ALC-Executive Subcommittee (All Day)
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- October 2, 2026
All right man, you could go and grab your seat.
We'll get this meeting started. ALC executive Committee. Mr. Co-Chairman, do you have any words of wisdom? Thanks for joining us. Thank you. Uh, members, just as a reminder today we're gonna be hearing 5 presentations in response to the captive. Manager RFP, the broker manager RFP, the 5 presentations are from Alliance. Aon Gallagher, McGriffin Stevens, and they will go in alphabetical order. Each company has been given 30 minutes for their presentation and then we'll have time for questions after that, around 30
minutes. Uh, we're gonna take a small break between the presentations to reset the room for the next presentation. She'll only take 5 or 6 minutes or so, and then upon conclusion of the presentations, we will deliberate but the decision will not be made until early next week. Uh, and as a reminder before each presentation that anyone from any of the other companies that are not presenting, if you would, uh, please leave the room during the presentation. And first on the list is Alliance. I'm assuming this is Alliance. Yeah. Great. Thanks for being here. If
Speaker 12
5:27
you would go ahead and just introduce yourself for the record and then you can begin your presentation. Certainly. Good morning, Mike
Speaker 15
5:36
Honeycutt, senior vice president with Alliance Public Entity Practice. Good morning, Karen Katerino, senior vice president with Alliance Insurance Services, the public
Speaker 18
5:42
entity practice. Good morning, Taylor Force, vice president with Alliance Insurance Services Publicity Practice. Again, thank you for being here and you go ahead and present your uh presentation. Great.
Mike Kennicott
Unverified
5:49
Thank you so much. Um, again, we're, we're very grateful for this opportunity to be here today. Uh, we understand the significance of this project
that is before us, um, and we're excited to share why we believe that we're uniquely qualified to be the broker of choice for the state, um, before we get started, we thought we just sort of frame out sort of how we've got this presentation set up really kind of 6 core topic. um, introductions of the proposed team. We want to share some time about Alliance as an organization, spend some time talking about our property expertise, the analytics that would be used to help drive decisions, uh, for the state and structure of the program, um, outline our framework for what
we believe to be a successful renewal and then some timeline and deliverables that would be important to achieving uh everyone's overall goals and certainly time for Q and A. Again, my name is Mike Kennicott, uh, senior vice president with Alliance Insurance Services, part of our public unity practice, um, I have been in this business for 32 years. I've had the pleasure of serving the public entity community, uh, for about 25 of those 32 years. Uh, my role on this account would be to serve as the lead, meaning that I would make sure and oversee all
aspects of the delivery of what we're engaged to do, um, that I'm gonna be hands on and hands on being involved in strategic planning. Uh, putting together a submission that goes to the market, visiting with the markets and underwriters negotiating, bringing those results back to this group to make decisions, um, our team is centrally located in Charlotte, North Carolina. It's a center of excellence for our public unity practice, so most of the members that you're gonna meet today as well as some that you'll see on the team chart here shortly are predominantly located in Charlotte, North Carolina, which
Chair
Unverified
7:30
is again a center of excellence for our
Speaker 15
7:35
public community practice. And good morning, Karen Katerino, senior vice president with Alliance Insurance Services, along with Mike as the team co-leader. I'll be supporting our team's efforts in terms of program meeting program goals, timeline, and deliverables, and with that I'll turn it over to Taylor. Good morning, Taylor
Speaker 17
7:50
Fort again with Alliance Insurance Services. Um, I'm a vice president with the organization and my role would be to spearhead sort of the market negotiations and analytical
Mike Kennicott
Unverified
8:00
processes. Great. Thanks, guys. So this next slide we've got is a sort of a team chart we've assembled a very deep bench of teammates that would support the three of us in this engagement, um, again, there's multifaceted resources depend upon what the subject matter, uh, might be we'll draw upon this group of individuals. Again, most of those folks are centrally located in our Charlotte office, uh, where we believe it's a value to be centrally located together. It allows us to collaborate and innovate on
behalf of our clients and being in the same location, um. We certainly understand the significance of, of this project and again the team that we've assembled represents the resources that we believe are going to be needed in order to assemble the program. OK I
Speaker 15
8:52
would like to take a few minutes to talk about Alliance. We have been in business 100 years celebrating our 100th year anniversary this year.
Speaker 31
8:58
Today we're the largest public entity specialty broker, and 5th
largest United States property and casualty broker. Of the top 5, we are the only brokerage that is employee owned. This means we answer to our clients, not stock analysts or shareholders. We don't have the distractions of ongoing mergers and challenges associated with combining resources and operations. We're a client first model with an industry leading 98% client retention rate, and we're
Speaker 15
9:26
very proud of. We are unique in that we have one P&L we are.
Speaker 33
9:35
We have some issues that have come up with a TCM
Speaker 34
9:39
and the care coordination that it kind of holds us up cause they don't necessarily know the answers of what
Speaker 37
9:55
is approved or not approved. Sorry. OK I was like, I wasn't thinking that, but Uh, as I was saying, I, I believe what's unique about a lion is
Speaker 15
10:05
our one P&L structure where one team, no silos, organizationally structured flat, which means that we have the focus at our client level. We take great pride
Speaker 31
10:14
in providing full transparency and disclosure and our client engagements, our model insurers were able to assign the best experts to a client regardless of geography and from the moment we get up really to turning out the lights at night, we're insurance brokers. It's all we do, and it's really the only thing we do.
As Mike, uh, mentioned, we have a public entity education center of excellence that we're very proud of. It's a special group within alliance that contains 350 professionals that are exclusively focused on only public entity business. The team in front of you and the team we propose is within this group. The practice has been around 40+ years. The chairman of the board for Alliance, uh, Tom Corbett started the practice and
Speaker 15
11:01
is still involved and engaged today, which means we have a top down approach and commitment to public entity business. We serve
over 10,000 public entity education clients throughout the country, including 30% of all states, 70 plus of public entity and education pools, as well as higher education institutions, both public and private, as you may have noticed. from our biographies and resumes, we have a very tenured team on average of about 20 plus years of service. I'd like to highlight
Speaker 31
11:31
to you that we're very active with associations that have mattered to the state. Including the state risk Managers Association, PRA RIMs,
where we're oftentimes asked to present based on our expertise. To give you an idea of the states we serve, uh, of the 20 state clients. We, uh, we serve 12 of them are for property coverages, and those are the ones that are in bold where we place their property programs. Those of us, uh, that are proposed for the state of Arkansas's program, Service 5 of these clients. The, uh, the beauty of our organizational structure really, even though we may not all work on all of these state accounts,
we all know one another within our community at Alliance, we're able to share best practices. We communicate as a team regularly to to share innovative approaches that states are taking as well as solutions to some of the large state challenges. We also have the honor of serving some of the largest K through 12 public school districts in the country, from Los Angeles, San Diego Unified School District to um uh Lafayette Parish School Board,
Charlotte Mecklenburg schools, our team here works on a number of these Southeast clients were very familiar with the challenges faced beyond even just property of these K through 12 schools. Our pooling practice is also uh familiar some home, uh, some home advantage here with the Arkansas Municipal League pool as one of our clients in addition to some of your neighboring schools, uh, pools in the states of Mississippi and Louisiana, uh, as well as Oklahoma, I think we, we can say
we fully understand and can appreciate the state of Arkansas's property exposure to severe convective storms. And last our mixed of some of the largest public universities and private institutions throughout the country, not just for property, but other coverages as well. And we certainly hope the executive committee found our client references to be relevant and insightful, uh, you know, of course, in public entity, there's no paid advertising, but our clients are our best advocates and we appreciate them and the, the value of the trust
they placed in us to place their business. So what does Alliance bring to the state of Arkansas? What is the value, uh, that we bring to this engagement. And what sets us apart, uh, from our competition. At the top of the slide you'll notice that we put our highest level client service. It is really our, our number one priority. We are hyper responsive to responding, uh, whether it be same day requests, we create teams that provide backup to each other, so there's
redundancy and availability 24/7. It's also an opportunity for us to grow, not only with our clients, but with our team. We have uh lead property brokers, assistant property brokers who are learning to client managers, assistant client managers, always ensuring that there's somebody available 24/7 as well as the fact that there's professional development and succession planning in our model. Our market access, we have a discipline direct approach to
markets. We have the expertise to place the state's program. Uh, an example of some of our thought leadership is our public and a property conference wherein we invite domestic and international property underwriters for a day and a half of focus client meetings in a setting that really deepens those relationships both between them, the client, and the broker. We, and this is an important point, we don't own any domestic London urban intermediaries intentionally. As we wish to be able to select
the best for our client. We truly share an independent mindset to leave no market untouched when it comes to looking in our quest for property, uh, capacity. We leverage a host of analytics to drive our decision making. We'll touch on some of those too later in this presentation. As far as the enhanced coverage and optimized program structures we're, we are experts at really helping our clients understand their total cost of risk, the
risk appetite, and their risk tolerance and developing alternative financing programs. You all are examining one of those, a captive. There are multiple other ones that also are available, uh, that we help our clients understand both within the construct of a captive as well as outside the construct of a captive and we'll touch on those. Last, we have embedded within our team a robust claims and risk control support. We can help with pre-loss planning and importantly, I'm sure to you all post lost assistance for property which
can include uh assistance with filing eligible FEMA expenses, quantifying business income losses and forensic accounting and and so forth. Our market clout with the carriers that the executive, uh, senior levels help really facilitate positive claim resolutions for our clients and our senior level claims, uh, advocates, some of whom are attorneys are really good at policy wording, so this is all to say we're tenacious, experienced, and on your side advocates always fighting for the best outcomes for our
clients. As a matter of fact, I think many of our clients view us as an extension of their own teams. We're incredibly honored to serve many of the public. many
Speaker 17
17:08
partners that we do. I'll turn it over to Taylor. Perfect. Thank you, Karen. For the next few minutes, I'll be walking y'all through our property expertise, our analytical offerings, and some of our insights into your data and an overview of potentially some opportunities to improve those over time. Uh, first and foremost to qualify our organization, Karen mentioned, we have 350 full-time public entity dedicated professionals
of that 35, 6 year full time dedicated to the property line of coverage, um, and what that means for, for an organization such as yourselves is that we're having biweekly calls where we're knowledge sharing, we're able to get ahead of any potential issues, um, we're sharing any potential competitive advantages that we have so we can get ahead of those as well, um, all with the ultimate goal of bringing home the most competitive and uh most competitively priced program to the state of Arkansas. Um, we'll go over the embedded analytics here in depth, but we do have all of those available at the broker desktop level, um. The unmatched global market
relationships Karen mentioned with our public and a property conference in particular. Um, we have 65 senior level directors at these organizations that they all view public ending as a core business of their offerings. We're able to meet with those folks to develop personal relationships, and we
Speaker 24
18:12
truly believe that that is a unique opportunity that our firm does that our competitors do not.
Speaker 17
18:18
Uh, 2 years ago he launched Alliance Re, which, uh, they handle the facultative reinsurance placements, we found that to be a immense success where we're able to reduce some of those frictional costs where some of our competitors might
have to go to a third party organization to um Back out that uh capacity, and we're able to do that in-house and reduce, uh, the ultimate cost of risk to the clients. Particularly germane with this opportunity, uh, we do have a staff of wordings experts, um, bringing three
Speaker 24
18:46
sort of separate programs under one roof, so to speak. Um, we want to ensure that there are no gaps in coverage.
Speaker 17
18:53
Everyone is familiar with the property form and also um some assistance with crap, crafting the captive wording that would be utilized for the
captive uh vehicle. We do have a team of terrorism specialists that sits in London. Um, I believe all three programs currently purchase stand-alone terrorism coverage, so that is something we would certainly advocate continuing going into the future. Um, in addition to the 60, uh, broking specialists. We also have 25 complex claims specialists, as Karen mentioned, most of those are attorneys and we are routinely working hand in hand with those folks that when claims disputes do arise, we're able to bring those to a swift and fair resolution. And lastly, uh, recognizing the state of Arkansas has embedded risk control engineers. We do
have those in-house as well that are very familiar with working hand in hand with our clients and their risk control professionals to uh stay ahead and abreast of the latest trends and practices there. Uh, lastly, as In order to credentialize our firm, we do place more than $950 billion in total insured value annually into the property marketplace and that translates to more than $8 billion in global property premium. So, uh, cat modeling and
analytics for that are those that are unfamiliar. Cats is short for catastrophe. So that is sort of the foundational framework of the placement process. So every year we're analyzing the statement of values that is provided by the state of Arkansas. We're looking to get ahead of any potential volatility there. Maybe there was a new location that rolled on, we're able to predict what that might do to the overall portfolio, if there's additional limits needed, um, potentially different deductible structures and what we do is we almost pre-underwrite the exposure before we go to market, which allows us to get ahead of any potential issues or have
conversations about potential changes to the structure, um, the cat modeling is utilized by all three sort of pillars of the process underwriters use it when they're pricing out a deal, when they're determining how much capacity they're going to be deploying on a deal. The insured uses it to determine that they have adequate limits so that there's no risk of underinsurance. And lastly, the broker uses it when structuring a placement. Um, we find that a lot of times there are sort of arbitrary limits and structures in place. Say in multiples of 5, so a $25 million primary with a 25 of 25
that sits above it. We do, uh, do things a little bit differently. Where we look for breaks in the cat perils and we'll talk about some of those breaks over time, but essentially different markets look to attach at different risks, appetites throughout the structure, so we know which markets like to participate lower on the tower, we're able to break that, maybe it's a $65 million primary rather than a 25, and that allows for pricing
Speaker 24
21:24
efficiencies and better use of capital deployment from the carriers. Um,
Speaker 17
21:31
there are two predominant third party vendors in this
space, RMS and AIR. We use both of those firms when doing our analysis, certain carriers have contracts with RMSer have with AIR, so we're able to look at those uh ahead of time and kind of broke on the basis of which one might model more favorably for the clients. Um, and as I mentioned, we're able to kind of catch
Speaker 24
21:51
any of those spikes in, in, uh, volatility before we go to the
Speaker 17
22:00
marketplace. Uh, the cat models, they are particularly focused on name windstorm earthquake, convective storm flood, wildfire, and terrorism. Obviously due to your
geographic positioning, earthquake and convective storm are the two most pertinent perils there that we would keep an eye on and use to determine how much insurance is ultimately purchased. Um, utilizing some of the data that was provided as part of the RFP process, we were actually able to go through and model the combined consolidated portfolio for all three entities, and um there's a lot of data and numbers here, but sort of walking through this process, each of those rows represents a different return period. So on
the news, you'll hear a 1 in 100 year event, a 1 in 250 year event, what does that actually mean? Essentially, a 1 to 100 year event has a 1% chance of occurring in any given year, and the resulting output is the level that would, uh, be sustained in terms of damages. So that is incredibly important for insured when they're looking to secure these programs if you're a risk appetite dictates that you buy to a 1 in 250 or a 1 in 500 year event, as we find with most of our clients, we're able to determine that and get ahead of it and uh go to market with on that basis. Um,
And then lastly, I think um what we find is that when you do consolidate a program, um, with more values under one roof. There's a lot of efficiencies realized where you might not need to purchase as much limit in the aggregate to have the same level of coverage. So if we were to look at the three entities individually, maybe each was purchasing X level of insurance, but when you combine those under one program,
Speaker 24
23:27
they might only need 75% of that overall limit, which of course leads to reduced premium volume. Um,
Speaker 17
23:38
I'll talk about a, a partnership we have with a firm called Archipelago in the next slide, but we did a deep dive into what is known as the primary cope information, um, that stands for construction, occupancy, protection, and exposure. That's sort of the, the foundation or the base level of information that's required to be considered a, a good risk in the marketplace, and we're pleased to relay that your portfolio stacks up very favorably against our book of business, but that being said, we're never complacent and we do look to improve each and every year. So these 4 inputs are areas That we honed in on that, we could look to improve over time.
