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Indian River County Board of County Commissioners <br />Executive Summary <br />Arthur J. Gallagher Risk Management Services, Inc. appreciates the opportunity to present this <br />proposal for your consideration. <br />We are very pleased to present Indian River County BOCC with a comprehensive property and casualty <br />insurance proposal effective May 1.2Q18—May 1.201S <br />Market Conditions <br />In early 2017, insurance industry surplus was approaching record levels and the market was continuing a <br />softening trend. With capital continuing to increase, carrier competition and demand for growth kept rates <br />down in the core property and casualty lines with the exception of auto liability. <br />We have been enjoying a soft pricing environment over the past several years and as a result of this soft <br />pricing industry results were showing some eady signs of deterioration in the first half of 2017. The <br />industry posted a combined ratio of 100.7 for the first half of 2017, the first time that the ratio has been <br />over 100 since 2002. Additionally, carrier net income dropped 29% in the first half of 2017. <br />Today, <br />to exceed $100 billion which would wipe out over 15% of the industry's surplus. While discussing and <br />estimating the industry impact with carriers, a long-term market correction is likely needed but it will be a <br />multi-year process. Currently, carriers are pushing for 10-25% rate increases on CAT exposed property <br />areas including all of Florida. Clients who have faced large hurricane losses in 2017 are experiencing <br />rate increases greater than 20% depending upon the level hurricane loss. <br />|naddition tothe and hardening of the property insurance market, vecontinue to see <br />deterioration of results and upward rate pressure in the Auto liability, Cyber and E&O lines. <br />Catastrophe Model <br />In order to assist in selection of an appropriate named windstorm limit of insurance,we have included the <br />windstorm catastrophe model, <br />Gross Loss ' <br />Ground Up <br />Ground Up <br />Gross Loss <br />Ground Up <br />0.10% <br />1.000 <br />$ <br />80,633330 <br />$73,681,555 <br />$ <br />73,662/617 <br />uo% <br />500 <br />$ <br />01.388.653 <br />$55.425.938 <br />$ <br />55.525.565 <br />0.40% <br />250 <br />$ <br />44,226,431 <br />$39,260,02$ <br />$ <br />39,217j51 <br />1.00% <br />100 <br />$ <br />25'048,777 <br />$21,3$3,155 <br />$ <br />21l41,344 <br />2.00% <br />50 <br />$ <br />13.488.945 <br />*10.097,408 <br />$ <br />10.55*.876 <br />5.000/6 <br />20 <br />$ <br />3.336.174 <br />$ 1.532.121 <br />$ <br />2.267.642 <br />AAL <br />$ 984.096 <br />$ 755.490 <br />Gross Loss ' <br />Ground Up <br />Gross Loss - <br />5% <br />6% <br />$ 68,606,598 <br />$63,029,377 <br />$58,O28t243 <br />$ 50.773,242 <br />$44.001.352 <br />$40.171,460 <br />$ 34,925,640 <br />$29205,450 <br />$25,390,718 <br />$ 17.597,059 <br />$13.877,407 <br />$11,081.254 <br />* 7.$52.447 <br />$6.178,006 <br />$4.061.078 <br />$ 508.587 <br />s1.089.886 <br />%0 <br />* 803.882 <br />$548.838 <br />$410.715 <br />As discussed in 2017, we recommend the County obtain an appraisal to obtain accurate values as well as <br />additional data with respect hoconstruction. This additional data will help with your model results and will <br />assist the carriers in the future at providing the County with competitive rates. <br />Overview of 2017 Property Renewal <br />In 2016 the County has submitted a claim for Hurricane Mathew which currently exceeds the 40% loss <br />ratio the rate agreement was subject to. The claim was still inits early stages during renewal negotiations <br />and the adjuster was still collecting data to properly value the claim and evaluating coverage. Asoresult, <br />Art^"d. Gabagher uisk' Inc. <br />—172 <br />2 <br />