Category Archives: Private Company Management Liability Insurance

Private Company Management Liability – Rates Up (or Down) Depending On the Carrier

This year’s Private Company Management Liability Insurance Market Survey found a market that would like higher rates, but is struggling to get them.  Some carriers report rising rates, while others report falling rates.  In both cases, the range is small except in California, which continues to be troubled by its EPLI and, to a lesser extent, D&O, loss experience.

We found that more carriers are offering the insured the option of even more lines of coverage that can be included, with a particular emphasis on Cyber coverages (not surprisingly) and Unauthorized Electronic Funds Transfer (thank goodness).  Intellectual Property coverage, especially for patent infringement allegations, was clarified by many carriers at our request.

We are increasingly concerned that insurers are excluding coverage for any claim that arises out of a cyber security breach and so we have asked the carriers whether they include such exclusions in their standard MLI product.  Responses are in the tables.

27 carriers are included in this year’s survey.  We added Aspen, Hanover, and specialist Franchise Perils as sources of MLI coverages.  Fireman’s Fund is now listed as Allianz.

Estimating the total premium volume is difficult, but we asked MarketStance for their insight into the market’s potential.  They responded with enticing information about the size and makeup of the marketplace of private companies in the U.S., reminding us how much potential is yet untapped.  You can find their estimates as well as the summary version of our Report at www.betterley.com.

The entire 62-page Report including specific information about the carriers, products, capacity, and market focus is here.

Specialty Insurance Year End Wrap-up Webinar 12/12 at 11 AM by Advisen

Please forgive me for a bit of self-promotion, but this program should be really good; I already learned a lot from our panelists’ conference call.

On Thursday morning, December 12 at 11 AM (eastern time), I will be on a panel moderated by Advisen’s David Bradford to review the trends and developments of 2013 in Specialty Lines insurance. The panel of experts will also provide insight into 2014 & beyond. This free, one-hour webinar is sponsored by OneBeacon Professional Insurance; registration is here.

The panel includes:

  • Paul Romano, President, OneBeacon Professional Insurance
  • David Lewison, National Practice Leader, AmWINS
  • Rick Betterley, President, Betterley Risk Consultants
  • David Bradford, President, Research & Editorial division, Advisen (moderator)

The economy continued to improve in 2013, which generally benefitted the insurance market. For specialty insurers, however, the year posed a number of challenges. Healthcare reform continued to reshape the risk landscape of hospitals and other healthcare organizations. Lawyers continued to feel the fallout of the credit crisis and recession as claims activity remained above historical averages. Network security challenges further evolved in the endless cat-and-mouse game between cyber criminals and system security experts.

This webinar will review the trends and developments of 2013 in “Specialty Lines” insurance. Our panel of experts also will provide their insights into the factors that will influence the market in 2014 and beyond.

Hope you can join us!

Side A D&O – My thoughts on the marketplace and especially the larger not-for-profit sector

Our October issue on Side A D&O products continues to be widely read as carriers continue to innovate.  But I am still pursuing the idea that larger not-for-profits don’t seem to have the interest in it that I (and many others) think they should.

In that issue, I speculated on the impact of the Affordable Care Act and the strains it is causing health care systems.  We are seeing some signs of increasing purchase of Side A by those systems, but it is far from pervasive.  That discussion is on page 3 of the issue.  Attorney Joe Monteleone and I also wrote about the topic in July’s edition of Trustee Magazine (published by the American Hospital Association).

WRINTV asked me to comment on the Side A market and in particular the interest on the part of health care systems; the interview is here.  The interview provides a bit more color to the topic.

This topic deserves more discussion than it is getting  – why isn’t it?

Private Company Management Liability Markets – WRINTV interview

WRINTV asked me to share our findings about the Private Company Management Liability market and product trends; here is the link to the interview.  It builds off of our August issue (Private Company Management Liability Market Survey 2013).

I continue to be impressed with the depth and breadth of WRIN TV’s content (and not just because I am a source, although I do like the opportunity to share our findings with its audience).  John Greene, Ken Simon, and their colleagues at World Risk and Insurance News have really done something special by creating and nurturing this resource.  Well done.

