Members,
I have been taking every opportunity in the last 18 months to let you all know that the insurance marketplace is returning to a hard market, meaning less competition, higher pricing, higher deductibles, lower limits and new exclusions. I wanted to take this opportunity to let you know that as you move into your budgeting season, you should consider that UCIP property casualty contributions may be increasing as much as double digits (10% or more) for the 2024 calendar year. We are working to confirm our reinsurance costs and have our actuary working on the annual rate analysis for the board’s consideration. We still plan to have estimated contributions to each member by September 1st, but because we have never had rates increase by near double-digit amounts, we wanted to give you this notice so you can prepare.
Public entity premiums are increasing across the US in high double digit and in some cases triple digits. Our neighbors in New Mexico had their property premiums increase by 200% last year and are expecting another 100%+ increase again this coming year. Some public agencies that are in the traditional marketplace are going to be without any quotes for insurance beginning 7-1-2023. This marketplace is similar to the market of the late 70’s and late 80’s that caused pools to form in the first place.
Luckily, UCIP has worked with other county pools through NACO to operate our own reinsurance carrier, which insulates us somewhat from these market swings, however our reinsurer must buy reinsurance for very large claims, and the costs of that reinsurance is causing increased costs to UCIP. These increased reinsurance rates make up a small portion of the overall rate UCIP charges, but the increases to the reinsurance are about 50% going into next year.
The UCIP Board has planned well for this market swing. By implementing a Net Asset Management Plan in 2017, we have added to equity while minimizing rate increases. The additional equity allows us now to increase our Self-Insured Retention (SIR) with our reinsurers, which reduces our reinsurance premium, and overall costs. The Board also has a Rate Stabilization Fund at its disposal as well to keep rate increases as minimal as possible.
We are hopeful and confident that our overall rate increases will remain under 10%, as that would be the largest increase in UCIP’s history, but wanted to notify you of the possibility.
Please don’t hesitate to contact Johnnie Miller if you have any questions.