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Home My WebLink About1984-12-04; City Council; Info; Risk Management ReportCARLSBAD — AGENbAlLL AH* MTG 12/4/84 , DFPT CM TITLE: RISK MANAGEMENT REPORT ' • DEPT. HD: — -~ CITYATTYAffiD. CITY MGR. "^0 o o o RECOMMENDED ACTION: For information only, no aetion required. ITEM EXPLANATION: . The attached report deals with three major insurance programs of the City for the 1983-84 fiscal year: Liability Insurance, Workers' Compensation Insurance, and.:Property and Miscellaneous Insurance. The report has been prepared by the Risk Management Coordinator and is submitted for your review and information. EXHIBIT: '" " , ' . ' '. 1. Risk Management Report - November 1984 . oz3Oo November 1984 TO: CITY MANAGER FROM: Risk Management Coordinator RISK MANAGEMENT REPORT This report deals with three major insurance programs of the City for the 1983-84 fiscal year: x - - Liability Insurance Workers' Compensation Insurance Property and Miscellaneous insurance. The fourth major insurance program, employee benefits, is the subject of a separate report. A detailed schedule of the City's insurance coverage is attached (Exhibit A). For the past few years, it has been a buyers market for liability, workers' compensation and property insurance. Premiums have been low, coverage broad, and numerous'insurance companies seeking City business. In the past three to four months, the situation has turned around dramatically. Cities are facing huge increases in premiums, coverage is being reduced, self-insured retention (SIR) levels increased, and fewer companies are willing to insure cities at any price. (See attached article from Business Insurance). In the coming year, the City of Carlsbad can expect substantial increases in liability .insurance premiums, a higher SIR level, and narrower coverage. In fact, one of the City's excess liability insurance carriers- has already cancelled a portion of the City's coverage, and is asking for an increase in premium costs of over 300% to continue coverage. , The City was fortunate that our insurance renewals during the 1983-84 year were negotiated before the recent and dramatic deterioration of insurance markets. We were able to obtain premium reductions on several- programs. In " ' '-.','.;'". : ' : - ' .-/ ' - . ' . - - 2 - addition, the City's liability self-insurance retention was reduced from $100 ,.000 to $50,000. Despite the purchase of increased liability protection, premium costs for the year totaled only $64,8^2. The City can expect premium costs to rise dramatically during the remainder of this fiscal year and next year as well. A summary of the total premium costs for liability, workers' compensation,1 property and miscellaneous insurance during the last four years is shown on the following graph. ©00 00© LJ O Z3 00 —I CD 00 _J 0 00 LJL_ D_ m °C/J QX O Q_ O ID O LJQi Q_ Q_ LJQ_ p^ j— QX LJ O 00a: _o CM"t00 ^t CD Ocn r\ ro CDo oo ooen QL O Oa:o_ roooICMooen m (N 00 ooen LJ < O 00 L_.o in * ooIoooen ooooo oooooCM OO O O O - 3 - LIABILITY SELF-INSURANCE PROGRAM Even though premium costs declined, the total cost of the City's Liability Self-Insurance Program continued to increase, as expected, in 1983-84-. A comparison of costs for the Liability Self-Insurance Program during the past four years is summarized below. LIABILITY SELF-INSURANCE PROGRAM 300000 250000 - 200000 - 150000- 100000 - 50000 - TOTAL, COSTS DOLLARS PREMIUMS lOOOOOOJ CLAIMS PAYMENTS CLAI MS ADMIN Y/////A LEGALEXPENSES 1980-81 * 1981-82 , 1982-83 1983-84 FISCAL YEAR * LAST YEAR OF INSURED PROGRAM. SELF-INSURANCE BEGAN IN 1981 As expected, the number of claims filed against the City continue to increase as well as the number of claims settled. Also, the settlement costs have increased proportionately. It is estimated $130,000 will be paid in claims and expenses in 1984-85. A chart showing the number of claims filed and settled in the last three years is presented below. 80 60 40 20 LIABILITY CLAIMS FILED vs. SETTLED CLAIMSFILED Y/////A CLAI MSSETTLED 1981-82 1982-83 FISCAL YEAR 1983-84 ; ' :.