I think um most of this information is out there somewhere available, whether it's through the appraisal process or a risk assessment survey, and we would look to kind of bring that all to bear underneath the statement of values. One of the ways that we would do this is through a firm called Archipelago, and Alliance has an enterprise agreement with Archipelago that all Alliance clients receive this free of charge as part of our offering. So what we start with is sort of the Excel file statement of values we'd load that into the platform, but if there's any appraisal reports, as I mentioned, risk assessment
surveys, we're able to bring that in and it will scrape the data from those reports automatically using artificial intelligence and supplement the statement of values with that data, which is a huge burden. relief from kind of the historic process of going through manually combing through hundreds of pages of PDFs to get that information. Obviously, the underwriters love that because more uncertainty equals more risk and thus translates into higher premiums. So that ultimate goal of bringing down those uh premiums over time. And then one last opportunity, um, you'll notice to the left side
of the slide. These are ASBA specific slides when we ran it through the platform. Um, there's about 23% of the schedule that is missing what is called secondary characteristics, uh, we the primary characteristics on that side. Secondary characteristics are things such as roof shape, roof age, roof type, etc. and kind of the same philosophy. The more data that we know about, the more accurate the modeling results are and thus translates to a lower premium
Speaker 56
25:36
over time. Great, thanks, Taylor. Um, we're gonna transition now into proposed strategies to have
Mike Kennicott
Unverified
25:43
successful outcomes for 71. We certainly understand that it is this committee's overarching goal to have a July 1 consolidated property program, um, we are confident that we can certainly deliver that, um, we are one sort of cog in the wheel, if you will, as it relates to the process and the vehicles that are used to fund, retain losses, uh, as well. well as there's a number of other steps with enabling legislation actuarial studies, development of coverage forms
that are to be reinsured, um, but from the perspective of transferring the risk into the marketplace and consolidating the three programs that you currently have into one, we're confident that can be done and we're really sort of indifferent or agnostic to the fact of whether a captive is used or not, we feel like that that can be accomplished, whether that's through depositing, you know, funds into a trust to deal with retained losses. With that said, we understand that that, you know, as we sit here today, it's 120 days to July 1, and there are a lot of steps and processes that need to
occur in order for that to be a successful outcome. We have developed sort of 3 paths, if you will, to potentially contemplate, uh, to ensure that coverage remains in effect, but also gives the state the opportunity to recognize savings and efficiency through both what is transpiring in the marketplace as well as potentially removing. um, frictional cost in the way of intermediary revenue and commissions by virtue of the fact that we've, you know, proposed a flat fee. So
regardless of which of the three options that are outlined here that this committee were to take, we're confident that it's going to yield savings, um, and certainly there's pros and cons to each of these three different paths, um, you know, the first path would be simply just taking those 3 programs that exist today and renew them July 1 with certain modifications and those. modifications would be removing any commission, obviously that's in there that would yield immediate savings. We would also look to make improvements where we can, uh, to coverage, um, and
even obviously take advantage of current market conditions, which, you know, again, market conditions are more favorable today than they were the past 2 or 3 years, so we would expect some savings from that perspective. Um, the consolidated program, which again we understand is, is the, you know, the overarching goal here, um, certainly the benefit of combining all those three together, leveraging the economies of scale, uh, presenting that to the marketplace, utilizing the captive as the funding vehicle, um, those things certainly we believe are obtainable for 71.
Once again, obviously there are a lot of other steps that need to transpire. The 3rd and last one is the consideration of, of extending these three programs to October 1 or November 1, which would give a little bit of runway for those underlying other items that need to occur, um, to make sure that those are done properly and done thoughtfully, uh, again, we're indifferent to that, but it is, it is an option to take and extend those again, those would be done with the removal of any frictional costs that exists in the way.
commissioned by, uh, both retail and intermediary, uh, revenue. 11 of the other benefits to consider around the October 1 or 111 effective date in our business January 1 April 1 and July 1 are the most active, effective dates, um, and certainly in the public entity banks July 1 is the most active. We believe that having an off July 1 date perhaps provide some advantage to the amount of attention that the account would
get in the marketplace, um, underwriters are overwhelmed leading 60 days up to July 1, and so to be able to position your account on an off effective date we think could provide some value in terms of greater attention. It's our job to make sure it gets the proper attention and we will irrespective of the effective date that's chosen, but it is one strategy we think might uh should be. For a program is complex as what we're considering here today, we need to access the global
marketplace and here we just wanna kind of show what our, we have over 350 markets we access directly, uh, it would require global capacity and capital to put this program together. And again, we just want to show that we've got a fantastic trading relationships with a number of those key partners that would be needed. And again sort of talking about just the overall approach, regardless of the three different options that we talked about, you know, there are sort of 3 core approaches and strategies that we deploy when
we go to market. One, we're very tenacious about how we market your program. We do it professionally, but we, we look to drive successful outcomes through being tenacious in our discussions and presenting your risk in a, in the most favorable way. The first is we would negotiate with some of those incumbent carriers that currently participate. We want to highlight their experience. We want to highlight the profitability. We know that a number of these markets have made a significant amount of money and we want to make sure that we recognize that. And and use that to our advantage. We encourage face to face meetings. We encourage our, our stakeholders to be involved
in those discussions with the underwriters. This is a very relational business. It is not transactional only, but it is relational and the underwriters underwrite the, the, the folks that are running the program as much as they do the data. Um, we certainly look to go beyond those incumbent markets. uh, we, we have a no stone unturned approach that we're going to aggressively canvass the marketplace on your behalf to make sure that we're accessing every ounce of capital that we possibly can. And then finally, which is unique to Alliance is we have
proprietary programs that the that the state could potentially consider, um, we're unique in that aspect. We're the only broker who has developed proprietary programs to benefit our public entity clients, and this is a tool that we would propose to explore, uh, to see if it
Speaker 21
31:34
drives value in the overall process. In a few minutes. Oh, sorry, in the few
Speaker 15
31:45
minutes that we have 5 minutes or so. Yeah, we appreciate that. Thank you. Uh, When we approach ale engage as Mike had mentioned, we typically
start 18 days, um, prior to, to renewal for and we have a defined service and placement plan, 10-step process that is uh very responsive and personalized and this instance. We recognize that the proposed timeline that is desired is 71. We wanted to just share and we have in the appendix all the details behind each of the 10 steps, but just some of the things that would need to happen. So upon award, uh, there's the data collection, the
BORs in the markets, understanding your current policy terms and conditions
Speaker 31
32:28
and a review of claim history, establishing with um the executive committee and, and whom we will be working with, what are the goals and. objectives for the program in conjunction with a captive, if that's going to be done at the same time, so beginning in March, you know, we, uh, we would normally start with the state of the market, explaining to our, our client representatives, what is happening in the market and um certainly providing some type of
renewal strategy recommendation from our side and we literally, and I put dates in here specifically, because if everything goes right, these are the dates that would be necessary to meet a 71. Timeline and the the amount of detail that would be necessary to do so, um, keep in mind that your timeline may be quick, underwriters typically need 30 days to look at a submission. So the soonest we can get it into the market, the better off we're going to be to negotiate the best terms and conditions for the program.
Understanding that as legislators you'll want to approve or bind authority for the program, you're likely going to need the proposal, I would assume probably by mid to end of May to be able to do so. So to, uh, just to, wanted to give you some kind of context, uh, as to, you know, we can do this, and we've done this, um, it's certainly, uh, within our wheelhouse and and our, our expertise to do so. It's
Speaker 37
33:51
just there's gonna be some detailed processes that will. Her to ensure that we meet that timeline.
Mike Kennicott
Unverified
33:59
Yeah, and in the cloth a wild line. I'll just sort of hit on a couple of these, uh, in the last few seconds we have, um, certainly we, we have robust public unity experience complex property experience, um, and understand the project that's at hand here, um, hopefully you've had a chance to see some of our references, um, in terms of our proven success in order to put these programs together. Um, we're very responsive, um, while we may not physically sit here in Little Rock, the level of service that you that you receive, we, we believe that you'll think that we are here.
You won't be our only client, but we want you to believe the level of service we provide that you believe that we are, that you are our only client, um, and then just trust and integrity, um, I think one of the things that, you know, challenging news has to move at the same pace as good news, so we, we don't withhold, we're very transparent. We believe in making sure that our clients are up. To speed on every aspect of the project as we work through it. So with that we'll open up for any questions that the group may have. Thank you for the
presentation. Did you say you, that you're not an agency based
Mike Kennicott
Unverified
35:02
in Little Rock or R. We, we are not, we have as an organization we have two offices, I have one in Fayetteville and one here in Little Rock. They are employee benefit focused. They're not property and casually. I think we have 75 employees in the state of Arkansas, but none of our team that would be working on this project reside in Little Rock or. Representative Lady and you're recognized. Thank you, Mr. Chairman.
Representative Jack Ladyman
Unverified
35:33
Uh, there's a lot of information to absorb, obviously, and I may have missed something on this, but back on uh like page 16, you you you talk about your um Where you're stacking your abilities here and you have engineering listed there's a second thing, so how do you utilize that engineering resource. I mean, I know you, they're probably helping you measure the risk. Is that correct? So tell me about boots on the ground. How do they do that? How do you utilize the
engineers? Do, do they do inspections? Do they review drawings, how
Speaker 17
36:07
does that work? All of the above, you're exactly on the money. So we, uh, work with either carrier-based engineers or there's third-party engineers. firms that'll go out and collect data information that will determine what's called a maximum foreseeable loss using that information, and oftentimes that will be more accurate than sort of the modeling world, um, output. So we'll use that in our negotiations to drive better than market bearing results. So do they look at different types
of materials that are used in construction Yeah, we also see a lot of our clients will consult the risk engineers when they're looking through the specs of
Speaker 24
36:44
uh building a new property as well, so that they're taking into account the, the latest information there to determine, you know, the best way to proceed on building a new site so that the insurance costs are presumably lower than they would be
Representative Jack Ladyman
Unverified
36:57
kind of using an outdated methodology. OK. One other question about the clients that you serve, uh, you said you municipal league is one of your
clients. Is that for, uh, uh, construction of
property? Yes, sir. How long have you had that? Uh, that's a 10 plus year relationship.
OK. Uh, and I know you touched on how quick you could respond to, uh, issues, and you said something about 24 hours. So, uh, I mean, is that Are you able to handle all issues in 24 hours or do you categorize those in longer. Response requirements. Yeah, great question. I mean, again,
Mike Kennicott
Unverified
37:36
we are super hyper focused on being responsive to our clients, um, everybody obviously carries one of these and we're. Ultra, ultra responsive, um, no client inquiry. Should or does go unacknowledged. past 24 hours, usually same day or less. So that's the
Representative Jack Ladyman
Unverified
37:52
response time and if it's a longer term issue you categorize those certainly depend upon what the what the
Mike Kennicott
Unverified
38:01
issue is correct, but we certainly will acknowledge the request or acknowledge the
inquiry same day and provide a timeline back in terms of an answer or an outcome.
Speaker 24
38:12
And I would just add on to that, especially in claims scenarios we're working around the clock. A lot of times these Don't fall Monday through Friday, 9 to 5, they tend to happen on holidays and weekends, and we have several examples of situations where we've been on the phone with our clients and stakeholders throughout the course of a weekend or a holiday, so
Representative Jack Ladyman
Unverified
38:28
on and so forth. So assume we have a major tornado here in Arkansas, which we do occasionally
and it hits a couple of our schools. So what's your response time on that? Yeah, and that's where
Mike Kennicott
Unverified
38:39
the, the pre-loss planning comes in. I mean, it's part of our services as well as where we would look to make sure that we're partnering with the right third party firms, you're, you're nominated loss adjuster on the program who would be boots on the ground, accessible, you know, on, on site whenever it's safe to get there to start helping the school district in this particular situation, deal with the recovery aspect, bringing in restoration firms, sucking water out if there's water there, tarping roofs, so those. type of plans are part of our services that we sit down with our clients and help put
together pre-lost plans and look to make sure that the right partners are in
Speaker 24
39:14
place for that. And we typically have an annual meeting where we make sure everyone's cell phone numbers are up to-date email addresses, any new members of the team are added so that we have all of this ironed out, folks have their laptops at home, so that if they're unable to get into the office, there's no delays or anything of
Representative Jack Ladyman
Unverified
39:27
that nature as well. So you, you look at the resources that are available in our state and our communities, so those will be available if you need them. Absolutely. Thank you. Thank you, Representative Senator Boyd, you recognize.
