1. The New Normal Public/Private Partnerships
Robert McWeeney | Monday, October 2nd 2017
Scott White

2. Introduction of Presenters
Robert McWeeney
Area Executive Vice President, Arthur J. Gallagher & Co.
Broker/administrator of pools and captives in Vermont, Georgia, Florida, Pennsylvania, Kansas, Illinois
$15 billion in TIV portfolio
25+ years of experience

3. Introduction of Presenters
Scott White
Director of Risk Management – Chicago Housing Authority (CHA)
25 years of insurance experience
Develops alternative risk transfer programs
Board member of Chicagoland RIMS
•  Risk experience in public and private sectors
•  Formerly known as ‘the ketchup guy’

4. What are We Going to Talk About?

5. What are We Going to Talk About?
What are “P3s”?
CHA – A Case Study
PMIP History
What is PMIP?
Can Pools Use This Tool?
Open Discussion/Exchange of Ideas

6. What are “P3s”?
WHY ARE THEY YOUR FUTURE?
A Public-Private Partnership (P3) is a contractual agreement between a public agency and a private sector entity. Through this agreement the skills and assets of each sector (public & private) are shared in delivering a service or facility for the use of the general public

7. CHA – A Case Study PMIP development (1999-2008) PMIP (2008–current)
PROPERTY MANAGERS INSURANCE PROGRAM
PMIP development ( )
PMIP (2008–current)
Cost savings/results
Pitfalls
Benefits
Future prospects

8. PMIP History
During the mid 1980s, the CHA started the Plan for Transformation - PFT
Densely populated high rises were difficult to maintain and unsafe

9. PMIP History
Mayor Jane Byrne moved into Cabrini Green in 1981

10. PMIP History CHA had its own police force
Today, CHA has over 22,000 housing units which are managed by private property managers
CHA was and is a difficult risk to insure!

11. What is PMIP?
Designed to provide affordable insurance coverage for the private property managers (PPM) partnering with CHA
CHA contracts with PPMs for the net of any insurance costs associated with only CHA properties
PPM insurance costs would be prohibitive or unavailable if required to include CHA

12. What is PMIP? Contract transfers risk of PPM back to CHA
Similar to an OCIP
CHA retains SIR and transfers catastrophic loss to reinsurers
CHA hires TPA to manage claims within SIR
Contract between CHA and PPM is critical
Clearly transfers exposure to CHA
Does not allow for gross negligence

13. What is PMIP? Poor loss ratio Expensive premiums $750,000 SIR
Conditions of portfolio
Crime
Serious injury
15 property managers
Expensive premiums
$750,000 SIR

14. What is PMIP? PPM firms reduced from 15 to 5
PMIP 2008-CURRENT
PPM firms reduced from 15 to 5
Improved physical portfolio
Improved claims experience
Lower claim count
Workers comp and auto liability transferred back to PPM firms

15. What is PMIP?
PMIP 2008-CURRENT
Increased competition in PMIP marketplace for reinsurance
Lower premiums
Retention $750,000 down to $250,000

16. What is PMIP?
COST SAVINGS

17. Losses
Property Managers Insurance Program

18. What is PMIP?
PITFALLS

19. What is PMIP? Daily management Annual board approval In-between claims
PITFALLS
Daily management
Annual board approval
In-between claims
Workers comp
Gross negligence
Contractor negligence
Runoff
Long tail claims
Continued TPA costs
Turf wars

20. Can Pools Use This Tool?
BENEFITS
Costs charged back to CHA from PPMs would be significantly higher without PMIP
CHA’s premiums have reduced over time
Loss ratio has improved
Safe and better protected portfolio
Control
Dedicated limits
Known/expanded coverage
No gaps in coverage provided by vendors
Better carriers
Control of claims within SIR

21. Can Pools Use This Tool? Security firms Custodial workers ??????
PMIP FUTURE
Security firms
Custodial workers
??????
So, how could this apply to risk pools?

22. Can Pools Use This Tool? For Most Pool Members
CURRENT BEST PRACTICES FOR POOL MEMBERS TO TRANSFER RISK
For Most Pool Members
Obtain certificates of insurance from 3rd party vendors
Have legal/consultant review contract for risk transfer
Review A.M. Best ratings of carriers
Obtain copy of policies/ endorsements
Pray!

23. Can Pools Use This Tool? For Most Pool Members
POTENTIAL ISSUES WITH TRADITIONAL RISK TRANSFER MODEL
For Most Pool Members
No good system for tracking large numbers of certificates
No guarantee coverage has not been cancelled
No control over specifics of coverage afforded
No control over claims even if they are transferred successfully to 3rd party vendor insurance program
Unknown insurance costs being paid via 3rd party vendor contract

24. Can Pools Use This Tool?
ANY IDEAS?

25. Can Pools Use This Tool?
SOLUTIONS FOR POOLS
Why couldn’t a pool form a separate program to insure the liabilities of vendors?

26. Can Pools Use This Tool? What do pool bylaws say? Tax issues
POTENTIAL ISSUES
What do pool bylaws say?
Tax issues
Tort immunity issues
Regulatory
Cost structure funded by reduction in vendor premiums
Other than that we are good to go!!!

27. Can Pools Use This Tool?
POTENTIAL BENEFITS

28. Can Pools Use This Tool? Benefits to Pool Member Control!
POTENTIAL BENEFITS
Benefits to Pool Member
Control!
Over vendor insurance
Structure and cost
Claim handling
Reduced cost in vendor contracts
Reduced administrative work in checking certificates and contracts

29. Can Pools Use This Tool? Benefits to Risk Pool – YOU!!
POTENTIAL BENEFITS
Benefits to Risk Pool – YOU!!
Competitive advantage over other pools/programs
Increased ability to retain members
Increased ability to gain/market to new members
Ability to keep underwriting profits when program performs well
Innovative approach
Membership engagement

30. Thank You Robert McWeeney Area Executive Vice President
Scott White Director of Risk Management