- '.' • • . ' . '• •' '. ' '-'• • .. - 5 - ' -FUNDING OF LIABILITY PROGRAM ; . The City pays claims and expenses for liability losses from a reserve fund, ' the Liability Self-Insurance Reserve Fund. The City attempts to maintain an ..uncommitted balance of $500,000 in the Liability Self-Insurance Fund. This i-,-•'• • - \ ' • amount provides for unknown incurred future costs and is a cushion against :pbssible catastrophic losses in any one year. Liability losses are charged back to the department responsible for the loss. An appropriation is made in the ,,; annual operating budget of the effected departments to fund these charge backs •'"':.- • ' " «! " '•.'.' • ' . ' " ,-' and the reserve fund is reimbursed. The financial report for the Liability i . f'Self-Insurance Fund is shown below. V - ' ; , , LIABILITY SELF-INSURANCE FUND . : •;'. •.'•".'•'.-•' ••''.'-. ; FINANCIAL REPORT - '•>."• '''••\ . •' ' ••' '. ";• '."••, .^: 1983-8^ .'-. Ouly 1, 1983 : " . Beginning Uncommitted Balance . $520,167 Reserves for Estimated Future Claims and Expense Payments / 203,500 Beginning Balance $723,667 „' :- • •'<•-"•• '•'. '.•*'•• • '• . •Expenses; ;, Premiums ( 37,082) 1 Paid Claims ' , (14-1,726) Legal Expenses ( 42,550) ; Claims Administration ( 11,492) ' TOTAL EXPENSES (232,850) '' ' Estimated Future Claims and Expenses Payments (255,526) Revenues: Interest 58,837 Contributions from Other Funds 93,500. Transfers from Contingency 150,000 . , - >'...'''•. • - • " . • • • " L~ ~' ~ ,; TOTAL REVENUES 302,337 June 30, 198A- Uncommitted Balance $537,628 7 • • ; , • - . • • - 6 - LIABILITY LOSS PREVENTION The most important function of a Risk Management Program is loss prevention, The primary way the City trys to prevent a liability loss is through the use of a reporting system. Unsafe Condition Method of Reporting Noticed prior to an accident Safety Referral Form After an accident has occured Incident Report After a claim has been filed Department(s) Report I I I COMPLAINT | I Safety Referral, Incident Report |l_ _ _____ _ I_ ; j ... __ I I Condition Reviewed I | Condition Corrected | '.'-•'- .••'• ' I . I During 1983-84, forty-two safety referral reports were completed. A breakdown of the types of referrals is as follows: City Streets .10 Trees, shrubs blocking signs, etc. 9 ; Raised Sidewalks 3 Fire Hydrant Problems k Miscellaneous 16 All reports were reviewed and corrections made by the appropriate department. The Police Department was responsible for sixteen reports. They are our "eyes" when it comes to spotting and reporting potentially unsafe conditions. - 7 - WORKERS' COMPENSATION PROGRAM Even though premium costs declined, the total cost of the Workers' Compensation Self-Insurance Program continued to rise. This increase was expected due to the settlement of a number of large claims during the year. Workers' Compensation costs are also increasing due to an increase In the amount of benefits mandated by the State.. The City is seeking recovery of State- mandated increases through the SB-90 reimbursement process. A comparison of costs for the Workers' Compensation Program during the last four years is summarized in the following graph: WORKERS' COMPENSATION SELF-INSURANCE PROGRAM 250000 200000 - 150000 - 100000 - 50000 - TOTALCOSTS DOLLARS PREMIUMS KXXXXXX3 CLAIMSPAYMENTS CLAIMSADMIN Y//////1 LEGALEXPENSES 1980-81 1981-82 1982-83 FISCAL YEAR 1983-84 FUNDING OF WORKERS' COMPENSATION PROGRAM The City pays claims and expenses for workers' compensation losses from a reserve fund, the Workers' Compensation Self-Insurance fund. The City attempts to maintain an uncommitted balance of $500,000 in the Workers' Compensation • Self-Insurance Fund. This amount provides for unknown future costs and is a cushion against possible catastrophic losses in any one year. Workers' compensation losses are charged back to the effected employee department. An overhead charge is made against each department for each workers' compensation loss in the operating ""budget. The reserve fund is reimbursed through the charge back system. A total of $227,573 was paid in claims and expenses in 1983-84. It is estimated that $250,000 will be paid in claims and expenses during 1984- 85. .The financial report for the Workers' Compensation Fund is presented on the following page. • . , . WORKERS' COMPENSATION SELF-INSURANCE FUND FINANCIAL REPORT 1983-84 Duly 1, 1983 Beginning Uncommitted Balance $551,002 Reserve for Estimated Future Claims and Expense Payments 126,143 Beginning Balance $677,145 Expenses; Premiums ( 9,146) Claims Paid (209,253) Claims Administration ( 6,000) Legal Expenses ( 3,174) TOTAL EXPENSES (227,573) Estimated Future Claims Payments and Expenses (231,884) Revenues: . Interest and Reimbursed Expenses 59,602 Contributions from Other Funds 228,148 TOTAL REVENUES 287,750 Oune 30, 1984 Uncommitted Balance $505,438 - 10 - The number of employee accidents and Workers' Compensation claims continues to rise as shown in the following chart. As shown in the chart, not all accidents result in workers' compensation claims. A workers' compensation claim results when time is lost or there is medical treatment. 120 100 80 60 40 20 0 EMPLOYEE ACCIDENTS & WORKERS' COMP. CLAIMS ACCI DENTS KXXXXX>3 CLAI MS Y/////A 1981-82 1982-83 FISCAL YEAR 103 95 1983-84 - 11 - Jhe Loss Prevention Committee has established a goal of reducing the number of employee accidents by 10% in 1983.-84-. Only the Utilities/Maintenance Department met this goal. Overall, there was a 5% increase in the number of accidents reported over the previous year. A chart showing the number of employee accidents by departments is presented below. EMPLOYEE ACCI DENT REPORTS FIRE .POLICE UTIL.MAINT. 1,'.','.','.'! PARKS & REC.OTHER IQOOOQOd FISCAL YEAR 1981-82 1982-83 1983-84 95 98 103 25 50 75 NUMBER OF. INJURIES 100 125 - 12 -. '"As usual, sprains and strains were the most frequent type of accident reported. Thirty-three percent (33%) of all accidents resulted in sprains and strains.. During the year, there were several training classes on proper lifting techniques and individual departments have shown the City's lifting slide show - at their safety meetings. A chart showing a comparison of the types of employee .accidents during the past two years is presented on the following page. TYPES OF EMPLOYEE ACCIDENTS FOR F.Y. 1982-83 OTHER 15 ABRASIONS 23 CUTS 7 DISEASE EXPOSURE 4 FOREIGN BODY 2 SPRAINS/STRAINS 47 TOTAL EMPLOYEE ACCIDENTS = 98 TYPES OF EMPLOYEE ACCIDENTS FOR F.Y. 1983-84 OTHER 16 ABRASIONS 16 DISEASE EXPOSURE 17 CUTS 7 FOREIGN BODY 3 SPRAINS/STRAINS 44 TOT/AL EMPLOYEE ACCIDENTS = 103 - 13 - In 1983-8^, only the Parks and Recreation Department reduced the number of hours lost due to injuries on duty. This department reduced their hours lost by 50% over the previous year. A chart showing the comparison of lost hours due to injuries on duty during the last two years is on the following page. HOURS LOST - INJURIES ON DUTY 1982-83 POLICE 66.2X 2376 3,588 TOTAL HOURS UTIL.MAINT. 18.7X 670 FIRE 12.6% 452 PARKS & REC. 1 .9% 69 OTHER 0.635 21 1983-84 FIRE 21.6X 1568 UTIL.MAINT. 11.6X 840 / OTHER 3.4X / 248 PARKS & REC. 0.5X POLICE 62.9X 4556 7,246 TOTAL HOURS WORKERS' COMPENSATION LOSS PREVENTION . 7 " r 'r ." ~'~ • ~~ ' ^--- "~' " T I ' : " The .key to reducing Workers' Compensations' losses is an on-going loss prevention program. The Loss Prevention Committee is the cornerstone of the -program,-as shown in the following chart. I- I I Injury , |. I Reports -I Tr ~ : i r I; Vehicle I | Incident I Accident Reports I | Reports Recommendations | | to Departments I I . I LOSS PREVENTION I COMMITTEE I I Safety Training I I I I Safety Awards I I I " - • - ', ' '. ' ' ' - 15 - The Safety Training Program is designed to reduce the number and severity of accidents to City employees. In 1983-84, there was a change in the Safety Training Program due to the resignation of the former Safety Engineer, Powell . Harrison. Cal-Surance was hired by the City in Oanuary to conduct monthly training classes and to assist in safety inspections and offer technical advise on safety-related problems. In addition to classes in