Golf Cart Claims: Don’t Let a Multi-Million Dollar Lawsuit Spoil Your Summer FunBy Lori Windolf Crispo, CPCU Area President RPS Bollinger Sports & Leisure

When you think of summertime accidents, your first thought is likely not “golf cart injuries,” but perhaps it should be. Golf carts are more prevalent than ever, and their use is no longer restricted to golf courses and country clubs. Whether your clients live in a private community, work or play at a university or sports complex, or plan to sponsor or participate in any number of outdoor events – concerts, tournaments, festivals or races – chances are there isa golf cart ride in their future.

Golf Cart InvasionGolf carts use is on the rise because they are an easy-to-

use, environmentally-friendly and efficient way to get around.

Seemingly innocuous and fun, golf carts send more than 15,000 people to the emergency room each year, according to the Consumer Products Safety Commission. Because they are designed primarily for off-road or private road driving, golf carts are not regulated like cars or trucks. There are no requirements for seat belts; no doors or windows to prevent riders from being thrown; no roll-bars to protect passengers if the cart flips; and in states like Florida, where millions of golf carts are on the pathways and roads, unlicensed drivers as young as 14 are legally allowed to drive carts.

Combine the lack of safety features with the perception that golf carts are harmless, sprinkle in some inexperienced drivers, a few beers during a round of golf, and the potential thrill of a joyride, and you’ve got a recipe for a multitude of golf cart claims.

At RPS Bollinger, we have seen the gamut of these types of injuries and lawsuits in our Golf and Sports Insurance Programs. From the expected to the far-fetched, many of these incidents could have been prevented with some additional awareness, more oversight, and basic risk management.

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Summer 2019

(Not So) Far Off the Beaten PathGolf carts seem easy to operate, but they can throw even

an experienced driver off his or her game. These types of accidental injuries due to poor driving, slippery conditions, or poor supervision are fairly common, and come as no surprise to anyone who’s seen carts in action.

• On the back 9, a golfer thought he put the cart in reverse, but instead accelerated forward, knocking down a woman in the foursome. Her injuries, including a concussion, resulted in a $1.1 million settlement.

• A tournament held at a university used golf carts to transport participants to the events. One cart driving on a wet slope was unable to stop in time, and slammed into a double glass door. The replacement cost of the door was in excess of $10,500, and injuries to the passengers racked up another $14,700.

• A golf cart at a youth tournament tipped over going around a sharp corner, injuring the 6 high-school aged occupants. The cart was over the maximum capacity, and driven by an unlicensed driver. Total payout was $322,000.

Take Away the Keys …and we don’t only mean from those who have had too much

to drink. In some cases, the difference between a life-threatening injury and dusting yourself off and walking away is in following the rules. Bear in mind that carts also present an attractive nuisance, especially in the YouTube-age where the “Hottest Pranks in Sports” feature golf cart accidents under the guise of social media fun. More watchful oversight of carts at tournaments, on the course, and in private communities could have prevented these and other tragic claims from occurring.

• A four-year old child at a soccer tournament climbed into an unattended golf cart with keys in the ignition, and ran down two spectators, who received $138,000 from the insurance carrier for their injuries.

• At a corporate golf outing, two players shared a cart after lunch. The driver of the cart took a hard turn causing his partner to be ejected. Neither was visibly intoxicated when they were last served at the clubhouse. However, open coolers of drinks, including beer, were available on the course; and according to the incident report, five empty beer cans were found in the cart. The claimant suffered multiple permanent injuries, resulting in a settlement in excess of $1 million. The driver, the club, and the corporation sponsoring the outing were each named in the lawsuit.

• In a tragic case in California, members of a softball team went to the home of the coach’s parents between tournament games to relax. The coach took the girls for a ride in her parents’ golf cart. A 15-year-old was driving

the cart jumped the curb and ran over a 67-year-old man. He was permanently paralyzed. The case went to arbitration where a $2 million settlement was reached including the league’s policy, plus additional payments from the girl’s parents’ insurance, the coach’s homeowner policy, the golf cart liability policy, and the coach’s parents’ homeowner policy.

