Author: Peter Persuitti
Everyone — including nonprofit leaders — is looking for stabilization from the insurance market, given the rise in costs and reduction in coverage over the past few years; however, the prognosis looks challenging as we make our way to 2024. Many carriers are still finalizing negotiations for treaty terms for January 1, 2024 that are effective for the 2024 policy year, and many fear the worst, in terms of increased costs and more stringent terms.
Here's a look at the current Property and Casualty (P&C) insurance market and advice on how to put yourself in the best position possible.
Property insurance for nonprofits
While your nonprofit may not be at high risk, or your organization may not have a large real estate exposure, this dynamic is so significant in terms of pressure on rates and profitability that it affects all industries and locations. (It's difficult for many nonprofits to purchase monoline coverage per se).
This dynamic is relatively new, as we were used to coastal pressures on pricing, but weather events such as micro hail and severe convective storms (SCSs) are happening everywhere and are among the reasons for carriers to apply a broader brush approach to funding.
Don't forget increases in inflation and loss costs and their impact on rebuilding after a loss.
Casualty insurance for nonprofits
As vital social service solutions, nonprofits are accustomed to reprieves such as charitable immunity — but those reprieves are in the past.
Social inflation and the opening of many states' statutes of limitations have given rise to unexpected losses, both from recent situations and those from many years ago (occurrence coverage). Add to that situation a relatively softer market and the ability to afford larger limits, and today we wake up to plaintiffs looking for large limit targets to pursue and increased social inflation.
Auto insurance rates also haven't kept up with the costs of losses, and thus you have another challenged line of coverage.
So what do we do about it?
We start early in the renewal process; in fact, what's wrong with year-round vigilance? It doesn't hurt to have that heart-to-heart with the incumbent carriers. At Gallagher, we begin not with insurance but with risk management, otherwise known as duty of care. Is your nonprofit doing all it can to prevent or mitigate loss? Do you have a thriving safety committee? What are the dynamics of your relationships with the local community and the jurisdictions in which you serve?
Gallagher works to improve the quality of the underwriting data:
- We capture the essence of the nonprofit's excellent management and operations qualitatively and quantitatively in the form of a superior underwriting submission.
- We include analytics and peer benchmarking that highlight excellence.
- We look at potential coverage and structure retentions that could bring reprieve, and we re-examine limits.
- We discuss other potential carrier solutions, and if we are "bigger," we consider alternative risk financing (captives, trusts, etc.).
Gallagher is here to help
For us at Gallagher, it's all centered on our CORE360® methodology and six cost drivers.
CORE360 is our unique comprehensive approach to evaluating our clients' risk management programs that leverages our analytical tools and diverse resources for custom, maximum impact on six cost drivers of their total cost of risk.
We consult with you to understand all your actual and potential costs and the strategic options to reallocate these costs with smart, actionable insights. This approach empowers you to know, control and minimize your total cost of risk and improve your profitability.