Strain and Back Injury Prevention, there were classes in Driver Training, Garage Safety, Chemical Safety, Personal Protective Equipment and Working in Confined Spaces during the last six months of the fiscal year. The Loss Prevention Committee assists in the preparation of the training schedule and expects to see an increase in the number of participants during 1984-85. PROPERTY AND MISCELLANEOUS INSURANCE In addition to liability and workers' compensation insurance, the City purchases general property coverage on buildings and equipment, boiler and machinery, earthquake, honesty bond coverage for City employees and special events liability insurance for groups than rent City facilities. The property insurance provides "all risk" coverage based on $11,506,615 of City property, .subject to a $5,000 deductable. Premium rates were unchanged for this coverage this year, but increased at renewal in October, 1984 to $12,192. Earthquake coverage is provided for the City Hall Complex, including the -Library, and these rates were increased 43% over the previous year. Also, the rate for the boiler and machinery coverage increased 5%, while the premiums for the honesty bond and special events liability insurance remained the same as the .previous year. - 16 - PROPERTY AND MISCELLANEOUS INSURANCE LOSS PREVENTION Preventing casualty losses and reducing their severity are two goals of the '. City's IRisk Management program as related to property insurance. The following chart depicts how the City implements the program for property insurance loss prevention. . I On site I Inspection I r ~~: ~~i I 'Employee Training | I Fire Extinguishers | I Material Storage I LOSS PREVENTION FOR | PROPERTY INSURANCE | •• . I I Disaster | I Planning I SUMMARY .;'-'.-'••• , . The City's Risk Management Program continues to develop and to play a vital role,.in the on-going effort to protect its employees, equipment and facilities from possible losses. RUTH FLETCHER " Risk Management Coordinator RF/ds "... '".,'•- : Liability market shrinking for publicentitiej By MEG FLETCHER Public entities seeking to renew liability coverages are being buf- fetted by gale-force winds of change..Seven insurers that wrote public qfficials'and police professional liability coverages 18 months ago have left the market. And, theremaining insurers are raising rates anywhere from 15% to 400% oncomprehensive general liability policies that include endorsementsfor public officials and police professional liability coverages. In the last 90 to 120 days, there has been a 180-degree turn in the market for municipalities seeking a total liability package, says James W. Chapman, resident vp of the governmental programs di- vision of Markel Service Inc., a.broker and managing general agent in Kichmond, Va. - ' 'And, the winds are not abating yet.•"There will be some real weeping and gnashing of teeth in the next two months," predicts D. Michael Enfield, managing director for broker Marsh & McLennan Inc. in San Francisco. "I expect to see a continued erosion of the public entity liability insurance market through the first quarter of 1985," he adds. Changes are generally being felt on the West Coast now, but the wind is blowing toward the East.Feeding the storm are tighter reinsurance conditions that reduce direct insurers' capacity and increase their costs; growing under- writing losses on policies underwritten at rock-bottom rates; and legal decisions that have broadened the exposure of municipalities, Several insurers have responded by pulling out of the public offi- cials and police professional liability markets completely.Two years ago, there were about 20 insurers in California that would underwrite low Jay er liability coverage for public entitites. Now there are fewer than seven', Mr. Enfield said.In the last month, Ideal Mutual Insurance Co. of New York andGreat Southwest Fire Insurance Co. of Scottsdale, Ariz., havestopped underwriting police professional and/or public officials lia-Continued on page 30 ...MARKET ALERT.. Continued from page 1 - 'bility coverage either