Managing Golf Cart RisksThere are numerous steps that can be taken to mitigate golf cart

exposures, and many are well within a club’s or user’s control.• Educate staff and users of carts in proper golf cart

operations• Obtain signed waivers of liability from drivers, users

and lessees of golf carts (to support assumption of risk defense, and serve as users’ acknowledgement of safety guidelines)

• Currently licensed drivers only should be permitted to operate or lease carts

• Never allow passengers to stand on the rear of the golf cart; observe cart occupancy limits

• When the golf cart is not in use, place the cart in "neutral" and remove the key (this is especially important at tournaments and events where spectators or others may use carts without permission)

• Secure carts with a cable and lock, or keep in locked garage or shed after hours

• Only golf carts with headlights, tail lights, turn signals and windshields should be used on public roads, or in any situation after dark

• Golf carts do not provide protection from lightning; seek appropriate shelter if lightning or thunder is present

• Golf courses and facilities should monitor and maintain cart paths to be clear of debris and have no obstruction of sight lines.

• Ensure all cart paths have signage designating appropriate travel lanes, marking potential driving hazards, and clearly noting that pedestrians have the right of way

• No joyriding! Encourage all users to “drive friendly,” and keep golf cart safety a priority

Implementing these procedures while raising awareness among golf cart owners, drivers, and passengers will go a long way toward ensuring that your clients have a safe and injury-free summer. Enjoy!

Keep on Truckin’: An Update on the Commercial Auto MarketBy Jimmy ProffittVice PresidentNational Transportation

If you ate it, drank it, wore it, sat on it, drove it or bought it off the shelf, it came to you on a truck. If it was assembled before you got it, those parts were delivered to the manufacturer by a truck. When you work in an office building, sleep in a hotel or even in your home, the materials used to build it were delivered by a truck. Trucks are the lifeblood of the economy and they are here to stay, in one form or another.

Why are trucks so difficult to insure? The Commercial Auto market remains in a state of chaos and

flux which creates opportunities for experts and specialists at all levels. This includes trucking companies, insurance carriers, retail producers and MGA/Wholesalers. It also weeds out the dabblers or pretenders who simply chase the premiums without doing the work to become an expert.

From a carrier perspective, the Commercial Auto market has been a losing game for the past seven years. Transportation has consistently underperformed the rest of the insurance market by 12 to 15 points, and 2010 was the last year Commercial Auto posted a combined ratio under 100%.

What’s the reason for such poor loss results?There are many reasons for the market’s poor loss results, and

these reasons combined created a perfect storm that caught many carriers by surprise. Since the recession ended in 2010, trucks have driven many more miles, increasing exposure and congestion. Our infrastructure of roads, bridges and ports is aging and struggling to keep up with the demand for trucks. Given our record low unemployment, there is a shortage of qualified drivers which has led to more inexperienced drivers behind the wheel. Distracted driving is a killer that is constantly in the news, and we continue to battle a highly successful and sophisticated plaintiff’s bar that has created previously unimaginable verdicts in the tens of millions of dollars. The robust economy has created more new ventures which have historically poor loss ratios and high cancellation rates. In summary, it has been a tough time to be an insurance carrier insuring trucks.

What are we doing to improve?Insurance carriers continue to raise rates and tighten

underwriting requirements and we do not expect this trend to stop or abate. Rates have increased steadily for the past five years, and the 2018 combined ratio for Commercial Auto is still estimated around 110%. As bad as this sounds, it is actually an improvement from prior years—though still way short of profitability and acceptable investment returns. Loss costs for both liability and physical damage are increasing annually by 5% to 7%, so a rate increase at this level it essentially a flat renewal for the carrier.

The more sophisticated carriers are also using data and predictive analytics to better segment their business and identify risks that will perform better in the future. We expect the better-performing accounts to see rate increases of 5% to 10%, average accounts 10% to 15%, and poor accounts 15% to 25% or possibly non-renewed.