Senator Justin Boyd
Unverified
39:41
Thank you, Mr. Chair. Um, I'm sure we asked both
of these questions I have somewhere in the process, but I wanna hear from you directly. So the first one is, you know, being a broker, um, what assurances can you give me that you will act at all times in the best interest of Arkansas taxpayers rather than with a consultant fee on the back end or some other payment from somebody. how are you gonna be transparent? How are we gonna know that you really are working in the best interest of Arkansas
Mike Kennicott
Unverified
40:06
taxpayers, great, great question. We, we have a very Parent model our service
agreements specify every dollar that is earned is to be shared with you. You, you see that the other item that we've put in place is that we have said that we would cap any other third party that is needed to be accessed to to the marketplace, so in jurisdictions like London, Bermuda, you have to have local presence in order to access those, the capital in those venues we have in our proposal capped the commission amount that those intermediaries can take and we would disclose that and show evidence. that in every document that we put forth in front of this group.
Senator Justin Boyd
Unverified
40:43
And then the second question again, I'm sure we've asked this somewhere, but I'm asking again personally. If
we hire you, what is the likelihood of us being surprised by any government or civil actions against your firm. Uh, currently
Speaker 26
40:53
we are unaware of any that would give rise to that type of matter. Thank you. Thank you, Senator.
Senator Jonathan Dismang
Unverified
41:03
Senator, dismay. I think I just had a couple of questions on slide 19. And then I wanted to spend a little bit more time on slide. 23 on the consolidated program,
thought that went pretty quick, um, but if you can't walk me through a little bit more of what you're looking at on slide 19, what you've done here, and if they're, I couldn't tell if there was a recommendation or what we were saying with this slide. Senator, what page is that? Page 9? That is the leveraging modeling and analytics. It's where they combine the portfolios for convective storms and an earthquake, and we're gonna pull it up on the screen
Speaker 17
41:34
as well, and I think, um, so there wasn't necessarily a recommendation from this page. I think what we would look to do is sit down with the stakeholders to determine. a collaborative approach to going to market, um, certain
clients we have, I have different risk appetites, so some buy to the 1 in 100 year event, somebody buys the one in 250 year event, so by the 1 in 500 year event.
Speaker 24
41:53
So we, we don't want to get that buy-in before we go to market so that we have a, a streamlined approach
Mike Kennicott
Unverified
42:00
to secure those limits. OK. Yeah, I think in this in terms of this specific exhibit, there's, there's two perils that we've modeled and one you'll see at the top is severe convective storms. So right, so we think about tornado activity, um. Um, and so we took your portfolio, ran it through the
RMS model and it suggests that a 250 year return event would, would probably create a 300 and some million dollar loss of 500 years closer to $420 million. So those are data points that help everybody, us, you, carriers understand the inherent risk as well as what's the proper limit to be thinking about for each peril. And so those are the type of tools that we would put forth in front of this group to help educate. as to what type of limit we should be thinking about for the different perils. And so just to base on your
Senator Jonathan Dismang
Unverified
42:46
analysis, a. 5-year probability of
a catastrophic catastrophic storm is 20% you estimate on annual then that's a $22 million loss or the
probabilities of $22 million loss. Correct, yes. OK, that's what I was trying to. On the earthquake is essentially 0. Just based on. I just want to make sure I was following that page. And then the other is just I wanted you to spend a little bit
more time if we did go with option 2. Um, didn't seem like that was a favorable option. We went pretty quick through that one. And so if you
can just walk me through a little bit more of what you're looking, what, what, how you would, I know we kind of covered it later in
a sense, but spend a little bit more time on that page 23? Yeah,
Mike Kennicott
Unverified
43:34
23 option to consolidated program. Thank you. So certainly that, that would be the the the program where we're taking all three individual programs and rolling them into one obviously leveraging the economies of scale, both from a limits perspective, so as we
just saw in the modeling results. The combined programs which suggest a 500 year sort of severe convective storm limit of $400 million whereas right now each of those individual towers are purchasing their own set of limits, and there's a, there's an inefficiency in that per se because you're buying, you know, multiple towers of limits, so we would look to consolidate that, uh, and, and pull that together in one program and whatever underlying funding structure would, you know, exist whether that again is the captive that we understand is being contemplated or whether there's
some. amount that's set aside to pay expected losses up to some, some amount we would then go into the insurance marketplace structure that program above the proposed retained amount and come back to this group with an optimized insurance structure. And I guess My thought is
Senator Jonathan Dismang
Unverified
44:41
I mean if we do launch July 1st, maybe we don't
have perfected information that we're building these off of when we take it to potential insurers, right? I mean that's. We don't have it right now and we're being insured, um, and so you're only being able to utilize the information that they're gonna give you. There's nothing that would prevent us from kind of restructuring that. In the next year and probably there would be a significant learning curve and lots of value created add up. My, my thought is, and I just want to see if you would agree or not, if we do take 2, it's not going to be perfect. And I know it's not going to be perfect, but we also
glean a lot more information than we would have, for instance, if we were working, you know, version 3, or even to some degree, you know, version one because your hands are actually on all of that data at is happening and. And what we're seeing, your engineers then have more time to go out and take a look at roof structures or whatever, would you see that to be a positive scenario for us if we, even if it wasn't perfected in the first year. Yeah, absolutely. I think you know the Option two is gonna
Mike Kennicott
Unverified
45:49
Likely drive the most significant savings in year one, whether that's done as a Effective July 1 or whether that's done as a a 101 or 111 effective date the consolidated program we are confident will drive the most financial savings. Every year that we move forward, we are gleaning more data and that data is only used to enhance the outcomes of the program. We don't allow the markets to basically roll over the same structure. We're going to force them to look at this program differently every single
year. It's not a, you know, put it together one time and it rolls over every year. We forced them to take a look at the program structure differently to drive as much value as we can in the capacity that is provided in the marketplace and that may be a product of we may get more capacity out of London one year than we did Bermuda out of the US, um, and so that's why we, you know, we believe having. partners throughout the globe involved drives efficiency because the market changes
Chair
Unverified
46:47
in those venues, appetite changes over, over the course of time.
Senator Bart Hester
Unverified
46:52
Senator Hester, you recognize. Thank you. So my, my questions are more of like, you wouldn't be in this room if, if you weren't capable of handling this and clearly you're, uh, credentials prove you can handle this well, but I wanna make sure you know us and we know you, but Karen, you guys, you, you said y'all handle at least 12 states. Are you handling, uh, property and casualty? Any of those or any of those
Speaker 37
47:17
captives in the, uh, the state slide, we have
Speaker 15
47:20
20 states that align in overall manages, uh, we
Speaker 37
47:24
have 12 state property programs that are, are property placements, of which our team handles 5 of those,
Senator Bart Hester
Unverified
47:36
any of those captives? No, no, but you can't in the current that that's all right, so you mentioned Oklahoma specifically, like we've got a lot of similarities on, on size and, and risk factors to
Speaker 112
47:45
Oklahoma, you're handling that for them? I just
Senator Bart Hester
Unverified
47:48
heard Oklahoma Oklahoma Municipal, OK, the same as our, same as our municipal league, uh, so, um, on, on the municipality, how long have
y'all been handling Arkansas's municipal league, and do you handle their property side or just risk for
Mike Kennicott
Unverified
48:00
what I'll, we, we handle all lines and that's about
Senator Bart Hester
Unverified
48:03
10+ year relationship, OK. So yeah, you got a, a good, Mike, I'm gonna ask you this last question, um, this is not insurance related, this is you related, uh, like your business. Do you guys
have any, um, very strong advocacy positions on ESG climate change, DEI. Um So certainly we have no
Mike Kennicott
Unverified
48:25
corporate position on climate change other than we do equip our clients with modeling to help them understand. The impact of extreme weather on their communities and their respective assets as well as consult on how to harden those assets and make those communities more resilient to the weather events that we're seeing, um, from a DEI perspective, we are a national
employer. We do have a DEI program currently, um, So I can confirm that, yeah, you
Senator Bart Hester
Unverified
49:00
know, I, I read that I did appreciate you guys' DAI statement on online. It was very much not promoting anyone, but promoting everyone inclusivity and collaboration is what we believe in, sir.
Senator Jonathan Dismang
Unverified
49:12
All right, thank you. Thank you, Senator Representative Brooks you recognize. Thank you, Mr. Chair, over here.
Representative Keith Brooks
Unverified
49:16
Thank you guys for all the work you've put in for this, uh, a couple of questions around effective dates. So you talked about how having an off effective date could be beneficial. Uh, what does that,
what does that benefit look like is, what we're talking about in terms of rate structure are we talking about in terms of capacity ability within the program, you know, understanding what our, our, our, our cat modeling, you know, storms normally hit, but what does that benefit look like?
Speaker 17
49:41
Sure. Um, so certainly, uh, for more tier one named Windstorm coverage, a lot of those folks are beholden to have their programs done before win
Speaker 24
49:47
season. You don't want to be in an instance where there's sort of a run on aggregate capacity in the marketplace and you have an event and then after the event there isn't coverage out there.
So, um, a lot of those clients are
Speaker 17
50:00
tied in, especially from a public entity perspective to somewhere between January 1st and July 1st. I think knowing the landscape of the severe weather in the state. It's not quite as seasonal potentially for the severe convective storm. Risks, so there could be an advantage to kind of having a later in cycle renewal period. Um, I think the biggest hurdle would be sort of internally within the state of Arkansas from a fiscal perspective, making sure that those premiums are, are aligned and ready to go at that time, it doesn't necessarily align with the fiscal year. Um, in addition to
that, we'll also see, you know, if there is a good wind season where there's not many losses, there can be kind of a, a microsoftening, if you will, in the
Speaker 24
50:35
marketplace where carriers are eager to look for a new premium and maybe a little bit more aggressive throughout the course of the year. Yeah,
Mike Kennicott
Unverified
50:41
I think if If, if we get to the end of the year and carriers haven't met their budget, they become a little bit more aggressive. So we, we have seen a lot of times, you know, the 4th quarter of the year, their budgets haven't been met, so they got to figure out a way to make budget and, and they become a little bit more aggressive. So that's certainly a strategy that could be considered. We're not saying
Speaker 125
50:59
it's, you know, the end all, but it's something that we think that should be
Senator Jonathan Dismang
Unverified
51:04
contemplated in a, in a discussion. Follow up, Mr. Chair. Uh, so, and actually I have probably 2 or 3 follow-ups. Um, so relative to the aggregate capacity that we
Representative Keith Brooks
Unverified
51:11
talked about as as we potentially combine multiple programs. Uh, I know that part of these discussions of the last 18 months have have talked through, uh, we have current programs that, that go by, maybe they, they take that primary layer from Lloyd's, uh, and then the other program also takes a primary layer from Lloyd's. Now we're going to have
one program that's doing that so that does that present as any problems relative to the agri capacity. I would
Speaker 17
51:36
actually say it presents an advantage. Um, you're gonna have folks that look at these programs
Speaker 127
51:40
that have the tenure and we're going to be able to leverage them against each other to drive the lowest possible premium
Representative Keith Brooks
Unverified
51:46
for enhanced terms and conditions. And then we when we talk about the boots on the ground, uh, and represented Ladyman hit on this quite a bit, uh, in terms of potential storms, you know, you've got a, uh, February of 2021 freeze where a
school's old pipes burst, you know, in the middle of the night. Uh, so what does that look like for you guys, uh, not having a presence here. Do you have, do you have someone you already contract with right now. Can you name them who they
Senator Jonathan Dismang
Unverified
52:12
are, that are, uh, that would be some that will be present virtually immediately, right?