as separate or combined policies or as endorse- • ments to comprehensive general li- ability policies. Last month, Ideal Mutual can- celed all police professional liabil- ity policies midterm with a 30-day • notice, said Daniel R. Varona, Ideal's vp, secretary and general counsel. Ideal's exodus from the police professional liability market is part of an ongoing redirection of the in- surer's priorities, he said. The com- pany is moving out of the agency business and concentrating on writing large, direct accounts, he said (BJ, May 21) , Those police professional liability policies that were canceled, some of .which also covered public officials, generated $3 million to $5 million, of the company's total 1983 premi- ums of *$200 million, he said. The loss ratio for this line was generally worse than the company's 71.5% loss ratio for all its liability lines in 1983, Mr. Varona said. About 1V$ years ago, Ideal changed its. reinsurance arrange- ment so it was retaining more of the risks and, therefore, felt the losses more, he said. Most of the police liability cover- age was written in rural areas. Great Southwest is letting the book run out on the vast majority of the public, officials and police professional coverages it under- writes, said Eugene J. Keating Jr., chief operations officer. Although it is not canceling any existing cov- erage, it is notifying policyholders now that it is neither writing new > coverage nor renewing existing coverage while evaluating its posi- tion. "We just don't-think we can make money on it," Mr. Keating ,- explained.' Also this spring, Compass Insur- ance Co. decided to close its doors and is running off its business, in- . eluding public entity business. The Cherokee Insurance Co., which has been in voluntary rehabilitation in Tennessee since July 17, also stopped writing all policies thisspring, including a CGL policy with special endorsements for po- lice and public officials. That mu- nicipal package generated $300,000 to $350,000 of Cherokee's $24.8 mil- lion in direct written premiums in 1983, according to Billy Akin, se-nior vp and secretary. The loss ratio for the municipalpackage was better than the com-pany's 165.3% loss ratio for all lia- bility lines, Mr. Akin said. Another three insurers—Guar-anty National Insurance Co., Cana-dian Indemnity .Co: and United Na- - tional .Insurance Co. — have dropped out of the-market since I spring of 1983. And, Transit Casualty Co. has directed broker Bayly, Martin, .& Fay International Inc. to stop writ- ing all police and public officials li- ability coverage for it, according to George P. Bowie, chairman and'general counsel. However, he said Transit Casualty will still consider insuring a municipality, on a se- lected underwriting basis. Transit Casualty's program hadbeen endorsed by the InternationalAssn. of Chiefs of Police, but that endorsement was given to Markel's program in September, according to Mr. Chapman. Markel is alsoforming a national advisory board on the topic of police liability. A surplus lines insurer that dropped out of.the market in Jan- uary said its losses in the public en-tity liability market coverages wereless than those in other liability lines, but it found it increasingly difficult to find municipalities that would accept policies written by non-admitted insurers becausesuch policies are not protected byguaranty funds and are not subjectto state rate and form regulations.As 'a result, the insurer antici- pated a problem in maintaining the necessary volume to keep reinsur- ance treaties that supported theprogram and decided to drop out ofthe market. The exodus of these insurers has made it extremely difficult for public risk managers to get compet- itive bids on the coverage they need. Getting competing bids for ex- cess cover for his self-insured lia- bility-and property program was a problem for Allen Hyman, risk, manager in Corpus Christi, Texas, and president of the Public Risk & Insurance Management Assn. He queried at least six potential insur-. ers; half refused to quote and two others never responded."Two years ago people would jump at' this business," said Mr.Hyman. "Now they are lying back. The tide is finally turning and it is going to become a seller's market instead of a buyer's market."Brokers are also less interested inpublic entity accounts. David Van Dyke, a partner in wholesale broker Charter House in -Nashville, Tenn., said that since July 1 no competing brokers have shown up to bid on accounts that he has been interested in. Last year there would have been seven or eight others there, he said.'