So what’s the good news?The economy drives the success of the trucking industry, and

in recent years the external factors have been outstanding – probably as good as we have ever seen. The demand for trucking is as high as it has ever been. Goods are shipping, freight rates are as high as we have ever seen and load boards are full. Our trucking clients who are well-managed with dedicated runs, stable teams of drivers and disciplined management are successful and profitable. These companies are making enough money to absorb the increased insurance costs, raise driver pay and still improve margins.

Insurance carriers now require specialization and expertise from their distribution partners or else they will not allow us to sell and distribute their product. For example, one leading market has recently cut their MGA representation by 30% and openly stated they will only work with “hard core” transportation specialists. As a result, retail producers and MGA/Wholesalers who are true experts and specialists now control a larger part of the business and enjoy the benefits of rate increases, which increases revenue and margins. It’s a good time to be a trucking company or a distributor of truck insurance.

What about technology?We already mentioned carriers are using data and predictive

analytics to refine risk selection, and the carriers that are ahead in this process are starting to win and far outperform their competitors. Carriers that are not investing in this technology and continue to operate like they did 10 years ago will get selected against and end up in a crowded graveyard.

Telematics is the use of technology to identify driving habits such as rapid acceleration, sharp turns and quick stops. Sophisticated trucking companies are using telematics to coach drivers into better driving habits, which will lead to fewer accidents and lower insurance costs.

Many trucking companies now have cameras installed in trucks. The outward-facing cameras document the cause of accidents which many times are caused by passenger vehicles cutting in front of trucks. This evidence makes it possible for trucking companies to defend themselves against claims that on the surface appear to be the fault of the trucking company.

What can we expect in the future?Insurance rates for trucking companies will continue to rise until

underwriting results become profitable...and they will. Data and predictive analytics will dominate in the 1 to 10 unit segment and that business will be controlled by a smaller number of carriers and producers that are specialists and proficient in the technology.

We are beginning to see some softening in the economy and freight rates on both the contract and spot market have fallen. We’re also seeing an increase in fuel prices which puts pressure on trucking companies to better manage their costs, operations and driver teams.

Retail producers and MGA/Wholesalers will have to develop a strategy to insure and serve the larger fleet clients and offer consultative and compliance services in addition to competitive insurance pricing. And retail producers, MGA/Wholesalers and carriers that experiment with trucking or try to fold it into a P&C division will fail spectacularly.

Autonomous vehicles will begin to appear, but so far the technology is far ahead of the business model and legislative process. Accidents and claims will no longer be the fault of negligent drivers but more of a products and cyber liability issue. In the early stages we expect autonomous vehicles to be more driver assisted and not fully autonomous. They will be used primarily in platoons on the highway, in trucking yards or in confined spaces of manufacturing facilities or college campuses that have limited and highly-defined routes.

There are many challenges ahead in the Transportation business, but it is an enormous market that is not going away. This demand will continue to create big opportunities for the experts and specialists at all levels. It is a good time to be in the trucking business.

Construction in Midstream Oil & GasBy Zach Burdine Area Senior Vice President & Texas Energy Practice Leader RPS Austin

In the mid-2000s, upstream oil and gas companies quickly bought up mineral rights all over the country and began moving assets to capitalize on what is known as the “shale revolution.” With increased technology and horizontal drilling becoming the norm, new shale plays and opportunities that were once not economical for production were beginning to take off in places like North Dakota, South Texas, Western Pennsylvania, and other areas across the country. Oil prices were robust with historic prices at over of $110/bbl and activity was widespread.

By the mid-2010s, though, the production greatly outpaced the demand and commodity prices took a nosedive. What has happened since is a gradual increase of commodity prices and decreased lifting costs (the cost to extract oil or gas). The upstream industry is once again producing at a steady rate, but there is a notable shortage in another area—our midstream infrastructure. The midstream sector is the logistical side of the industry that connects oil producers to refineries and petrochemical plants. It’s a vital role that includes gathering and processing, storage, logistics and transportation.

