pools often present the ratings of their reinsurers as their own, however this only represents security for the credit risk the pools bear, when the pass the cost of high value claims to reinsurers. This is markedly different from the private market carriers. While the reinsurers of pools are generally rated, they will not ‘drop-down’ to respond to claims, in the event of a pool insolvency. Heavy reliance of pools on reinsurers can create difficulties if a claim accepted by a pool does not have reinsurance support – leaving the pool to deny the claim, or attempt to settle the claim without reinsurance support. The pool will also have greater volatility as the capacity and appetite of reinsurers changes, based on natural disasters and other major loss events.
Since pools are not fully regulated or rated, they may develop an aggregation of risk with unfavorable loss development. This may impair their ability to respond to claims.
3. REGULATION
The private market insurance solutions we deliver are fully regulated by state insurance departments. This assures the policy forms, rates, claim practices, renewal notices and overall conduct of all insurance carriers are carefully monitored.
Pools generally are not regulated by state insurance departments, and are formed through loose interlocal cooperation. Over the years this lack of regulation has yielded some unfortunate outcomes, from pool failures, to inconsistent claim practices, and the cancellation of membership in pools – as was the case of Hildale, Utah.
Pools generally are not regulated by state insurance departments, and are formed through loose interlocal cooperation. Over the years this lack of regulation has yielded some unfortunate outcomes, from pool failures, to inconsistent claim practices, and the cancellation of membership in pools – as was the case of Hildale, Utah.
4. TAILORED PROGRAMS
No two public agencies are identical; their insurance programs shouldn’t be either. Pools generally provide a ‘one-size fits all approach’, leaving many unique or complex risks uninsured, with pool members left to defend and settle claims in these areas on their own.
In contrast, the private market offers tailored insurance programs, specific to the risks faced by you. Don’t settle for an insurance program that is not designed for your unique circumstances.
In contrast, the private market offers tailored insurance programs, specific to the risks faced by you. Don’t settle for an insurance program that is not designed for your unique circumstances.
5. INNOVATION
Emerging risks occur in all aspects of our organizations. These occur through societal changes, technology and the development of claims through case law. Is your insurance provider proactively anticipating these changes, or reacting just to try and catch up?
In an ever changing world of risk, we work to proactively develop responsive coverage solutions and risk management programs – before problems arise.
In an ever changing world of risk, we work to proactively develop responsive coverage solutions and risk management programs – before problems arise.
6. PARTIAL SELF-INSURANCE
An efficient way to manage routine risks is through partial self-funding. Most pooled risk concepts handle all claims, which includes pool overhead and administrative costs. Direct handling of claims reduces overhead cost, and often results in greater efficiency with local control of claims.
We have the expertise to guide you through this transition, in fact we have established more partial self-insurance programs among public agencies than any other broker in our area.
We have the expertise to guide you through this transition, in fact we have established more partial self-insurance programs among public agencies than any other broker in our area.
7. LONG-TERM COMMITMENT
Many of our private insurance market partners have been serving the needs of the public sector for over 100 years. These partners take a long-view at serving client needs, with a commitment to long term coverage and cost stability, and excellent support services.
Olympus has decades of experience developing private market based programs for public sector organizations. Contact us today to learn how Olympus can improve your situation.
Olympus has decades of experience developing private market based programs for public sector organizations. Contact us today to learn how Olympus can improve your situation.