. Meanwhile, the insurers remain:ing in the market are charging more for the coverage..feThe city .of.'Santa Anar»Calif.,sa••community•of.fewer.ithan 220,000 '.about>35.miles south, of-Los. An- geles, was hit this year, with a 220%-increase.-in.the.premium for a CGL , policy that includes public officials and police professional liability coverage, said Risk Manager Jeff Stevens. He declined to name his insurer. _;For the fiscal year, beginning July 1, the city paid $315,625 for $60 million in coverage, up from . $97,250 for $50 million in coverage the previous year. The insurer also doubled the city's self-insured retention to . $200,000 from $100,000. ••Some increase in premium was . expected because two. non-police claims were settled earlier this year . for a total in excess of $1 million, hesaid. But, Mr. Stevens said he wassurprised by the size of the increaseand worked a month trying to finding a better rate, but was un- able to do so. "Already my concern-is whatwill happen next year," he adds. * And, when Corpus Christi did find excess liability coverage, its rates were up 35%, said the city's broker Gerald Michalak, area vpwith Arthur J. Gallagher Co. inDallas.For the year beginning Oct. 1, thecity is paying $97,750—compared with $72,335-last year—for $25 mil- lion in liability coverage above the city's selfrihsured retention" of$250,000 for all casualty coverages,Mr. Michalak said. Rates on comprehensive general liability policies that include police and public officials coverage are up anywhere from 15% to 400%, said M&M's Mr. Enfield said. The size of increase depends on the'entity's loss'experience and how under- priced the coverage was previously, he explained. Markel's Mr. Chapman says rates are going up 50% to 300% for liabil- ity packages that include general li- ability, police and public officials, auto liability and third-party prop- erty coverages. The market for public officials and police professional liability coverages written as separate poli- cies is in "real distress and flux," said Mr. Enfield. Police'professional coverage in particular is becoming more, re-strictive and harder to find, addsBob' Bieber, director of client ser-vices for Ebasco Risk Management Consultants in New York. Among the insurers most often identified as writing coverages for police professionals or public offi- cials, as part of a CGL policy or separately, are National Casualty Co., Scottsdale Insurance Co., In- ternational Surplus Lines Insur- ance Co., Imperial Casualty & In- demnity Co:, The Forum Insurance Co. and INAPRO, a CIGNA Corp. subsidiary that is the professional liability underwriting manager for CIGNA. Mr. Chapman of Markel, which is the managing general agency for National Casualty and Scottsdale Insurance, expects average pre- mium increases of 20% to 50% for - public officials coverage and 20% to 40% for police professional cover- age. Markel generated $1.25 million' in premium volume for public offi- cials coverages and $4.25 million in premium volume for police profes- sional coverages in 1983. However, Robert M. Bryant, vp at Special Risks Inc., a wholesale broker in Virginia Beach, Va., that is the managing general agency forImperial Casualty, said the nationalmarket is still competitive with in- creases of only 10% to 20% for po- lice professional liability coverage. In 1983, Imperial Casualty gen-'erated $3.3 million of its $86.9 mil- lion in premium volume from a separately written police profes- sional policy. It generated an addi- tional $2 million to $3 million in premium volume from