Some reports have said that the midstream industry is 10-15 years behind where it should be given the production output nationwide. This shortage has caused an influx of capital and a race amongst midstream companies to build the needed capacity. For insurance professionals, understanding the risks and

ways to cover these projects is crucial as they can be complex and often include multiple companies on the same project.

The Joint Venture ChallengeThe energy sector is famous for joint ventures. Many companies

consolidate costs this way and utilize each other's assets on what are typically multi-year projects. Some of the largest ongoing pipeline projects to date are joint ventures between two major oil and gas companies. Other large petrochemical plants are being built in places like Baton Rouge between private equity companies and their operating partners.

One of the challenging parts for an underwriter is working through the financials of these joint ventures (JV). As a JV is formed, it typically shows little or no positive cash flow especially when large partners are involved. This doesn’t make it a bad risk, but it does require a strong narrative from your broker when presenting why there is a negative cash flow to a carrier. The good news about this situation is that quite a few JV participants are publicly-traded companies and their individual financial statements are publicly shared on their website. An understanding of this accompanied by the understanding as to why a JV is in place satisfies most underwriting files.

Another area that causes challenges for our underwriting partners is their treaty reinsurance. As we know, most carriers that participate on complex accounts like these have many divisions as well as Lloyd’s syndicates. Many JV participants are large international firms that carry large limits, even into the billions. What this creates is a situation where domestically and in London, many carriers and UK syndicates can be participating on the master policy for each JV partner already. It’s critical to know who is participating and at what limit to avoid treaty reinsurance violations and stacking of limits. This unfortunately can shrink the marketplace for a JV and your brokerage team.

The last major challenge in JVs is having multiple risk managers involved. Remember that many JV participants are multi-national publicly-traded companies with some of the brightest risk managers in the business. Having been on calls with JVs, it’s often difficult to decipher who is the lead RM and who is secondary. Unfortunately, this can create a disconnect in communication and a lag in understanding where a particular part of a construction project stands. An underwriter’s nightmare!

Pollution, Cyber, Project Coverage Types and Lapses in CoverageHaving been on many calls with risk managers from some of the country’s largest pipeline companies, they’ve expressed what keeps them up at night and new ideas as it pertains to their assets’ insurance programs.

1. The first thing is the integrity of their pipeline systems. In 2018, an estimated 5,000 barrels (275,000 gallons) of

crude oil, fuel and gasoline were reported as discharged from various gathering and transmission lines. EPA fines, bodily injury, property damage and cleanup costs quickly begin eroding policy limits or cost their companies out of pocket.

2. The threat of a cyberattack. Just last year, a cyberattack shut down four natural gas pipeline operations for a week. Many pipelines are connected via wireless networks as are their critical components like pressure monitors and control valves. The midstream sector has many antiquated systems from old pipeline networks that are currently being modernized and as such, opening more doors for intrusion on their networks.

3. Many of the projects are great candidates for an owner-controlled insurance program (OCIP). Risk managers that our team has dealt with like the idea of an OCIP and understand the advantages of controlling the insurance program themselves. The majority of the projects that come across our desk are controlled by the eventual owner/operator of the facility. They like the ability to negotiate SIR or higher deductibles, a seamless claims process and as importantly, the idea that the contractors they hire are covered under the same blanket policy.

4. A few years ago, our team was working on one of the largest pipelines in the country that runs over 1,000 miles. At the time, the pipeline had around 50% of the project complete and the rest of the project set to be completed by 2020. The pipeline carried its own one-year construction policy rated on sub costs (they were also the GC) and an operational policy that covered the operation of the live lines rated on mileage. The lead risk manager expressed that he often doesn’t get updates on when a portion of a line goes live until a few days or even weeks after it’s been completed, and tests are satisfactory. This has created a lag and grey area of coverage between his two policies if he isn’t prompt on alerting his broker to add the new mileage to their operation policy. Keep in mind that many carriers have an appetite for construction or operation, but few have an appetite for both.