Mike Kennicott
Unverified
52:17
So, uh, you know, one of the, one of the items that we look as we construct an insurance property insurance program is, we, we want to make sure that there are name loss adjusters. In the program that the carriers recognize as being having the
authority to go out and adjust the loss, um, but also we want to work with you to make sure that we have the right contractors that help with the restoration. So immediately after a storm happens, the best thing that you can do is, is have a a predetermined restoration plan, whether it's again tarping roofs, sucking water out of the building, you know, just putting the envelope protecting it from, you know, further loss, and there's actually a contractual responsibility to do that. There are third party firms, that's not. what our firm does, but we would certainly work with you to, to find the right vendor, whether
that's a Belfor or cotton or a BMS uh cat. There are a number of firms and those, all those firms, um, do have presence in the state of Arkansas. Those costs are covered by the insurance program. Those are not, you know, exponential to you, they're covered under the insurance. So we would
Speaker 21
53:15
want to make sure that that, that process and plan is in place there's no retainer for
Speaker 127
53:19
having those folks on under contract, it's ultimately paid by the insurance carriers and what we find is that the insurance
Speaker 24
53:25
carriers Our, they love that process because we're able to lock in rates ahead of time so that you don't have the same um
Speaker 17
53:34
Potential for demand surge or things like that that could ultimately drive the drive the claim up
Representative Keith Brooks
Unverified
53:39
at the end of the day if it's a widespread issue. And
do those same uh contracted, contracted companies. Do those same people uh Engage with you from the perspective of as you
start the initial, uh, rollout of this program. Obviously, you've got to evaluate a lot of properties. Uh, so we've got hundreds and hundreds if not thousands of properties across the state of varying qualities and ages and
uh repair slash disrepair, and deferred maintenance, all this. Do those people help you figure out, hey, are we having do does our program have the right TIV does do those same people work with you on
Speaker 15
54:17
that or how do, how do you approach that? So from a disaster recovery services perspective, one of our preferred partnerships is with a firm that actually would load the entire statement of values, and they have monitoring 24/7 center, um, pretty amazingly they find out about losses even before the risk manager, maybe even the facility manager knows
the building's on fire. So they send email alerts immediately to all of the contacts that are on the list to let them know that there's been a pipe burst, a fire, some type of hazard that's occurred almost immediately there. able to deploy, um, uh, they, they typically have boots on the ground that can get to that location very, very quickly and mitigate losses. It's such an effective way to approach mitigation because it's immediate and they also have the uh the renovation, if it's a large loss capabilities to
Speaker 17
55:06
claim cost from the get-go. And the only thing I would add to that is part of the pre-loss planning stages, simple things like knowing where the keys are, knowing where the generators are kept, things like that that are
Speaker 24
55:18
vetted out ahead of time for some of the larger exposures, um, save, you know, Hundreds of thousands of dollars at the end of the day, and that's part of the
Representative Keith Brooks
Unverified
55:27
process as well. And how do we handle though the, uh, that other question of, of kind of the, the current, um, takeoff of a program like this. So if we're, especially as we're coming up on a pretty tight time frame, uh,
and, and your job obviously is to ensure that our buildings are insured and how the as, uh, for an appropriate amount for the, the risk that we have as a state. So how would we make sure that we can accomplish all of those things in
Speaker 93
55:49
the time frame that would be needed. Yeah, I think, you know, from our
Mike Kennicott
Unverified
55:53
perspective, it, it's, you know, one. You land on your Captive management partner, your brokerage partner, those stakeholders plus the group that you have empowered in your consultant. They need to get in a room and they really need to work out a very defined timeline and roadmap to get to the
targeted date. It's not, we are one cog in this wheel, but the entire wheel needs to get together and, and put together a road map and a plan that we bring back to this committee
as a suggested timeline. Thank you, Representing our members. We've got about 2 or 3 minutes, Representative Ladyman, you're
Representative Jack Ladyman
Unverified
56:25
recognized. I'll try to ask a short question, but, um, Going back to what Senator Dipang said about page 23, we're talking about the three options. I just wanna make sure I understand because I think this is a very important question
long term, uh, I think I heard you say that if we go with option 2, there's a lot of savings in the first year, but if, if we go with option 3, there, there might be more savings. And what I'm getting at here is, as Keith said, there's a lot of uh buildings out there in different arrays, and, you know, if you maintain a building really well, you can keep an old building going for a long time, but then it won't withstand the wind, right? So you don't know that until you go out and look at
that. So, Option 3, the way I hear this, it would give your people more time to really evaluate, not just going out, but data and everything. Uh, so the savings might be greater in option 3 than 2, but we might have to take some short
Mike Kennicott
Unverified
57:28
term pains, I think 3 gives more runway to refine the data that's ultimately presented to the markets and provides more runway to be fair to the other sort of, um,
Organizations that are involved in helping create the loss funding mechanism as well. I mean, obviously there's, like I said, there's actuarial studies that need to be done. There's enabling legislation. There's, um, you know, All sorts of things that have to be done around that but specific to the insurance transaction, you know, it would allow us to kind of do a deeper dive on what type of losses has the portfolio incurred over the course of time. It helps us to have more time to create the right underlying policy language that's going to be issued to each of the agencies. I'll give
you an example. So we understand, you know, certainly some of the schools can't have, can have some age on them and some of the roofs may have sort of run their, their normal life expectancy. and they aren't quite as resilient to a hailstorm. So the question becomes do we want to have restrictive language. It says if that roof is over 10 amount of age and it's run its life, do we want the insurance to pay for a full replacement of that, or do we want to pay for a partial actual cash value. So those are the type of activities
that we would look to undertake to say, here are the losses, here are the ways that we can put some guardrails to protect the insurance from being a maintenance policy, if you will. Um, as well as are there time limitations. We don't want to be paying claims that are 5 years old. A property claim you should know about it in the same year. But unfortunately, we see claims that are 2 and 3 and 4 years old that emerge because people haven't gone on the roofs to take a look to see what's happened after an event, so do we want to put time limitations on, on, on some of this. So those are the type of discussions that we would look to have with the stakeholders to
Chair
Unverified
59:13
figure out how do we want to shape the underlying coverage that's ultimately gonna be reinsured by the insurance market. And I
Speaker 24
59:19
just to add on to that, I think the, the lowest hanging fruit is the consolidated program. I think that's where we're gonna, where we're gonna achieve the greatest economies of scale and thus lower premium, whether that is a 71 day or a 10-1 day. We're talking a little bit smaller scale in terms of savings. I think the consolidated program is certainly the, the most important part. All right, members, any other questions?
We have, we got a few members that are uh With this virtually online. I haven't heard from them, so I guess no other questions. Thank you for your presentation, and we'll be in touch. Members are gonna take a few minutes to reset the room and get the next group up for their presentation.
Our mayors we go and grab a seat. We're gonna call this meeting back to
order. And next on the presentation list is Aon. Did I say that right? All right, if you would, you could start wherever you want to just introduce yourself for the record and then you can begin your presentation. There Yes, uh,
Speaker 147
1:06:29
Todd Denton, managing director of the local Aon office here in Little Rock. Uh, my name
Mark Sulli
Unverified
1:06:35
is Mark Sulli. I'm the director of ANS National Public Sector Practice out of Nashville.
Chair
Unverified
1:06:44
Pull that microphone down for you. I know it's, there you
Morgan Mulheron
Unverified
1:06:48
go. Yeah. My name is Morgan Mulheron. I'm a senior property placement broker based out of Atlanta, Georgia. Good morning.
Speaker 153
1:06:54
Brady, uh, senior account executive here in Little Rock for the Britain like the country. Alright, go right ahead. I think first First thing we want to talk about is um we were asked a question yesterday about kind of our team structure and how it worked specifically if you know something goes wrong, who do you pick up the phone and call? Um,
didn't do a great, I believe you asked me that question, didn't do a great job of answering it, so I just want to circle back. So what we have here in front of you is kind of the team chart of how the, how kind of the service structure with Aon works. Todd and I are your local folks here. Offices down on 3rd Street. Um, you know, anything goes wrong sideways, we're kind of the tip of the spear. There's a huge team behind helping the state of Arkansas with all the individual resources and all the, the specific things that they're very good at. Our job is really to coordinate that and make sure that you're getting the resources you need and we're
delivering that 60,000 employee bench we have to what you guys specifically are required, so I just kind of wanted to put a visualization of the team chart in front of you and so you can kind of see that, sorry, I didn't quite answer the
Mark Sulli
Unverified
1:08:04
question yesterday very well. I think this is, OK, yes, um, so one of the things I wanted to bring up, uh, you'll see on page 5 is why
Speaker 157
1:08:11
Aon, um, having to do, you know, we know that you have
your 71 renewal, um, and that is, uh, looking at the timing and the execution for that renewal is something that we have. A lot of practice doing um in terms of what you're looking to do and accomplish with your current program. We have a lot of experience, especially out of the Nashville office and through the public entity practice with programs such as yours. Uh, we work closely with the state of Tennessee to help them develop their own captive. Um, it was uh a very, very, uh, um,
You know, detailed process, um, and had to be very well coordinated, and I just want to make sure that that's something that you understand that we have experienced. We've done it before. It was a first time it was ever done, uh, and it was uh a very good team effort with our captive uh management group as well. Um, we look at the project costs that we're looking for you, we, we see that we could save upwards of 20% of what you're doing right now, um and. Considering what you are
currently paying that we see being a large savings for not just the state but the taxpayers. Um, we have over 1000 clients of our public entity practice that we service such as states, municipalities, um, and then one thing I want to I think separates us and uh differentiates us from our competitors and our our uh other firms is our global market, uh, our reach. We have London and Bermuda placements. Oh, sorry,
facilities so that we are able to eliminate uh and lower frictional costs so that we don't have to go through intermediaries that we, um, that would need for your, for your large placements. Um, if you can see that little picture right there, those are current states that we work with, um, and there are some that are going to be added to that recently, um, but we, uh, we work with states across the country. We play 70 to 800 million, uh, in premium dollars annually. We
are the largest property broking firm and we place the most, uh, not just domestically but also through London, um, and that allows us to have a lot of leverage, uh, with the markets, um, and I know that Morgan will go ahead and some more detail with that, um, we, so one of the things that Britt was saying is like, so you'll see here on the team, like the national public sector practice, um. Todd and Britain obviously are gonna be your, your point people, you know, when you need
something, they're your go to, um, but you're gonna be supported by the global reach of Aon. And so with that is our. Our expertise not just the people who are on this, not only like Tricia Piccinini and, you know, Colin and Marcus, like these not only are they specific experts in their field on that brokerage like that specific like Morgan only touches property, but not just that, with public entity.
Speaker 158
1:11:28
So that's where that is their expertise. And I want to kick it
over to Morgan real quick. Awesome thanks Mark. Ma'am, hang on. Go ahead and push the button on your, there you go, and then pull
Speaker 151
1:11:40
that mic closer to you so we can hear you. There you go start by addressing what we understand to be one of your main concerns, and that is timing for your 7-1 renewal. Regardless of how you choose to transfer your risk for this upcoming renewal, we have a plan in place and we are ready to hit the ground running. timing will not be an issue with this team.
Speaker 162
1:11:58
We would like to call your attention to number 4 on Slide 8. This is the decision regarding if a captive will be utilized or not for the renewal. We will need that decision by 5-1 in order to get into the marketplace around 60 days before your renewal. And give our markets directive on how the program's going to be structured for the renewal. So we're gonna break up the property discussion in 3 buckets. First, we're going to start looking at your current
program and discuss opportunities for improvement. So we understand you currently spend a lot of money on property insurance, roughly $70 million. And there are many different ways to structure your program, and we believe regardless of how you choose to transfer your risk, there are cost savings. The 3 main ways that we look at your program and see ways to save money. Are the strong marketplace that we are currently in. I know the last couple of years in the property marketplace have been a bloodbath for clients.
It's been very difficult on the broker side to consistently deliver rate increases. However, we are in a marketplace that is seeing softening rates and a very, and at a very aggressive pace. We will leverage healthy competition between our carriers to drive down your rate. All of our carriers have growth goals for the upcoming year and all of us are continuing to be asked to provide more capacity to those carriers. So if they did 5% last year on your program, they're saying, hey, I want to do 10%. I want to do
15%. So this is helping us complete complete clients programs, but also drive down the rate increases. We also believe that utilizing optimal market access to reduce frictional cost, there is room for improvement in this area. A large portion of your markets are being accessed in the ENS space, which adds a frictional cost. We can go direct to many of the markets that are currently on your program and reduce the need to pay a wholesale commission. Finally, we believe in a thing
called changing the box. I have said this my entire career. A lot of people look at me funny when I say it, but as a broker to remove the incumbent bias. I like to push carriers out of their comfort zone. And what I mean by that is they're boxed in the program. So if we look at hats. Let's slide 11. So a box when I refer to a box, it's It's one of these carriers in each of these boxes, so that's where they participate in your program. So if they are on a primary 50, I'll say, hey, I want you to
look at a primary 100. Doing so forces them to look at your risk and, in a new light and in a different realm. And longer stretches of capacity tend to be more priced aggressively. If you have longer stretches of capacity, let's say they do 100, 150, you don't have to buy as much excess capacity and the rate online on those longer stretches is more beneficial to the state. So we wanna make sure that when push comes to shove, your
Speaker 151
1:15:03
coverage is tight, it is robust, and that you're not paying a lot of property premium for no reason.
Speaker 162
1:15:08
We want the coverage to be there to pay the claims. So with your current program, um, we received 2 out of the 3 program policies and we reviewed those in depth. Number 1 and 2 on this slide do come with a cost. However, Increasing your flood limits and your earth movement limits can be done in the DIC marketplace. As that market is very soft right now. So we can purchase let's say in in your traditional property insurance program.
You have 100 million of flood. We can go to the DIC market and say, hey, we want a 100 acts of 100 to get you a 200 million limit, but that will be a separate place policy. We can also put them into your property program. We just run into more issues of carriers' capacity on a cap perspective. Number 3, there is a clause in your, in your program right now, um, a maximum amount payable clause. You have an AIG based form, which is a good form. However, these clauses can restrict
coverage in the event of a loss. They are tying your or your recovery in the event of a claim to an agreed value or a time. And date of when you reported your statement of values. I know you all update your values very regularly, however, sometimes carriers are slow at processing those updates, unfortunately. And so if you're reporting 100 million on 71, you have a claim that happens on 101. Your building is now higher. You could be tied to that 100 million in value. So we
would remove this and ask for carriers to provide replacement costs. Coverage, which is predominantly what most of our accounts have. The remainder of the supplements on this page we'd look to increase to provide a more robust program to the state. And most of these can be done for little. So on slide 11, now we'll look at how we review new clients, create new programs, or restructure existing programs.
First, we'll start by determining what your optimal program limit is and what that optimal program looks like. Every single program that's optimal is different from another client. We want to make sure that we are creating your program that fits your risk strategy and your tolerance. First we're gonna look at your loss limit. We determine this by looking at a slew of analytics. So we want to understand your value aggregation to your largest areas of exposure, the closeness and proximity of those areas.
Speaker 151
1:17:36
So if you have an area that is
heavily exposed to severe convective storm or hail, we will take that into account when reviewing these large aggregation of values. We also want to make sure we understand yourA modeling. So we have in-house cat modeling that tells us, hey, based on this SOV, we recommend 100 million, 200 million, 500 million of flood coverage or earth movement coverage, and we want to make sure that we are tailoring your program to protect your assets when the claim does happen. So once we have that program designed structure laid out.