comprehen- sive general liability policies that " include endorsements for public of- ficials and-police liability cover- ages, according to Mel Epstein, Im- perial Casualty's manager of prop- erty and casualty underwriting. Forum Insurance, which gen- erated $6 million of .its $54 million in direct written premiums in 1983 from separately written public offi- cials liability policies, may not in- crease rates that have remained the same for seven years for some poli- cyholders, while others will get in- creases of up to 30%, according to Ted Padgett, assistant "vp for com- mercial underwriting. Forum did not cut rates over re- cent years to remain competitive, even though this cost the insurer business, says Mr. Padgett. Public officials coverages, which gen- erated $8 million in premium vol- ume two or three years ago, will generate only $4 million in pre- mium volume this year, he said. Premiums also have remained stable because Forum bases premi- ums on the public entities' budgets', which have been kept.down through belt tightening and propo- sitions to reduce taxes. Forum's loss ratio on its public officials coverage was worse.than its 91.7% loss ratio for its liability lines as a whole, Mr. Padgett said.Losses were greatest in industrialstates and in states where the sov- ereignty of public entities has been eroded by state statute, he said. ' . Insurers are also tightening un- derwriting terms; especially by in- creasing deductibles and self-in- sured retentions. M&M's Mr. En- field said insurers are gradually eli- minating aggregate deductibles and stop-loss provisions on SIRs. But, the dramatic tightening inthe public entity liability market ismost evident in Western states and does not seem to have hit the East Coast and Deep South yet. For ex-ample, rates are currently up only 10% to 20% for public entities on the East Coast, sources say. Likewise, in the Mid- and Deep South, premiums for liability pack- ages including coverage for police and public officials are up a moder- ate 10% to 15%, said Mr. Van Dyke of Charter House. The wholesale . broker writes only regional busi- ness from offices in Kentucky, Tennessee, Georgia and Alabama.. One of the largest factors behind the tightening of the market is the*. "extent to which public entity'liabil- ity products were unde'rpriced. .' Two years ago, there was a lot of competition in the market, says Markel's Mr. Chapman. And, a lot of insurers didn't appreciate the exposures and underpriced the public officials and police profes- sional liability coverages, he said. "There are so few who under- stand the potential exposure of the business itself," Mr. Chapman said. "I think they all got burned." 'The biggest factor is the product has been terribly underpriced and poorly underwritten by most com- panies," agrees Jim Bliss, who is president of wholesale brokerage The Bliss Group Co. and president of the Governmental Interin- surance Exchange, a pool-likegroup based in Bloomington, 111., that includes about three dozen cities and counties. Mr. Chapman, however, says the biggest factor is the tightening of the reinsurance market. '^The.rea-? son: the market has'collapsed is the lack'bf reinsurance,? he says. Reinsurers are increasing their rates on the contracts they renew this fall and will pull out of some classes of business entirely to stem their underwriting losses, which have hit historic highs this year (B7, Sept. 17). The legal climate and specific court rulings also have broadened public entities' liability exposures, - which has produced more claims and losses.Municipalities are a special class among sp'ecial classes when it conies to insurance "said Mr "Bliss "The laws are unique arcane and changing rapidly ",-he explained The frequency of lawsuits , against public officials and law en forcement personnel is up-400% in the past five years said Markel sMr. Chapman. .. ;And, the cost of defending suits is more than the insurance industryanticipated, Mr. Chapman said.;OuV,;" CD M. X X LJ < M z ce< a. 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