Handling Concerns and Getting CreativeDuring the construction of a midstream facility or pipeline, there

is a real contractor’s pollution (CPL) exposure. There are a couple of ways to cover this in the current market. CPL can be written on a stand-alone basis or can be combined within the General Liability policy on a package with a separate aggregate. It’s important to remember that all contractors should carry this coverage if there is a “knock for knock” master service agreement in place. The other important thing to remember is to include blanket non-owned disposal site coverage or NODS on your policy. This is important due to the amount of excavation being done; removal of waste

can cause bodily injury, property damage or clean up costs at a non-owned disposal facility.

For Cyber coverage, working with an executive lines expert to tailor a specific program for the insured’s exposure can create a robust offering. Executive lines experts can provide higher limits in the brokerage markets than the off the shelf products and can often combine other coverages like D&O on the same policy form.

We frequently get the question of when to offer a wrap up policy and when to offer a project-specific policy. The first thing to look at is the construction value of the project. If the project exceeds $50-100 million in value, then it’s a good candidate for a wrap up. If it’s smaller or even larger, a risk manager may prefer the project-specific; advantages and disadvantages of each approach can be discussed. Either way, the next step is to work on the minimum limit to offer. There are quite a few “rules of thumb” on this subject and with the help of a specialist in this sector, it’s not that difficult to calculate.

One of the challenges of insuring midstream projects, pipelines specifically, is that large portions of the lines can be fully operational while construction is ongoing elsewhere. The traditional thinking has been to place an operational policy in place that accounts for the operational mileage and run it parallel with a construction policy that is based on the construction value that remains. This is a fine approach, but there might be a better one—combining a construction and operation policy into one as a conversion policy. This idea came up when visiting a risk manager on a large pipeline construction risk. The concern was to not limit coverage and to seamlessly be able to move mileage from the construction phase to the operational phase. The benefits of this type of policy are to reduce costs from economies of scale and to provide a solution for what optically is a gap in the traditional coverage solution. While sub cost is the rating basis for the construction portion of the policy, a savvy underwriter can back that into a mileage basis to make for seamless conversion. For this type of policy, increased limits are important to not erode the limits on the combined form and an annual review of live mileage versus construction mileage is needed to allocate rate appropriately.

Ultimately, there are countless things to think about and cover in what is a growing and dynamic sector. We’ve only really scratched the surface with these topics and more will surely arise. It’s important to work with a specialist within the energy and energy construction vertical to ensure that you’re protecting your insured’s assets and fully understand their ever-changing exposures.

State of the Umbrella and Excess MarketplaceBy Adam J. Mazan Vice President, Western Pacific Region RPS

Over the past decade, insureds have been spoiled by a very soft umbrella and excess market with its overly abundant capacity and very low minimums. Back in 2016-2017 it was possible to secure blocks of $50M of capacity from a single carrier, with minimum premiums as low as $750 per million of limit on an individual risk basis (there were a few risk purchasing group programs that offered much lower pricing on eligible accounts).

We started to see a transition in this marketplace in the beginning of 2018 but haven’t really felt the effects until this year. Starting at the end: There is much less capacity in the marketplace today, carriers have a big push on limit management, minimum premiums are going up, underwriting guidelines have tightened, underwriting has become more diligent (more questions), and auto exposure has become one of the biggest concerns. Let’s take a closer look.

Marketplace CapacityDue to mergers and acquisitions, consolidation, and

restructuring, there is far less capacity in the umbrella and excess marketplace than there was a few years ago. We have probably seen $100M of readily available capacity dissipate through mergers, and another $25M+ go away due to limits management (more on this below). With the reduced capacity have come more restrictive underwriting guidelines, reducing available capacity on classes such as excess auto, affordable housing, any account with an abuse & molestation exposure, high hazard products, agriculture accounts, and several other classes.