Then we want to determine what is the best layer structure. And the layers being, if you look on this example, schematic. You'll see there's various different boxes, and each layer, so the primary layers is the one that's down low and then you have some excess layers as we start to build up the tower. And so every single one of those layers is is thought of, it's determined based on that client's. Risk and what your exposure to certain perils are. We will look
Speaker 162
1:18:39
at, um, the average annual loss and the probable
maximum loss of each of these layers to make sure we are breaking up your program to utilize carriers' capacity in the best possible way. Some carriers like to be in the primary, some like the access. So we want to make sure that we're enticing as many carriers as possible. Once we have our program designed in our layer structuring, then we'll go in to review the AALS or the average annual loss by layer. This helps us guide decisions and increasing your attentions and if it makes sense or not. We want to make sure since we, we wanna make sure if we are
recommending an increase in your retention, we aren't just erroneously throwing a number at a wall and saying, let's see if it sticks. We want to make sure that you see the analytics behind it, you see the return on the investment that we're not just trying to test this out in the marketplace. So once all of this is done and we have our program strategy and our design, we then execute on our global market strategy and our strategy is ready to be executed with or without a captive. So on this next page, this is a
um high level overview of the process a broker goes through for every single renewal cycle. So whether I've had a client for 5 years or a year. I do this every single year to make sure I understand the risk I'm about to place into the marketplace, but also I'm providing my client with the best possible program. We understand that programs can change year every year. So this is why this is an annual phase one is the, is the phase where we like to understand and analyze every single thing about your account. We want to look at all the data. We want to look at your flood zones, your value aggregation, what your cat limit
Speaker 151
1:20:17
should be, we want to review your loss history, your retentions. This is also where we review your coverage terms and conditions and suggest any increases or additional items that may not be covered in your program. We essentially want to pre- underwrite your account before it goes to market. We want to know the ins and outs about every single thing that an underwriter may ask us in the market. Phase two, we want to understand your risk purchasing strategy and your risk tolerance. Every client's risk purchasing strategy and tolerance is
different, and it can change in market cycles. We saw a lot of clients change their market, um, their risk tolerance in the hard market. And we're seeing that softening a little bit in the softening market. Then we design your program as we mentioned on the last slide. So phase 3 is our go to market strategy. This is the phase where we send out your submissions, we start the negotiations. We like to have market meetings, uh, and the program starts to come together. So when I mentioned market meetings, we believe that no one tells their story better than the client. So we like to put
you in front of the client and you talk about your risk, and it, it's amazing how comfortable it makes an underwriter with a risk for if they've met with the client versus if they have not. And it goes a long way in the London marketplace. This is also where we start to begin. Where we began to provide you with options for the best structure for your property program.
Speaker 162
1:21:41
So to continue expanding on our go to market strategy. There is one center point for capacity, and that is your US property broker.
And by having one central quarterback, there's a consistent message to the global marketplace and we are able to create healthy competition by utilizing our global broking centers in London and Bermuda. The US retail broker will access the ENS marketplace and the reinsurers stateside. The reason we're able to create healthy competition is because We in the US are getting calls from our London broking Center, from our Bermuda Broking Center, from our ENS wholesaler from our
reinsurer to our direct market saying, hey, I want to get on that program. How can I get on that program? So you create this healthy tension where you start to push and pull. And once you have overlined a program. So when I say overlines or oversubscribed. We only need to get to 100% to complete your property program. Most of our accounts in the marketplace right now, we are seeing 150% subscribe
Speaker 151
1:22:43
to 200%, um, even on loss sensitive accounts. So that means that carriers have the growth goals, they want to get on accounts,
they want to increase their participation. And so by doing this, if we have 150%, there's 50% of capacity that I have to get rid of. And so with doing that, I go back to this market and say, hey, your price is high. They dropped their price, then you start and you say, hey, your price is high, drop your price. And with that, you are then able to drive down the rate increases by being oversubscribed and creating that healthy competition. One of the things
Speaker 162
1:23:13
I do want to make sure I mention on this slide is Aon client treaty.
A client treaty is automatic capacity that attaches to lending capacity. So anything that is placed in the London marketplace through our global broking center. Attaches to this automatically. So it's basically capacity that we do not have to negotiate. It's also at a 1.5% dividend or discount. So if they attach to a London carrier who's providing a $5 million layer price. Theirs will be at a 1.5% discount of the slip that they're attaching to. So it's an automatic savings for the client.
Now we'll finish, um, the property discussion with a few examples of our analytics. This is not all that we have. These are just two that a broker uses on a daily basis to review property accounts. So this first slide and we're using APSIT as, um, an example on the next two slides. Impact on demand are tools that we use to review value aggregation. The image on the left shows Little Rock and a 27 mile radius. So within that 27 mile radius on your statement of
values, you have 738 million of values exposed. So if we drill down even further into that radius to a 1.5 miles, we see that you have 347 million of values exposed. And it's a little difficult to see on this, on this picture, but there are little pinpoints of your locations. So when I see this as a broker, I think, what are they exposed to in this? Because if you have 347 million exposed. In Little Rock, Arkansas, my main concern would be hail.
Or possibly a flood. So what's the chances that you have that damage. That then you have a massive loss. So we review that we're also looking at this comparative to the proximity of other large locations because the chances of you having a massive fire loss in a five-mile radius at multiple locations. It's pretty rare, but the chance of having a tornado or hail or maybe a flood, there is a higher chance for that. Once we've done our impact on demand review and looked at the value aggregation. We also like
to check it against our modeling. So the, the chart shown below is a modeling output from property risk analyzer, which is our modeling platform. For your severe convective storm exposure. On the left-hand side, those are what we use to determine limits. And then the average annual loss is what a lot of carriers use to rate from a premium perspective. This is another example of one of our analytical tools that we use daily. This is property risk
analyzer. It can review value aggregations. Um, I would say I predominantly use it for modeling, but you also are able to use the aggregation tool. So on the top, the left-hand image shows the darker blue are the higher value of aggregations. If we zoom down even further into North Little Rock, we will see that there's one location of 255 million, really contributing to a massive aggregation in that area. Obviously, it starts. To add up, but that's the big pain point that we would want to know before we send our submission out. Certain carriers
Speaker 151
1:26:31
might have an issue with larger TIVs and one of, want to attach in your program, access of those big locations. So we want to know that. And then on the very bottom, this is another output from property risk analyzer. This is the all perils. So all perils includes flood, name one storm, earth movement, severe convective storm, wildfire. And terrorism. So that is the all perils results for this. So we believe that we have best in class data
analytics, and we use them on every single one of our accounts. All of your data is loaded into our system. We've done a lot of the pre-underwriting. So if we're awarded your broker, we would be able to update the information in these systems very quickly and start having conversations within less than a week. All this to say, we have a plan in place, we can hit the ground running as if we were awarded your broker, and we can guarantee you that you will have
Speaker 157
1:27:36
property coverage in place on 71. Thank you, Morgan. Um, one of the things I wanted to just reiterate, uh, with all those great details that Morgan has just explained the reason why analytics is so important is that going to the markets and telling your story, and we, Aon has invested millions and millions on these analytics because You're basically going to these markets with data saying this is why you should be on our program.
And what Morgan said, using those analytics has allowed us to be have our clients be oversubscribed. Who doesn't want to go to the market and say, hey, you know, we don't necessarily need you. You need us. And so the state of Arkansas is gonna be able to go to those markets, or actually what we do is we have the markets come to you and they get to compete for your program, you know, it's not the same as the hard market was a tough time, but that forced a lot of necessary um
analytics to and like going through, um, your losses, uh, making sure that the values are accurate, um, and it has allowed us to have amazing success for our clients and um that's gonna bring us to this too, is that, um. When we're going to these markets and stuff, we will always provide Aon does this no matter what. I know in RFPs they say, hey, you know, you have to provide some, you know, like where we want to see the flow of the money, like this is taxpayer money. I used to be a school
teacher. I know the savings of a dollar where that goes, you know, so we want to save, you know, have that be completely full and transparent, um, and that's something that we do no matter what. When we go to these markets, you will see, you know, we will provide 100% transparency. uh with a disclosure report saying here's the markets, here's what the commissions are. Here's, uh, and then we can negotiate and do everything with you. Everything is done in advance, so you won't find out after the fact, we will discuss it with you and say, hey, here's
what we have, here's the best price, and here's what, and here's how we accessed it. So when we use uh those intermediaries, we will try to do our best to not use them if we don't need to. And that's what uh Morgan was saying is that having, you know, one using A on client treaty, you're, we are able to use our London facility to help negotiate and. Um, say sorry to uh get the best
savings on that, um, but fully transparent is something that we do. It's, it's, it's, we consider it best practices, and it's something that I believe, especially working with public entities, we, we are very proud that we do this, um, so that's, um. We look at our compensation approach. Obviously there's like the flat fee, um, we are able to then go ahead and net that out, uh, when we go and access some of the other markets having to use intermediaries and when there's commissions that are necessary, um, using the domestic domestic
intermediaries, um, we will go to those, uh, directly or through, um, we will access the markets through them if we need to. Most of the time we do not need to, uh, only if it benefits the state. Um, and then the international, our London and Bermuda allows us to get, uh, you know, like Morgan had pointed out, like they're gonna call us and say, hey, we want to be on that program. How do we get there? Um But, uh, for the most part, like that's just something I think that is really, really important, especially nowadays,
I think it's important that transparency and being fully uh Um, a partner with the state is important. Um, the other thing I want to say is we don't look at ourselves as like, yes, we're an insurance broker. Yeah, every we're there's a lot of really good insurance brokers, but that's not what we do. We, this is a holistic program. It's looking at from the get-go, looking in there, looking at your analytics, where can we help you so that the risk, maybe we can soften it so it doesn't have to be as high of a risk.
There, there are other ways of doing that, um, and. We see ourselves as a partner, not just on insurance, it's, you know, because insurance again. Anyone can place shrines. We're looking to do it from a holistic approach and be your partner and your risk management. Like we're, we're, we're part of your risk management program if you choose, you know, Aon. Um, I wanna go ahead and give this over to you all. I think I'm not sure how much time.
We have left 5, so I wanted to
give some time for Q and A. All right, thank you for that presentation, Representative
Representative Jack Ladyman
Unverified
1:32:25
Ladyman, you recognize? Thank you, Mr. Chairman over here, um, when I was looking at, uh, I think you referred to this on page 10, Earth Movements and, and throughout the report, but If, you know, if I'm looking at other states, costs and others of other in other states of property protection. Uh,
This may be outside of your presentation here, but You know, here in Arkansas, hurricane would not be an issue, right? Forest fires is not a big issue for us. Terrorism is not like it would be in, say, New York City. Um, but we do have tornadoes. Floods, as you referred to, and we have one of the largest earthquake faults in the nation. So When you look at that, I mean, can we compare? Uh, are some risk more expensive
than others. That's what I'm asking really. You know, would we be more at risk than a, than say South Carolina where they have hurricane maybe
Speaker 151
1:33:28
forest fires. So I think that it's hard to do an apples to apples comparison just because if you do compare your state yourself to the state of South Carolina. Your risk profile is so different. In South Carolina has had a lot more recent impacts from hurricanes, then you all have, but you have had claims. So I think that we, we as your
broker analyze what is the best possible protection for you, knowing what we know. And those are the perils that you're exposed here, but for us to take your, your program and compare it to the state of Texas. It's just, it's, it's very hard. It's apples and oranges, but we will give you a very detailed report of, hey, here's what we're seeing with our analytics. And here's where we see some room to improve because your Earth movement exposure is a lot larger than you're aware of, or your flood
exposure is a lot larger than you're aware of. And we'll provide you all those analytics. I mean, we can even do a live walkthrough of the process of how we go about that, but I think it's a little difficult to compare apples to oranges just because the exposure
Representative Jack Ladyman
Unverified
1:34:36
is so different. understand one of the question, uh, So When you look at, when you're trying to analyze the risk, and I know the data and analytics are good for that, but that doesn't really see the boots on the ground, you know, out. We,
we've got a lot of facilities across the state, different conditions, uh, uh, different construction. So how do you try to analyze that, I mean, do you have your in-house uh engineers that do that, or do you hire other people? How does that work? So we do
Speaker 151
1:35:07
have an in-house engineering offering where they can come out and do boots on the ground inspections. They can provide property condition reports and those also go into the analysis of your account because, I mean, from, from my
perspective with how many locations you have, there's, you can't know every single thing about every single location. I think there's 20,000 lines or more on the combined schedule. So it's just very difficult for that, but like, yes, we do have that offering and we would be happy to provide that. So in a case like that where you got a lot of
Representative Jack Ladyman
Unverified
1:35:39
different sites, would you do a sampling like a quality 10% sampling or something? Do you do something like that? So we can, um,
Speaker 151
1:35:47
we currently have a client who is going through that
process, um, and they have a massive schedule, and they're sampling, I believe it's 20% because most of their locations are similar construction quality build, all of that. And so they're going through that and then looking at the portfolio and seeing where can we provide? OK, this location is frame construction. We sampled this location, but we didn't sample location number 600. That's also frame location, but we're going to assume it's very similar just from a, a construction perspective so are you able to find out or take
Representative Jack Ladyman
Unverified
1:36:23
into consideration, say the earthquake fault that we have in eastern Arkansas. And the city I'm from years ago, we passed um construction standards to build earthquake resistant. And so our school, our school was leveled. It's built that way now. Uh, we have a university there. So do you take that into consideration when you're measuring the risks of those buildings would withstand earthquake better than if you didn't have those standards. We do. And any information that
Speaker 151
1:36:55
is provided to us, engineering reports, um, seismic reports, anything that you have done to essentially retrofit this building for better protection. We love to review and we provide that to the markets. We say, hey, these are the, everything that the state has done. We want you to view these locations differently because they have spent a lot of money to uplift their facilities and protect them in the event of a major claim. Alright, thank you. Thank you, Representative Senator Boyd.
Senator Justin Boyd
Unverified
1:37:27
Thank you, Mr. Chair. Uh, I've got 3 questions for you and I'm gonna start with the one that seems to be unique to you so far. Um, so like all interviews, it's a two-way interview, you're interviewing us as much as we're, you know, interviewing you. So Arkansas has multiple initiatives which
focus on securing America first. Would our America first attitude create any problems for you with your global presence. No, I wouldn't.
OK. Uh, the second thing is, and
this is a something I plan to ask everybody, uh, in some form of fact fashion. I appreciate your price transparency initiative. That's, that's important to me, but again, what kind of assurances because when we write contracts, we can have money coming in from in from other ways or whatever. And so I have kind of a healthcare space concern and there are a lot of things that go on there. So what assurances can you give me that you will always be acting, or you will act at all times in the best interest of the Arkansas taxpayers.
