DECREASED COFFERS/

INCREASED RISKWHAT’S A PUBLIC

ENTITY TO DO?

MODERATOR: • Robert A. Spolzino, Esq., Partner,

Wilson Elser Moskowitz Edelman & Dicker LLP

PANELISTS: • Daniel J. Howell, CPCU, ARM-P, Senior Executive Vice President,

Managing Director, Specialty Group, Alliant Insurance Services, Inc.• Susan L. Kostro, MBA, Senior Vice President, Public Entity and

Energy, Ironshore • Sean M. Pattwell, MS, Managing Director & Senior Vice President,

Herbert L. Jamison & Co., L.L.C. & Jamison Special Risk, Inc. • Thomas L. Vance, MBA, ARM, Risk Manager, City of Anaheim

Introductions

Agenda

• Financial Challenges Facing Municipalities• Impact on Claims• The Economy and the Municipal Insurance Market• Emerging Risk Management Strategies• Where Do We Go From Here?• Q&A

• Nassau Police Precinct Closures Eyed, October 10, 2011

• Chicago Transit Authority to Cut More than 200 Jobs to Save $22 Million, October 10, 2011

• Many Cities Imposing Broad Cuts as Revenue Shrinks, September 27, 2011

Recent Headlines

Some Stats

• Cities' general fund revenues declined 3.8% from 2009 to 2010 and are expected to decline another 2.3% in 2011.

• Their expenditures went down 4.4% from 2009 to 2010 and are expected to decrease by another 1.9% in 2011.

• Sales tax receipts declined 8.4% in 2010.

• 72% of cities planned to deal with the financial situation by making personnel cuts.

Source: National League of Cities Report dated September 2011

Some Stats

• 550,000 jobs in local government have been lost nationally since 2008.

• 60% would be delaying or cancelling capitalinfrastructure projects.

• 30% planned to reduce employee health benefits.

• ??? planned to reduce insurance expenditures.

Source: National League of Cities Report dated September 2011

Financial ChallengesFacing Municipalities

• Decreased revenues; decreased reserves

• Cutbacks, holdbacks, and cost-shifting

• Restrictions on of local taxing authority

• Diminished ability to raise fees

• Labor-intensive governments

• Greater demands for social services

• Employment practices claims

– Employees less likely to sue?

– Are insured's doing a better job terminating employees?

– Likely trend when economy improves?

– Are other exposures similarly impacted?

– Outsourcing implications?

Impact on Claims

The Economy and the Municipal Insurance Market

• Downward pressure on premiums

• New markets; available capacity

• Insurance purchasing behavior

• Alternative financing

• Have governmental entities mortgaged their future?

• JIFs/pools – part of the answer or part of the problem?

• Packaged coverage vs. stand-alone?

• Training and post-loss advice – valuable strategies?

• Evaluating increased risk in expenditure reduction strategies?

• Using the economy to expand defenses?

• What else?

Emerging Risk Management Strategies

• Present meaningful tort reform– Financial crisis – Questionable/unfair verdicts (and settlements)

• Use economies of scale for broad riskmanagement projects

Where Do We Go From Here?

Key Take-Aways

• Public Sector would argue that financial pressures have not measurably increased claims.

• Primary Excess Pools report faster claims development and greater willingness to settle clear liability claims.

• Legal environment has not worsened, but juries continue to award staggering verdicts against public entities.

Key Take-Aways

• Immunities from professional liability claims are available in most states, but insurers (and brokers looking for a value-added service) need to educate their public entity insured's (clients) on how they can act within those immunities.

• Professional Liability Market participants must be prepared to offer new products and services to a public entity client base that is seeing radical changes.

Questions&

Answers

• Dan Howell

• Susan Kostro

• Sean Pattwell

• Bob Spolzino

• Tom Vance

Many thanks to …