This article was written by Tami Tanoue, CIRSA Executive Director.
If you keep up with the news, whether locally, nationally, or globally, you already know the biggest drivers of insurance costs for the coming year: (1) police liability trends; (2) wind, hail, and tornado risks; and (3) wildfire risks. Each of these factors is discussed below.
Police departments around the country are seeing unprecedented judgments and settlements in police liability cases. This trend has intensified in Colorado with the passage of S.B. 20-217, which expands police liability under state law. In the past decade, Colorado police departments, including CIRSA members, have experienced ever-larger settlements and judgments. A couple of years ago, an $8.75 million settlement by a CIRSA member department was the largest ever in the state for a police settlement. That record was broken shortly thereafter by a $9.5 million settlement involving a county sheriff’s department. In 2022, Denver experienced a $14 million jury verdict in a case arising out of the 2020 George Floyd protests. This year, another record was set with a $19 million settlement involving a county sheriff’s department, two CIRSA members, and some state agencies.
The result of this trend is that many insurers are getting out of the law enforcement liability business altogether. In recent years, CIRSA has seen some of its long-time liability reinsurers leave the market. Other insurers are cutting back on coverage limits and greatly increasing premiums. A large Colorado police department recently noted that its law enforcement coverage premium is doubling. Premium increases of as much as 400 percent are being reported elsewhere.
For those CIRSA members with police departments, your 2024 contributions reflect a 150% increase* in the cost of law enforcement liability coverage. This increase is necessary to cover the cost of defense and settlements/judgments in CIRSA’s retention, a potential increase in that retention from $1 million to $2 million, and the likely cost of reinsurance coverage. A member without a police department will not be charged for any portion of the law enforcement liability coverage.
*This increase will be offset by decreases in the cost of other liability coverages for 2024. There will be decreases in general liability (-9.3%), auto liability (-8.2%), and public officials’ errors and omissions coverage (-4%). Thus, the average “blended” liability increase will be 47%.
The big story this year is hail. If you’re in the eastern half of the state, your roofs have likely been pummeled multiple times. As of this writing, CIRSA members’ 2023 hail damage claims have been reserved at $15.4 million, a figure that may still increase as roof, vehicle, and other property inspections continue. Earlier this summer, a tornado hit a metropolitan residential area, causing substantial damage. CIRSA members have experienced some tornado damage as well.
Although the severe weather has been accompanied by unusually large (and welcome) rainfalls, it’s a mixed blessing. The vegetation is lush and green now, but it doesn’t take much to turn that greenery into fuel for wildfires once it dries out. With a virtually year-round wildfire “season,” mountain communities will be on high alert in coming months. We’ve also learned, from the catastrophic 2021 Marshall fire, that urban areas aren’t exempt from wildfire risk.
Your 2024 contribution quotes reflect a 7.4% increase for property, and auto physical damage will increase by 11.4%. The percentages noted above for property and liability contribution increases and decreases are for the membership as a whole. Individual members may see greater or lesser increases, depending on a number of factors.
OTHER FACTORS AFFECTING THE COST OF YOUR PROPERTY AND LIABILITY COVERAGE
CIRSA’S RATING METHODOLOGY
CIRSA uses a rating methodology to allocate costs for the upcoming year fairly among all of the members. Those costs consist of the following:
The information you provide in your annual renewal is used, along with other factors, to allocate these costs equitably among the members. The rating methodology continues to be refined and streamlined each year. Among the refinements that were made for the calculation of 2024 contributions are the following:
It continues to be a rough period for liability and property coverage in Colorado. We know it’s scant comfort, but please know that these difficulties prevail for municipalities whether or not they participate in pooling their risks. Thus, those who self-insure or insure commercially are facing the same situation as CIRSA members are facing. Pooling means that the challenges of a hard market are spread out, that no single member bears the entirety of a large claim, and that the high limits and broad coverages you’ve come to expect as a pool member will remain in place. We thank you for your continued membership in CIRSA, and for your commitment to public entity pooling.
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