Speaker 189
1:38:29
As opposed to somebody else. I, I understand. Good question. Um,
Speaker 157
1:38:34
this is something that is global throughout Aon. This isn't just us here, you know, or the local, you know, you know, the, uh, the Little Rock office like this is something that an initiative that Aon does, and that's we did this, the instituted this on purpose, you know, because we want to have that transparency. We always do, and that's what I was saying is sometimes in like these RFPs, they there's a requirement or it's not in there, we do. anyway,
whether it's asked of us or not, you're going to get that in the renewal, no matter what, you could, you could throw it away if you don't want to see it, that's fine. We
Speaker 147
1:39:11
always do that. OK. And then finally one more, one more comment on that. We talked about intermediary several different times, and I hope, I'm not sure if everybody understands what that is, but it's just a, it's another organization that might represent an insurance carrier or, you know, uh, reinsure or whatever. We'll actually disclose if we can find out how much commission they're actually getting on the
deal as well. So there's a lot of layers sometimes when you, as you looked at that box, a lot of different people involved and so we'll disclose everything we can find out about compensation and through top to bottom.
Senator Justin Boyd
Unverified
1:39:45
Uh, I definitely appreciate that. Uh, it's a complex system. It sounds simple, but there's lots of people involved in in uh dollar here adds up, right? Uh, and then finally, if we hire you, what is the likelihood of us being surprised by any government or civil actions against your firm.
Speaker 189
1:40:04
I don't, I don't believe that there would be any. I, I don't, I don't see that instance that that would be. Uh, come up.
I haven't seen any. Thank you, Senator,
Senator Bart Hester
Unverified
1:40:17
Senator Hester, you recognized. Thank you. Morgan, you guys are clearly, uh, one of the biggest, biggest operators in the space, uh, like, I'm gonna ask earlier a random, uh, You've got All these carriers, right? What are the chances that like 80% of all y'all's business goes to 5%
of the carriers. Does that, do you, you understand
Speaker 151
1:40:38
what I'm trying to get at there? OK business to 5 carriers. Yes, I understand that. Um, so I think that if you look at this program structure and I have a couple of your schematics printed off. There's a whole lot of carriers on this. This program with the limits you're purchasing doesn't get done with that. And my philosophy as a broker and It, it paid off in the hard market of consistently adding
more and more carriers to programs. I believe that I, I have relationships that all of the, the carriers, but I don't believe that it's in your best interest to have 5 carriers on your program. Could you get it done? Probably. But the problem is, is when one carrier pulls out, you're now replacing 2030, 40% of your program. And we saw in the hard market when that happened for the the clients who had a smaller number of carriers on their program. That their costs then shot through the roof because you're
replacing a big chunk of capacity. So I love to have multiple carriers on your program from a protection strategy and it balances out your cost a lot more efficiently than having to replace half of your program potentially, um, but no, I would say that every single program I place. 20 plus carriers, uh, so you guys
Senator Bart Hester
Unverified
1:41:55
mentioned the state of Tennessee, you know, it's important to me that. You know us and we know you like, so are, are you, are you the brokers for Tennessee or the
Speaker 157
1:42:09
captive manager or what are you with, with Tennessee? Uh, well, I I actually worked with the whole that whole thing, um, as I said, I, yeah, I'm. relocated to Nashville to to help with that whole program, um. we're both, we are both, uh, we, we operate a little bit like, like there's a separate uh like a separate team for the captive because they have to be doing that, uh, but we work all in tandem, but we are the broker as well, um, and because that was
implemented, I think it was 2022 is when they, when they did that, um, but yeah, we, we, we do everything it it was a, it was a daunting task, but at the end of the day, it saved millions year over
Senator Bart Hester
Unverified
1:42:52
year for the state's great. And I know you're locating here at Arkansas. You already have a team here in Arkansas, um, are you, are you handling any, uh, brokerage sides of captives in Arkansas. A
Speaker 153
1:43:03
lot of our clients have various different risk strategy methods that employ captives, RRGs, traditional insurance, uh, you know, it, it really comes
down to the industry, the client, what their risk profile looks like. So yes, much more of a generalist, have my hands kind of in all of this. But again, my main role is kind of tip of the sphere, right, is, is under identifying what the need is and then if it's a property engaging the property folks if it's a captive need, engaging the captive people and bringing the experts to the table. I'm not going to sit in front of you and pretend to be an expert. That's how we all. get in trouble and it's not gonna, it's not gonna work. I'm not smart enough to do it. So really that's, that's what my role is to facilitate AO. I mean, Aeon's a global company,
as we've said many, many times, but we're right down the street and that's kind of the bridge we're trying to create. There is to to bring that global resource to people that need it and you know, sat satisfy those needs. Thank you.
Senator Bart Hester
Unverified
1:43:56
Um, so, I, I, I got two more questions. I, I go back to Morgan, uh, so I, I've been hearing,
uh, Like 4 months ago, I didn't understand all insurance ran through London, OK, right? So like, when you guys say you're able to go to London, like, uh, what makes you different than the next person able to go to
London or in Bermuda. I've been hearing that lately, like probably two different markets. I'm not embarrassed to say I didn't
know that, right? So like what is What sets you apart with your ability to go
Speaker 151
1:44:26
to London and, and secure the best rates. So what sets us apart we are the from a property perspective, we are the largest property placement premium broker. In the world. So we have the volume to where we can, when we go to London and our London broker sits down with Someone at Lloyd's of London and
says, hey, I want to talk to you about the state of Arkansas. The name carries weight because of the premium put into the marketplace. And that's how we're able to get
Speaker 168
1:44:53
the best possible results for our clients. Good. Uh, can,
Speaker 207
1:44:58
can I add one thing to that as well? Um, particularly with London. It's, it's, it matters to
Speaker 153
1:45:03
have boots on the ground. Aon has a massive office there. We have a lot of colleagues that are in the London marketplace day in and day out, and not all brokers can say that. There are others that can, but Es by far got the
biggest footprint in in that space representing domestic US clients getting that London capacity and building out these programs in the most competitive price. Um. OK,
Senator Bart Hester
Unverified
1:45:26
so Todd, this is gonna be, this is like not, not necessarily insurance related like
some of uh Senator Boyd's questions, but, uh, since you're the, the, the local team leader like, um, is there, is there any, anything that we would be surprised with, uh, as far as, uh.
Public ESG or ESG positions, DEI positions, uh. That might conflict with uh with the current positions Arkansas has. To
Speaker 210
1:45:54
my, to my knowledge, no. Um, you know, what, I think especially
Speaker 147
1:45:58
this office, uh, in Little Rock, um, you probably know some of the people that that worked there, um, great group of people and um I think represent the values of the state of Arkansas. Thank you. Thank you, Senator,
Senator Dima, you recognized. I just had
Senator Jonathan Dismang
Unverified
1:46:18
a question on page 15, and this is where you kind of use your analytics to do.
Just a A review of one of the programs that we have right now. Did y'all do that on a consolidated level? Did I miss that in
the deal or do you have that? Uh, it is not
Speaker 213
1:46:33
in the presentation but we have, we have done that. Just out of
Senator Jonathan Dismang
Unverified
1:46:37
curiosity, can you get on your 500 year event and your 250 year event, what did you note as the ground up loss for the consolidated.
Senator Jonathan Dismang
Unverified
1:46:52
if you consolidated and like so you have your 2 10s and the 500 year event, you know, for the, the particular program that you have on 15, you have 193 million round up laws. On the consulted, what did you provide the value for there? So we
Speaker 151
1:47:08
modeled the consolidated program, um, on a combined basis. With, um, so we, I pulled out specifically the New Madrid earthquake and the flood. So we
modeled up to a $200 million limit. Reason being is we wanted to see is that if we set at 200 million, do you all blow through the limit, um, And for flood, you do. So that tells me as a property broker, we probably need a higher flood limit. um, but I don't, I don't have in front of me the AALs, but I do have some limit analysis that I've done, but should we move forward, we can definitely provide that to you and have conversations. All right, perfect. Thank you. Thank you,
Chair
Unverified
1:47:47
Senator Representative Brooks you recognize. Thank you, Mr. Chair.
Representative Keith Brooks
Unverified
1:47:50
Just a couple of questions. I think if I could clip a meme of the of yesterday and today, it's gonna be boots on the ground that's our favorite terminology to use. So, uh, continue with the theme of boots on the ground. So I guess, two of you on the ends, Mr. uh, Brady and Mr. Denton, uh, so you're our local, uh, representation. So what experience do, do you have personally with regard to a large public entities like this. Obviously, Mr. Ray, you said you have a lot of generalists, but what, what does that look like for the one? who we would be counting on here locally. Yeah, I mean, in terms of public
Speaker 221
1:48:22
entity space, um, before when I kind of started
Speaker 153
1:48:25
my tenure with Aon, I was heavily involved with the state of Oregon and worked on that quite a bit, um, not directly, I mean, to To your point, a different, different risk profile for sure, um, different things going on there, but to have some experience on the public entity side. But again, as I will fall on the sword, I am a generalist. I, I do look after multiple different kinds of clients, um, Little Rock, our, our main focus is transportation logistics because that's obviously a major industry here in Arkansas. Um, so we have quite a bit of that
and you know, our, our client spread is is nationwide. So it's just, it's. We're here, we're servicing Arkansas-based clients, but we're also servicing clients. Yeah, just to add
Speaker 147
1:49:04
on there, you know, I think that's the beauty of Aon, um, uh, early in my career, I worked for a smaller broker. And we were not a specialist in anything, and I got the Aon in uh 25 years ago and realized that I didn't really know a whole lot about anything.
Um, but I was good at marshaling resources. And what's great about Aon is we have specialists in almost any area you can imagine, public entity, captive, cyber liability, uh, you know, auto liability, um, just everything you can imagine that's a risk or a peril in the in the world, and we are able to go. and find not just one person, but typically um a pretty substantial team and every one of those areas and bring them to the table. And, and then to another job of
ours is to not only find that team, but, but to find the best people on that team. And one of the things that we did here today is that we brought a team here that actually put together and works on the state of Tennessee program that you guys may want to mimic. So, it's not like they'll be doing it for the first time, where in some cases, other
Senator Jonathan Dismang
Unverified
1:50:17
people will. Follow up, uh, a little bit
Representative Keith Brooks
Unverified
1:50:20
more nuanced gets kind of specific question. Some of the conversations of the last 18 months have, uh, revolved
around ensuring that we're at the right, uh, total insured value that that as property values have increased significantly, uh, especially the last 5 years. Uh, what is the, the regular cycle for our schools, particularly, uh
Look at their, um, their risk. Are, are we actually insuring the risk for what um replacement costs or whatever, whatever values we determine. So, uh, how would you approach that, you know, looking at, I met with a superintendent last Friday, and she was talking about new construction and her, her budget
of that new construction 4 years ago when they had the architectural drawings and got everything approved, uh, doesn't even exist in the same realm anymore. So what would you do to ensure that our properties are, that we're
Speaker 151
1:51:17
protecting our risk. The way that we need to be. So property evaluations have been a very hot topic. In the marketplace over the last 34 years, especially in 2022, 2023. if clients were not reviewing
their values. It was, I mean, we, we saw clients being penalized. Oh, you didn't trend your values. It, it was, it was a mess. um, and we as your broker, we like to stay ahead of it. So in 2023, probably during the height of inflation is when we saw the market was hardening, but inflation was also very high. We've seen that tamper off. We're seeing 1 to 2% on value trends. So from a broker perspective without having, if you're doing appraisals on a
4-year rotating period, we will use those updated appraisal values. to make sure you have the adequate insurance for those specific locations. If you're off cycle of those 4 years for a location, we would recommend a trend based on industry data. We predominantly rely on two data sources, um, FM and Zurich puts out a great, uh, cost analysis of what they're seeing in the world. They have for the US, for Canada, for Europe, everything. And so we rely on those and they're very trusted in the industry. If you're not going to
be completing that appraisal. that renewal cycle. All right, thank you for that.
members, any other questions? Good. All right, Tina, thank you very much for the presentation. Uh, we'll be getting with you. Our members are going to take just a thank you very much. Thank you. Thank you very much.
Unknown speaker
1:53:38
So if you do. An issue and that is something.
Perfect.
Our members, we're gonna get this committee meeting, meeting started in about 3 minutes so I
Our members are gonna get on with the next presentation. So the next group that we'll be presenting is uh Gallagher. If you would please, uh, introduce yourselves each for the record, and
Speaker 230
2:00:21
then you can begin your presentation. Yes, I'm, uh, Ken Estes, uh, I'm in the Little Rock office here at Gallagher. I'm the senior vice president focused on municipality and
Speaker 234
2:00:32
large property business. Good morning or I'm Brendan Monaghan. I'm the Arkansas area president over our offices in Little Rock, Rogers, and Jonesboro, Arkansas.
Speaker 236
2:00:42
I'm Jeff Estes. I'm a regional director of Gallagher's public entity and scholastic Division, um, I'm also a vice president, a little more about myself. I'm, I'm in, I live in Jackson, Mississippi now, but I grew up in Damas, Arkansas, uh, attended the University of Arkansas, went through Gallagher's internship. I spent my entire 35 year career at Gallagher. I started in our Little Rock office, uh, and so just kind of wanna give you,
Speaker 237
2:01:02
I do have some Arkansas background. Hello, my name is Doug
Doug May
Unverified
2:01:07
May. I'm the president of Gallagher Re North America.
Speaker 240
2:01:16
And we thank the committee for the opportunity to come before you today, um, while we've introduced ourselves already, just to touch for one more second about Gallagher. We are the, the 3rd largest broker in the world, uh, we're also, according to the latest Arkansas business, the largest broker in the state of Arkansas. We have over 160 total colleagues here, 17 of whom are actively engaged in public entity, uh, risk management for clients here in Arkansas. Uh, we're very excited to be
here. There are 3 reasons why Gallagher, that we're gonna share with you guys today. Uh, the first is our public entity expertise and the level of expertise we have in the mid-South region as well as nationally the Mid-South will highlight on why that's so critically important in just a bit. The second being our specific knowledge and understanding of Arkansas public entity risk and the nuances that are here that we are very much aware of and we have been working hard to help manage we are taxpayers here as well. These are our dollars too. Uh,
and then also the third point that we're going to touch on is why we are best positioned for 71 success, not just standing up, a captive solution, but successfully, properly standing up a captive solution under the time frame that we've been asked to adhere to and we know that we can hit. So with that we're gonna start the presentation. I'm gonna turn it over to Jeff Estes.