Limit ManagementWith the size and number of catastrophic losses increasing,

carriers have started actively managing their limits. As of today there are probably only a small handful of markets that will offer a lead $25M and it may be safe to say that there are no carriers that would offer a lead $25M on any heavy auto exposure. With attorneys pushing verdicts and settlements higher and higher, carriers have been looking to limit and cap their overall exposure. On auto-driven accounts (not truckers but accounts with more than 50–75 power units) we are seeing carriers work to limit capacity to $5M or less in a lead. We are also seeing auto buffers become more and more common, whether it be a $1M xs $1M or a $2M xs $1M CSL or sometimes a $3M. Agricultural and habitational are two other classes of business that are seeing a drastic shift in limit management due to recent claims and losses.

Minimum PremiumsPrior to this year there were a couple carriers that would offer

minimums below $1,000 per mil and as low as $750 per mil. Today (outside of a program or an online rater) it is probably safe to say the minimum premium available is $1,000 per mil with several carriers who had been offering that pricing looking to increase it to $1,500 per mil. I would expect this trend to continue given that the $1,000 per mil price has been the rough floor since the ‘80s, with no uptick to follow inflation or rising costs in any manner.

UnderwritingIn years past it was possible to send an application, currently

valued loss runs and underlying quotes to secure your umbrella/excess quote with no further questions asked. Today, on almost every account, underwriters will have a handful of questions or need additional information to offer pricing and formal terms. The main driver of this is reduced underwriting authority in the field, with most accounts needing to be referred and the referral always coming back with a handful of questions. Common questions or requests include additional years of loss runs beyond the traditional five (with some carriers asking for 10 years), safety manuals, auto manual, measures the insured has taken to mitigate regularly occurring losses, historical exposures, and many more.

In conclusion, we would expect these trends to continue and become the new normal in the excess and umbrella marketplace as attorneys continue to look to insurance for big paydays.

State of the Property Market: 2nd Quarter 2019By James Rozzi, CPCU, ASLIArea Executive Vice PresidentRPS San Francisco

I hope this market update finds you well! Hopefully, the 4th of July holiday provided a nice reprieve from what has been a challenging quarter and certainly a challenging property market. If you are at all like me, I am sure you are feeling a bit exhausted by all the market craziness but excited by the challenges and work that have gone into each deal. Even though we are only six months into the year, I feel like I have taken 10 years off my life. Despite that feeling, I remain truly excited for what lies ahead because I find that every challenge seems to present new opportunities. As summer unfolds, things will slow down for us all and allow us to take a look back on how the market has performed in the hopes that we may see some signs of how the year will progress. If your crystal ball is a bit hazy, then I would suggest you have a few more beers, throw a few more steaks on the grill, and enjoy the summer sun because I can almost guarantee you that when it’s over and it is time to get back to

work, the market will remain a challenge for the rest of 2019 and likely into 2020—at least that’s what my crystal ball tells me!

2019 started with hints of a firm market and then quickly developed into a hard market that has continued to harden each week of each month without any slowdown. In the last three years, carrier profitability hit all-time lows and 2017 and 2018 were marked as some of the worst years carriers have ever seen from an underwriting performance standpoint. Carriers rolled into 2019 with one simple objective: to reposition their books to have a banner year. In order to do this, we have seen rate increase levels start out modest but then swing to severe in many cases on various asset classes. Carriers have pulled away from various asset classes and tightened down terms and conditions on others. They have started to raise their cost of capital charges and loss costs actuarial numbers in order to yield higher rates of return on every account.

For the first time in a long time, we have seen carriers simply walk away from long-term accounts and relationships if they cannot find a way for those accounts to make sense from an underwriting perspective. When 2019 began, it seemed that garden style multi-family business and hospitality business was going to take the brunt of what carriers viewed as much needed market correction. As the second quarter unfolded, however, the

needed market correction spread to California with distressed wildfire exposed business, to the Midwest which continues to be impacted by tornadoes and large hail events, and just about every other area around the country. Standard markets have now reined in their appetite and pushed a plethora of business on the excess and surplus lines community, which is happy to write it but is operating much more cautiously than in previous years.