A Quick Look at EPLI Claims – the Worst States (updated to include new information)

Since EPL claims in certain states are becoming even more of a problem for carriers, we did a brief survey asking which states are the worst.  This is non-scientific and only represents the responses of 7 carriers, but they are worth noting.

The question asked was “Which are the 5 worst states for EPLI claims?”

The responses were:

State

# of Times Mentioned

CA

*******

FL

*******

NY

*****

NJ

****

WV

***

HI

**

MA

**

PA

**

TX

**

AK

*

IL

*

KY

*

MI

*

OR

*

VT

*

WA

*

Each tick mark equals the number of times this state was mentioned.

Several underwriters mentioned that both NY and Texas were problems ‘in and around larger cities.’

Keep in mind that not all underwriters may have a presence in each state, which could explain some of the variability.

Wage & Hour – the cover that couldn’t be done

Early this year, I had heard that Aon Risk Solutions was working on a Wage & Hour coverage, and was intrigued.  As many know, W&H has been a much sought after coverage, one that many carriers said ‘no way’ they would want to offer. Among other reasons, it was thought to be a dangerous coverage to offer, tempting employers to shift their compensation obligations to the insurer.

I have speculated that the small employer, and maybe the mid-sized employer, might be insurable, as many W&H violations seemed to be mistakes, not intentional.  Some EPL carriers offer W&H coverage, but mostly it is defense only (see EPLI Market Survey 2011).  Not surprisingly, these coverages are for the smaller employers.

What didn’t seem possible was that the large employer might be a market for this coverage.

In April, Aon brought out a new product designed for the larger employer that wanted indemnity and defense coverage for W&H claims.  After 2 years of work developing and analyzing data, drafting policy forms, and educating potential carriers, the new product arrived to huge market interest.  Before commenting on it, I wanted a bit of time to see the market’s reaction.

Some product notes:

  • Capacity of $50 million+, with more being added as carriers become more comfortable with the concept
  • A minimum retention of $5 million
  • Probably makes the most sense for employers with 7,500 or more employees.  This is not a restriction, more a result of the large retention.
  • US-only employees
  • Pricing is generally $20-30,000 per million, but this can vary substantially depending upon the risk
  • There are 5 core carriers: XL, Alterra, Allied World, Chubb, and Beazley.  Additional excess capacity is available from other carriers
  • Coverage is on a claims made basis with broad prior acts
  • Coverage choices between Defense, Classification Claims, and Pay Practices Claims can be made
  • Choice of counsel is permitted, but consent is required for actions that may reasonably exceed 25% of the retention.  Jackson Lewis, Seyfarth Shaw, and Morgan Lewis are pre-approved.  Each played a key role in developing the product and will be critical to its success
  • 50% hammer clause

Reports to date are that the potential insureds are very interested in the product, and have been willing (eager?) to provide the information required by the application.

This new coverage represents a significant step forward in EPL coverage for larger employers.  We would not be surprised to see other carriers offering comparable products, and perhaps even extending into smaller employers.  That last comment, though, illustrates a significant risk, as Aon and its insurance and legal partners believe that large employers are more likely to have controls that minimize the chance of a claim, and have the ability to sustain a large self-insured retention. Middle market and smaller employers have neither.

I’ll keep you posted.

Premium volume estimates for Management Liability policies

In The Betterley Report, I try to estimate the written premium for the line I am covering; for our Private Company Management Liability Report, I have a challenge making an estimate, as many carriers keep the premiums by line, not by the bundled policy.

I had several readers ask me to try harder, so I have.  Recently, I asked the participating carriers directly for their estimate of the market size; I received numerous answers.  Here are the ones that I thought were most useful:

  • $2 billion (this is from 2 major carriers + 1 reinsurer)
  • $2.5 billion (from 2 carriers)

I believe about 1/2 of this premium is written by the 4 largest writers of MLI products.

So, there you have our estimate – $2-2.5 billion in gross written premium for U.S.-based Private Company Management Liability products.  I’d be interested in your estimates (or comments).