Speaker 244
2:02:49
OK, thank you, Brandon. Um, this is a slide that I'll probably use with almost every client over the
Speaker 236
2:02:55
last 3 or 4 years. In reality, we're here because there's been a shift in tornado alley. I mean these three, programs that we've been discussing over the last 18 months have had over $350 million of claims during that time. Most of them have been severe convective storm, which is we would define a straight line wind tornado, and hail and
Speaker 245
2:03:11
what this graph is showing is there's been a lot of research about the tornado alley has shifted.
It shifted from the south and the east and so if you look at this particular picture Arkansas is, you know, they're right in the
Speaker 236
2:03:27
middle of this new, new area. Now there's also Gallagher Ree's done some of that FM Global's done, Traveler's Insurance Company. There's been a lot of research we're not
Speaker 245
2:03:35
having more severe convective storm activity than we did 10 or 15 years ago. It's just changed where it's happening and it's also happening where we have a lot more population based so Dallas Fort Worth area. In our case, you look at
Arkansas, you know, 35 years ago I was a student at the University of Arkansas. There wasn't really a lot there. Look at the Northwest Arkansas area now we've recently had a $20 million loss in Springdale, uh $20 million dollar loss in Rogers, Benton Bill had a large, uh, claim. Is
Speaker 236
2:04:05
that because of more tornadoes or because we got more rooftops. I think it's kind of a combination of both. I mean, the tornadoes have switched, but they're way more rooftops there and so we're we're
Speaker 245
2:04:15
here today because of this change in landscape. The second point I
want to make on this slide is you see our little Gallagher logo in the surrounding states. Now we do a ton of business. On the west coast where California wildfires are, you know, the number one peril that we're concerned about. We do a ton on the east coast where we're number one peril that we're concerned about is named Storm, but here it's severe convective storm. You look at Oklahoma, we write 95% of the public schools in the state of Oklahoma. They've had $280 million of claims during the same time you've had 350 million. We write 95% of the
public schools and community colleges in the state of Missouri. They went from averaging $20 million a year in. Uh, losses to in 2023 they had 40 million and then in 2024 they had $90 million of losses. The state of Texas is our account. We write the property for the state of Texas. We write the property for Texas A&M University. We, we've got a case study that's in our report. I mean, Texas A&M University self-insured the pair of hell for a while and we worked with our reinsurance team to try to work through that state of Louisiana is one of the hardest,
uh, reinsurance placements uh you can have because of what you, you've seen with their name storm, but they also have severe convective storm. We've been their broker for a number of years and then in Mississippi. Uh, we write all the higher education, so Mississippi State, Ole Miss, all the, uh, higher ed colleges and over $10 billion of public schools. The public schools have had two separate claims over $30 million in the last few years. They're higher ed is, is actually had winter freeze losses which kind of goes in line with this changing weather pattern, so we've had over $30 million of winter
freeze losses, so there's been a lot of talk about hard and soft markets, um, you know, 2 years ago we were in the hardest market of our lifetime. It is softening, but One of the big keys on your footprint is just kind of the change in weather patterns. OK. So we wrote our entire response that we were the broker that, you know, thought we could combine this, and we think there is huge savings and and a much better program structure capability by combining the programs. Now we're affiliated
with all three programs now. We weren't in a position to combine them, you know, 5 years ago or 10 years ago. We're all under our, you know, our separate brokerage contracts, you know, we've been following these hearings closely for the last 18 months, and there are some things that can happen. If we combine them, that will be beneficial to the member properties of this program, um, but if you look at, let's just start with AME and Absit and I paired those two together because they're both run by the Arkansas Insurance department, um, you know, the insurance commissioner is very involved in
both those programs. So as you transition to a captive, his ability to have a real understanding of these uh programs we think is a plus. They use the exact same Remi system and I'm gonna talk about the building evaluation reports in, in just a minute, uh, same. manuscript coverage products. And then here's an example where combining them helps. They've had a great relationship with AIG over the years. At one point, AIG gave Ament a billion dollars limit and absent a billion dollar limit. Well, we were always kind of fighting among ourselves.
You know, to get limit from AIG and we've had a great relationship with them they lead both programs now, but if we have a combined program, we'll be able to get more capacity from AIG uh potentially a better price. Stars another example. They were on the AA program in 2023, which was the most difficult time we've had. They could not provide capacity in ASA because because of uh aggregation concerns. They have now come on the program, but if we were combined, getting that capacity just as a a lot easier.
Um, one thing I wanna say about the state of Arkansas program there's been no balance sheet risk to how we've had these structured. I know you've had a lot of discussion about it, but both ABSA and Asma, I, I mean AA has a 4. $8.5 million dollar aggregate and ABSA has a $6 million aggregate, so 14.5 million is all the state of Arkansas has had to pay, and we, and that's all been fully funded, so I wanna commend the insurance department. They've done a good job to protect the assets of the state of Arkansas, uh, Asma is a little different. It's run by a
nonprofit board of directors and I, I do think they have a little balance sheet risks with the way they have their wind and hail deductible struck. So now let's compare abs and AA. So we've been, you know, going to market last year with all these hearings going on and these are the exact slides that Randy Randy Robinson, who's a risk manager for the state of Arkansas and his team discussed both domestically and internationally in London with the markets. We essentially told them that we
were gonna renew Absent and AA the same for the 2024 policy year and we really asked them to keep absent with the same structure 2 million. Uh, retention with the 6 million ag they pro we probably would have looked to increase that structure if we hadn't told them what was coming in 2025. ABA had signed a memorandum of understanding that they were going to sunset their coverage. So we towed the markets last year that we were gonna be combining asma and sit into a single program so when we talk
about combining the programs, the marketplace is actually expecting that to happen in July 1. The only difference would be you're adding aim at to it which is run by Randy and his team. It's very similar to how apps it's run now, so I mean we think it's a really easy transition to move into that direction, whether it's in a captive or whether I'll talk about the other options in a minute. So this is a slide if you just look at, you know, Kyle Halls said, you know, our goal is to have, or parite, our goal is to
have a fully functioning captive by July 1, 2025. We're totally in agreement with that, but some of that's not in our control. You gotta get your feasibility study. You got to get the enabling legislation and the insurance commissioner or the regulators have to approve it. We wrote a lot in our document about How can we combine this without a captive for July 1 and really get a lot of the basic functions of a captain. I mean we think the savings comes from the combining of the programs. The captive is a regulatory way though there's some more
advantages to the captive, but it provides some regulation around it, but the insurance department is already running two programs right now with significant retentions. So if you look at in the middle section here, the state of Texas, state of Louisiana, Oklahoma school group, Missouri, all these accounts that I just talked about all run very similar to a captive, but there's not a captive. I mean, Oklahoma's taking $45 million retention, and that's done through a reinsurance agreement. Louisiana's got a $10 million all other peril retention and
$50 million retention for win. They use Galighery on the reinsurance. They use Bermuda, they use London, they use ILS capacity which think pension funds so we do a lot of that now without a captive. And then You know, I've heard Paite say that the worst case scenario there'd be no insurance effective July 1 and, you know, All three of these accounts of our clients, you know, our obligation to them is to provide them insurance on July 1. We don't think it's gonna get to that. We think we can definitely uh combine them. July 1, but we
would provide some sort of protection for the state of Arkansas on those existing named the church. And then this is kind of our one Gallagher approach, um, Patrick Pat Gallagher is our CEO and um he says all the time that there's not an account anywhere, any size any of the anywhere in the world that we can't handle. Now when I started at Gallagher we had 2500 people. I don't think we could have said that, you know, in 1989, but we got
60,000 people now and we can handle every facet of this and we priced our, uh, proposal where it's all included. Um, I'll say this, y'all are about to start an insurance company with over $50 billion of TIV. That is a very large program on any scale. And so as I go through these people, it's our top people in every spot. I mean, I've got 35 years experience on this. Ken's been working on AME's account for many, many years, and Doug's the president of Gallagher Re. But if you look at um our
wholesale operation risk placement services, so you have to access some markets through an intermediary. We own risk placement services. Their fees are included in our fee. Stephen Adair is, uh, been with them for over 20 years. He's been working on Arkansas programs for over 10. Bermuda Artex, they presented to y'all yesterday. Were we reiterate what they said this transition is much smoother if we're working with our partner company on the captive management piece. Um, we also
have Bermuda, uh, reinsurance brokers in Bermuda and then in our Gallagher specialty division we have London, um where they access the London marketplace and, and, and the rest of the world, you know, Asia, Nigel Holland, uh, is runs North American operations for that. And he's been the broker on the Arkansas account for the last 2 years, he's handled every meeting personally. Uh, and the Gallagher Bassett also has a claims management, uh, team for third-party administration and then Doug's gonna speak in just a few minutes, uh, about Gallagher Ree where we can do facultative
reinsurance and treaty reinsurance. I want to spend a little bit of time on the building appraisal report, um. It's been a hot
Speaker 236
2:13:49
topic over the last 3 or 4 years about valuations and and what clients have um in the way of of property values.
Speaker 245
2:13:55
I've taken over multiple accounts from other brokers that were in excess of $10 billion that had no schedule at all. I mean, no cope information, no square footage, very little information. The state of Arkansas has been ahead
of their time on this program. I got involved in this account 25 years ago and y'all were providing appraisals for all state-owned property. Y'all have developed a um salesforce platform which we've taken a screenshot here. It's one of the best in the industry. It's won awards. The staff of the Arkansas Insurance Department have presented on this at StreamA and different, um, national conferences, you've got full-time appraisers on staff that go and look at every one of these buildings, and this is the reason why we've got such a good relationship with the markets,
even if you. at how bad the hard market was we were able to point to this keep blanket coverage and keep everybody trusted this data, um, and so you're gonna hear about catastrophic modeling from Doug and you know the actuar if this information is not correct on the front end if you're construction type, age of your roof, the secondary modifiers, if that's not correct, then your modeling's not correct and if your modeling is not correct, what we're trying to tell you on limits may not be correct or what we're trying to tell you on
how much risk you can take that's not correct, so this is very important, so as we transition into combining these, we feel really good about absent and Ament's information because it's been going on for, you know, 25 years. Asma, which is the public school program that's, uh, with the school board Association, it would take some on boarding by the, the staff of the Arkansassurance department to get that data and we'd have to, you know, work very quickly to do that. So I'm gonna turn it over to
Speaker 248
2:15:40
Doug Gallaghery now. Thanks, Jeff. Um, so this first slide you see from the tools section, the analytics
Speaker 250
2:15:48
section is, um, kind of a summary of our non-peak peril tool, but it's a hail model and effectively what we've done is digitized 23 years of hail swaths. Um, and so what that allows us to do is take those 23 years and run it all over, run them all over the locations that you have in the portfolio from the 3 polls, um, and so. That gives us really good
information on what's the frequency of hail losses at a location in, in the portfolio and how large that hail's been. And then with your claims data, we can build a specific model which applies just to the state of Arkansas for hail. Um, so that becomes a different, that becomes an additional model which is made for you that you can use to predict hail losses and severe convective storm losses in the state of, in the state of Arkansas. If you go to the next slide, um,
Where this is important, in addition to kind of creating, potentially creating a model. This also allows us to look at events that happen, pull the actual radar data from an event that happens and look at what Hale has has impacted actual locations. So if you think about there's a loss, there's a large loss that happens in the state of, in the state of Arkansas, you can get a download of all of your locations and and what the size of the hail was at that.
Location and, and if um if, you know, we have your claims data, we can tell you what the loss, what the estimated losses for that location. It's a unique, it's a unique skill, unique information that we can use to help better manage the account, especially on the claims side. Beyond that, go to the next slide. Beyond that, um, The other, the other key pieces you can, you can do a lot of things in terms of, um, data management and kind of like quantifying the exposures that you have, but you also have to
need, you need to know market conditions, OK? And fortunately, we track market conditions across the United States. This is a representation of rate level changes for public entity business across the continental United States. You can see that in, you know, the hard market of the Q123, Q1, Q2, 23, and so on. The, the, the rate changes in the aggregate were well above 20%. Um, I think in Arkansas, there are probably more extreme because of the loss experience. You've seen it softening a little bit, but we're still
seeing rate increases north of 10% across, um, across public entity property business. Um, so having that information, if you're gonna build a captive, Part of a big part of the equation is understanding the market or understanding market conditions, um, for what, what it's gonna cost to see what it's gonna cost to seed and get protection, um, and also understanding how likely it is that you're gonna have claims at a certain location based on history. And so those two tools go right
into that ability. If we go to the next slide. The other thing is There's a, there's kind of rudimentary PML reports, we say, you know, the you're 1 in 100 is 500 million and you're 1 in 1000 is, is a billion or something like that. Those are pretty esoteric numbers, but what is important, especially when you're trying to purchase reinsurance for a program is to understand what your, what your model results say, and then compare that to your actual results or your loss results and compare them in
tranches of capacity, so you understand where your loss is pretty predictable. And that's the, that's the loss that's appropriate to retain in a captive, and then figure out where the loss is really volatile where you definitely want to see it. You don't wanna, you don't wanna expose captive dollars to really volatile exposures. So in this exhibit, you can see we've compared the the model losses you have, and this is air modeling. With your historical loss, and you see for losses for the 1st $10 million of occurrence loss you have. Um
You know, with excluding flood, it's about $28 million and then excluding, excluding, um, non-CAT or ALP losses, it's more like, it's more like 24 million. That's spot on what the, your historical average losses, we've taken trended losses and taken them by year, and you can see that average is about $24 million. So your actual air modeling for the 1st $10 million of risk completely matches your actual experience over the last 7 years. Um, if you go to the next
tranche of capacity from 10 to 100 million, you see the model law says it's about 11 million, um, about 11 million, um, excluding flood, your actual is about 22 million, which is a little bit more because of recent experience, but then with flood, it's 27 million. So that's, that looks really volatile. Right, we would recommend you, you consider seeding that. You don't want to take that exposure, excess of 10 million on your balance sheet or on, or put it against a captive, which you have to finance, because
one, you have a lot of loss there that's flood, and even though you haven't had a flood in the last 7 years, you did have one at, at the Black River, uh, Technical College a few years ago, several years ago, and it was pretty sizable. And the models say that your flood was is, is pretty significant. You have flood exposure, but you don't have it in your historical laws, right? So you wanna, you want a reinsurance protection that takes out that volatility because you can't price for it, you can't predict it as well as you can for severe convective storm. Um, secondly, above, above 100 million, you, you know, that again matches pretty
well. You do have some tail events that can go above 100 million, and that's probably where you want to see. You don't really want to keep that net from our, from our perspective and, and so. These numbers basically basically guide us in how we look at structuring protection for your, for the state of Arkansas. So the structure we, we kind of came up with, and this is a test structure, I think we wouldn't, we wouldn't, this is not a final structure, but it's a test structure and it accomplishes
two goals. One, it lets you retain the predictable loss so that you have the maximum amount of savings and 2, it allows you to cycle through different market conditions. So if the market's hard and the market's lost, you can make adjustments to this structure to manage that market cycle or manage those market conditions. Um, and, and the structure we kind of, the test structure we kind of came up with was, you know, the, in the 1st $100 million primary, you keep $40 million aggregate for all losses that were $10 million and below.