Garden style multi-family business and hospitality business still remain the most challenging assets classes; I think the adversity seen on these two asset classes is the best example of current market conditions. In the multi-family world, you have a short list of carriers that will write larger schedules—and those that will are using very high base rates, minimum deductibles that continue to leave clients with lender issues, and very restrictive terms and conditions that are being driven by systemic replacement cost valuation issues in this space. Rate increases in this class have averaged 10% to 50% depending on the deal and I would say the average account is seeing increases in the 15% to 30% range. In the past, clients could take higher deductibles to bring rates down, but in today’s market, we are finding that even higher deductibles are not giving clients the same benefit they used to because of base rates carriers want to implore on risks of this nature.

In today’s market, the list of carriers who no longer want to write multi-family business is growing and as it stands, it greatly outnumbers the list of carriers available to write any given risk. The most frustrating part to clients continues to be the lack of differentiation that underwriters are using when driving rate and terms and conditions change. The underwriting approach is very broad brush, and I think carriers are making mistakes here because what could have been a great opportunity to build client loyalty has turned into a very one-sided discussion. In the multi-family world, all the issues are in the primary and that is where the capacity shortfalls remain.

In the hospitality sector, we have the exact opposite problem because the shortfalls are all in the higher excess layers (especially in Gulf coast exposed CAT accounts). We have been through several renewals in the first quarter and second quarter on larger hotel programs where non-renewed capacity represented capacity amounts that exceeded $100M+ and replacing these large slugs of capacity in the higher layers is what drove rate increases another 10%+. The issue with hospitality is that many carriers have lost faith in the modeled results because the losses they have seen from the events of 2017 and 2018 have greatly exceeded both the value of the property and the expected modeled results from those storms. It has become clear that the modeling companies and carriers do not have a good metric for accounting for remediation costs, building ordinance codes, and demand surge that has greatly increased construction and replacement costs in some areas. As a result of the lack of confidence in the modeled output, carriers have become more

conservative when it comes to hospitality business and the entire sector has a bit of a black eye.

The outcome of this year’s hurricane season will be a huge driver on market conditions at the end of 2019 and into 2020. But even if the wind doesn’t blow, you don’t get the sense that carriers are inclined to start giving rate back any time soon. This went on for far too long and drove rates to unhealthy levels so I would not expect an immediate change to market conditions. In my opinion, even if the wind doesn’t blow, wildfires are kept at bay, and the results are very profitable for most major P&C providers, the harder market is here to stay and something we will need to stay ahead of as we start planning for 2020. If the hurricane season is another active one, and P&C results don’t look good, I think clients will need to brace themselves for capacity shortfalls and even tighter terms and conditions.

Below is a breakdown of what we have seen in the market in the second quarter. It is not meant to be doom and gloom, but I have always been of the opinion that honesty is better than blowing smoke:

• Hab/Multi-family - Continues to be marked by shortages in capacity with Swiss Re being the most recent carrier to exit the market. Most carriers are now requiring minimum rate levels of $0.20 or more for non-CAT risks, $100K AOP deductibles, and carriers are cracking down on blanket limits and other broker form advantages. Average rate increases are 10% to 50% depending on losses, starting rate, and geography. We have also seen carriers require 2% Wind and Hail Deductibles in key Midwest states and the ability to buy those deductibles down has more or less dried up in the market.

• Hospitality - Excess CAT is the biggest challenge and larger programs are coming down to the final weeks to get the programs fully subscribed and supported. Average rate increases are 10% to 35% depending on claims and CAT footprint.

• General Real Estate/Office - This continues to be very desirable business and rate change is driven more by geography, but in general, rates are up 7.5% to 15%.

• Municipal Business/Higher Education - Several risk pools for municipal business have seen some challenges at renewal as a result of carriers pulling away from shared limits programs and risk purchase groups. As a result, and despite this being a desirable class of business for most carriers, rate increases range 10% to 15% but could be well north of that if the client is coming out of a larger pool or risk purchase group and back into the open market. Additionally, the vast underwriting changes FM Global and AIG have made to this class of business are causing significant pressure on rate and terms in the southern plains.

