The hardened law enforcement liabilities market is facing mounting and costly claims, driving it into pole position as a loss leader for some insurers, according to RPS.
Auto used to be the loss leader, but law enforcement is taking over,” said Russ Stein, area executive vice president for RPS’ Southern California territory.
“Carriers that were traditionally writing what I like to refer as the retained limits — the first capacity excess of that retain limit — a lot of them are not offering law enforcement or they're increasing the self-insured retention on that line of coverage.”
During a webinar detailing the state of casualty insurance in America, Stein spoke about why this market is experiencing a rough patch and how a backlog in court cases due to COVID may hinder the market even further.
In the public entities’ coverage marketplace, law enforcement liability is “on every carrier’s mind,” Stein said.
There are roughly three to four monoline law enforcement markets out there right now that can offer coverage in conjunction with another carrier that offers general liability, auto liability, public officials UPLI, sex abuse and other relevant coverages.
“But again, it's getting more and more difficult, especially in western states that don't have tort caps that are experiencing a lot of the impacts of law enforcement claims,” Stein said.
As a result, renewal premiums are also on the rise as capacity restrictions and loss ratios continue to provide challenges in the market.
“Renewal premiums are up anywhere between 15% to much even higher, and those are on well performing risks,” Stein said.
This increase is even more problematic to sign off on since these types of decisions need to be figured out by a board of individuals.
“Meetings about this are usually set 60 to 90 days before the renewal date, which makes it harder to manage expectations, especially in a market that is ever changing, and carriers seem to be pulling out more often,” Stein said.
“With the increased scrutiny on these lines of coverage in these classes of business, carriers need to know more information and it takes a lot more sign off. It takes a lot more management referrals, sometimes even reinsurance support.”
Nuclear verdicts, which are losses that reach the $10 million threshold, are also piling pressure on insurers.
“In the law enforcement field, nuclear verdicts are happening way too often,” Stein said.
The large auto fleets that are needed for a police force to function offer a wealth of opportunities for claims, and with supply chain issues causing prices to skyrocket, as well as the force of inflation, replacing or fixing these vehicles is more challenging.
There is also the fear of future litigation that will bring even more claims to the fore and cause losses to increase significantly.
“During the COVID period, with courts being closed, a lot of reinsurers are very concerned about a lot of the dormant claims that are going to come to fruition,” Stein said.
They are anticipating an extended litigation period of over three to five years as courts catch up with cases that came into existence while the industry was at a standstill.