• CA EQ/DIC - This continues to be competitive and capacity is still in abundance but in general, rates are up 5% to 15%. Larger risks who purchase significant CAT limits tend to see higher increases because there is less competition on the larger programs than the smaller middle market accounts, as so many carriers are already subscribed on that business.

• CA Wildfire Exposed Risks - This is an area that we have seen evolve at the end of 2018 and then really accelerate in 2019. Changes by standard markets are causing clients to be forced into the excess and surplus lines world and at rates that tend to be 100% to 300% higher than what they were previously paying on a package basis. E&S markets have limited appetite for these risks and are charging high rates with limited capacity to deploy on an account by account basis. This segment is very opportunistic and we have even seen some clients turn to the California Fair Plan for lack of better options.

Many of us have not operated in a market like this in quite some time, and some of us have never operated in a market like this. Those that have seen it before have commented that it can get worse and those that have never experienced it are likely not enjoying the ride but are navigating troubled waters as best they can. Regardless of whether you are a seasoned veteran of this type of market or are hoping to wrap up rookie camp, market conditions will change and market cycles come and go. The best thing you can do now is have open and honest communication with your clients and carrier partners to manage expectations and make sure no one is surprised or caught off guard by the outcome of any deal. There will be some surprises along the way but that is part of the job. One thing this market does better than the others is that it weeds out the good brokers from the bad, the good underwriters from the less savvy, and it allows those with a good handle on their business to rise to the top. RPS continues to be poised to serve our clients with some of the best brokers and underwriters around the country and we hope to continue to earn your trust during this challenging market cycle.

Branch Spotlight: RPS Wall StreetBy Steve Levin Area President RPS Uniondale

Not too far from the New York Stock Exchange is the office of RPS Wall Street, housing two different business units—small business and NY construction.

The NY construction unit, headed up by Mike Mulvey and Jerry Silver, has been continually growing year after year. What began as a team of six a decade ago is now a team of 12, writing everything from very small to multi-million dollar risks. No risk is too small or too large, and having access to almost every NY construction market is a big plus for retailers. The secrets to their success, among other things, are quick response times and overall knowledge of a very challenging NY construction marketplace. As carriers start to appoint individuals and not offices, the team has been able to maintain access to the markets they need.

Alongside the NY construction team is a small business unit headed up by Maya Cruz. Maya leads a team of six people that specializes in small accounts with premiums under $25,000. Their success is also based on the ability to use the “pen” to get back to clients quickly with multiple options. As a team, they look at about 150 new accounts each month and enjoy a lot of repeat customers who know them for their specialization.

All of this adds up to RPS Wall Street experiencing the biggest month in their history this past April. The team is a winning combination of experience and youth, enabling newcomers to get mentored as they learn the ropes, and the results speak for themselves.

July 17 IIAA of ID Convention Meridian, ID

July 17-19 MAC Summit Osage Beach, MO

July 21-24 TSLA Mid-Year Meeting Truckee, CA

July 28-30 IIAEP Big I Day El Paso, TX

July 31- August 3

LAAIA Convention Hollywood, FL

August 7-8 PIA of WI Convention Wisconsin Dells, WI

August 12 RPS Cowles & Connell Golf Outing

Danbury, CT

August 21 SIAA MSAA Annual Convention

Charleston, WV

August 22-23

IIAB of AZ Convention Scottsdale, AZ

August 25-27

SIAA MAA Members Meeting

Great Falls, MT

September 11-12

PIIAC Convention Black Hawk, CO

September 13-14

SIAA STAA Meeting Houston, TX

September 18-19

IIAI Annual Convention Altoona, IA

September 18-20

PIA WA Joint Conference

Coeur d’Alene, ID

October 1-3

IIA of IL Convention Springfield, IL

Upcoming EventsRPS is hitting the road! We hope to see you soon at one of our

stops. For complete listings, please visit the “Upcoming Events” section on the RPSins.com homepage.

NAVIGATOR

THE

RPS: Your Wholesaler of Choice! Call: 866.595.8413 Email: Contact_Us@RPSins.com Click: RPSins.com