Right? Or, or the 1st $10 million of every loss will go into a net aggregate of 40 million. We think that that would be perfectly matched to what a captive could be, um, and that would allow you to retain what's highly predictable loss. Moreover, the flood component does add a lot of volatility. And if you look at, you can look at these and there's a lot of numbers. I apologize here, but you look at this, the, the gross loss is the loss without the insurance coverage. The net loss is lost with the insurance coverage. And you can see the net loss to the state of
Arkansas in this position at, at, you know, tail events, and that's the 2025, 50, 100 year return periods. The net loss is the same with and without flood. Basically what we're saying is the volatility of flood and the volatility of tail events are captured by the insurance product. State of Arkansas keeps what's predictable. And by keeping what's predictable, they can price for it and properly capitalize a captive. So the next slide.
This is the backtest. It's a lot of, it's, it's sometimes it's, it's nice to look at the way a reinsurance structure and insurance structure applies not just to model the results, but your actual losses. So historically, you look at the losses and, and we have um we have the proposed net loss. The proposed seeded, that's our estimated insurance price for the proposed structure. And then the total proposed, which is basically what you keep in terms of net loss, plus the reinsurance premium you see it.
And you can see that those numbers range from about $51 million in 2018, which was a particularly good year in terms of loss experience, all the way up to about 88 million in 2022. Right? But if you juxtapose that with expiring. There are deductibles on the expiring 3 programs independently, so you have some net loss, and then, and then currently those three programs seat a little over $72 million a year. So the expiring total is down
below and you can compare the proposed total versus expiring total. And I think the important thing of this structure is if you look at 2018. By going to the proposed consolidating the 3 programs and keeping a, a $40 million net aggregate. Your savings is about 22 million. And really what's happening is by good results or good loss history, the state of Arkansas keeps the benefit of that. In this structure.
In 2022, which was a particularly bad year. Um, the losses are pretty, the losses in the, and the seeded premiums are pretty similar. There's a marginal savings in the proposed. But that's the dynamic we want. That way, The state of Arkansas itself can use some of the good loss control techniques that you have to manage losses and exposures and that all inures to your benefit. As the losses improve, you'll receive the benefit of that. And as, and the other advantage is
if the market hardens or the market softens, the size of the deductible, size of the a deductible, can be altered to to kind of consider market conditions. So going forward, before we would renew this structure, we would look at market conditions and your loss history and make a decision about how much, how much the captives should take. If it's a captive, and how large that deductible should be. And then if the losses are particularly bad in a given year, at some point, the insurance product comes in and
takes the tail, takes the downside. So your downside's capped every year and, and you're, you, you've got a structure that can respond to market conditions and a structure that that preserves the capital in the captive. And I think with
Speaker 254
2:26:20
that, I'll pass it over. I'll pass it over to my colleagues here to talk about
Speaker 106
2:26:25
a timeline. Thank you, Doug. Um, so, Back to what
Speaker 230
2:26:29
Brendon opened up with for us, you know, we're ready to, we're ready to serve. We hit on those 3 points, I
think in our presentation, um. You know, Jeff laid out the, the market, how we handle the basically in this area some of the key risks around our surrounding states and of course our current state, um, we have over we have over 160 local, uh, folks and which a good portion of that were assigned to the state's program already, so we have a deep knowledge of claims, claims activity. We had claims
advocates in our office that know these claims in and out. We're not going to the markets or to London or to anywhere blind we we know everything about this. We're not having to um reinvent the wheel, um. We're best positioned for success on this, but what we're most excited about is the opportunity that you've enabled us to do and combining these programs, um. It is, um, absolutely gonna bring on some savings. I mean they're as everybody's talked about we talked about earlier.
You, uh, you, you have to deploy less capacity we've got, we've got one program so we don't have to worry about 3 silos trying to get capacity for those we got one, so we, we can leverage those different placements through the other carriers, get better pricing and and you're in and we're actually at a perfect time in the marketplace because as you probably heard the marketplace is softening for large property. There's more companies out there wanting to take more risk, so there it's more aggressive, so it's a good time uh for that, but most. Importantly,
I think everyone wants stability and Doug talked about that with um, you know, Gallagheree and how we'll just so once you know if we get to the when we get to the captive structure you can take more risk you can allocate differently in order to create stability in the program so we don't see huge swings, which is I think is what everybody would like to see on top of it being very competitive and you're getting the best deal for the state and the taxpayers. So. With that questions.
All right, gentlemen, thank you for that presentation. We do have. couple of questions. Uh, Senator Boyd, you recognize.
Senator Justin Boyd
Unverified
2:28:51
Thank you. Um, so I've got a couple of questions that I'm asking in some
form or fashion to everybody. What assurances, you know, so there's a, you know, we're here, um, to talk about a broker and other areas of insurance, there are lots of ways brokers can get paid lots of different mechanisms. And so what assurances can you give me that you will act at all times
in the best interest of Arkansas taxpayers.
Speaker 240
2:29:18
Well, first and foremost, I believe our response, we went into great detail to help articulate and explain the brokerage space and the various ways that compensation can occur in different places within that that chain and process and then articulate one number that encapsulated all, and that's a number that will be of course communicated, disclosed, but making sure that we're spelling it out and laying out that entirety of the chain that exists, so it's not just one
number that's being communicated to you, but then there's some. another number in the background. That's the value proposition of Gallagher. There are a few peers that can also do that, but, but many and most cannot, but we at Gallagher can, uh, in addition to that, as, as I mentioned in my opening. We are also Arkansas taxpayers. We are here. These are our tax dollars. The way that we've approached our work with the Amate is from that perspective of these are our dollars that we pay in taxes. We want these best utilized for all of us. And so if we can help control this cost
here that enables those dollars to be deployed in
Senator Justin Boyd
Unverified
2:30:19
other places. Thank you. I, I appreciate that answer, uh, secondly, then, if we hire you, what is the likelihood of us being surprised by any government or civil actions against
Speaker 232
2:30:29
your firm. There's nothing that I'm aware of that would
Senator Justin Boyd
Unverified
2:30:32
cause you to be surprised. OK? And then finally, uh, you know, you are a large company, right? And you have a presence across multiple places besides the United States. So, you know, Arkansas has multiple init initiatives which focus on
securing America first would our America first? attitude create any problems
for you with your global presence. So again where it's a two-way interview right? you're interviewing us too, right? So, no,
Speaker 240
2:30:56
that would not create any problems. We're very familiar with some of the historical, you know, that is, uh, Israeli boycott documentation that we attest to and have never been an issue. We nothing in America first and and honestly the the the Gallagher culture we have is not just America first, but it's Arkansas first. We are here in as a company we're looking to build
those those relationships and have Colleagues present. Throughout the communities that we serve and that's why we're here today based in. After the team here in
Speaker 264
2:31:25
front of you based in Little Rock with the whole supporting cast that is also here in the state of Arkansas. Thank you. Thank you,
Senator. We have um a couple of members that are online virtually listening. So I think uh, Representative Wardlaw is called in
and has a question. Yeah, so if you follow me back.
Representative Jeff Wardlaw
Unverified
2:31:51
Bottom right-hand corner where it talks about the historical loss. You've got 0 to 10 million. You've got historical loss 10 to 100 million and above 100 million. It's easy to track across between the 10 to 100 over to above, but when you're looking at the 0 to 10. Your numbers don't stop at 10 million and move
to the next column and I was wondering if you could explain why that is.
Speaker 248
2:32:16
Yeah, so the, so basically, um, you might have, like in 2018,
you might have had two losses that were below 10 million. You accumulate that in that year. If the lot, the 1st $10 million of every occurrence loss. I,
Representative Jeff Wardlaw
Unverified
2:32:33
I'm kind of dumb and slow, so let me, let me do this my way. So what you're saying is in 2019, we had this is individual losses that were 0 to 10 and so in 2023 that's basically the Wy school system with the, with the tornado, and that's why I carried out through 3 columns.
Speaker 248
2:32:53
That's correct. So every occurrence, every occurrence, the 1st $10 million of every occurrence goes into the first column and
Representative Jeff Wardlaw
Unverified
2:33:00
then I just. of percurrence, but that's, that's what I needed. Thank you. Thank
you, uh, Representative Wardlaw. Senator has to recognize.
Senator Bart Hester
Unverified
2:33:10
Over here Uh, so I understand that the current relationships and potential future relationships here so early in the, uh, discussion, uh, and clearly because of those relationships you're proud of
the work that you've done, uh, are you confident? I, I know at the end, you, you showed some optimism that there are savings that, that you're
confident with the, with the change that you would have your best interest to show success in
Speaker 240
2:33:37
this, uh, in this new program. Absolutely, I think that we have been engaged for a long time, but it's under that that structure of the, the bitter vendor contract for these individual programs where here, here's our role. We play our role to the best of our abilities, we always will, and in those individual programs,
here's the structure that we're gonna go out and we're gonna create that best offering that we can in that structure. Within that structure, historically I would say that there's been the opportunity at the bottom and at the top to look at some incremental changes that the insurance department felt, and I don't want to speak on their behalf, felt comfortable they could make that's why you see that retention level having shifted over the years, and that way you see that total limit of insurance having also shifted. So there are some, some
Abilities to move that needle at the top and the bottom, but not so much anywhere else within the program, given the enabling legislation or whatever it may have been, but that didn't mean that we weren't there saying, hey, there, there may be other opportunities here, but that's and those opportunities are ones that we feel now we're gonna be able to explore and take advantage of that historically we haven't been able to do so
Senator Bart Hester
Unverified
2:34:44
because it's good, um, and I've, I've been having a lot of questions about, you know, do you know who we are and understanding that, that I can skip that with you guys, uh.
The, uh, but I will ask this one question, uh, just not from an insurance base. Is there, is there anything
that would, uh, um, shock us or surprise us about, uh, your company's position on ESG or DEI. No, I don't believe there is at all. Not going to make any news headlines. Thank you. Senator Dismay you recognize. Representative Brooks.
Senator Jonathan Dismang
Unverified
2:35:21
Thank you, Mr. Chair, over here. Thank you, gentlemen for being here and all of your work on this. So
Representative Keith Brooks
Unverified
2:35:26
what are, what are some of the primary challenges that you see. Obviously, we've talked the last 18 months about a lot of different things, but we've kind of centered in on, we'd like to be able to accomplish this on 71 in conjunction with the captive setup. What are some of the biggest challenges you see of hitting that date, those deliverables, and why would you be best
Senator Jonathan Dismang
Unverified
2:35:45
suited to be the people that could do that. I think the, you know,
Speaker 236
2:35:52
from the, from the captive standpoint, I think the challenge would be
whether you can get the enabling legislation approved, the feasibility study, I mean, Perry Knight's doing the feasibility study, our captive management team, RTE, I mean, we, we would like, you know, we prefer to use our captive management team. We think that puts us in the best position to be able to move quickly as we start the renewal process. I mean, we're really ready to go to renewal now. I mean, before this RRP was released, we had London meetings scheduled for both Eamon and it in the month of February that we had to postpone. We've got a placeholder, uh, for I think the
week of March 13th to potentially go back. So we have what we need to go to the marketplace, combine them, do a structure that will provide the savings for the state of Arkansas. The big question will be,
Speaker 282
2:36:38
can we go ahead and have it in the captive because that's really more on the neighbor and legislation side, so
Senator Jonathan Dismang
Unverified
2:36:44
should, uh, our texts not be chosen as a captive, um, what, what limits are there for you to work with whoever is. chosen. We can, we
Speaker 283
2:36:51
can work with anybody, and we, I mean,
Speaker 282
2:36:54
we, we don't always work with our own
intermediaries. I mean, we work with different wholesalers, different Bermuda brokers, different captive managers, but I just think it would be a little bit easier if we were with our texts, but we're not opposed to working with somebody else. I mean, we're not saying we're not gonna work with if you chose
Representative Keith Brooks
Unverified
2:37:12
a different vendor we'll, we will work with them. And you hit on this just a little bit, um, the last group
really talked about it quite a bit from a pay transparency perspective of, of what the costs are to the state with this, you know, what you're earning
in essence, because I think as we've looked the last
18 months or so, questions on ensuring we know that, that our dollars are being spent in the most efficient, effective ways, and that there's not waste within that that's going somewhere that we don't know. So what, what can you tell us in terms of the transparency that they would make. us feel comfortable, uh, in line of, of how
Speaker 283
2:37:44
you would approach it. I mean, as far as our compensation and we
Speaker 236
2:37:49
laid that out in our, in our written proposal, but if you're a broker that does not have owned intermediaries. Basically they can go to those own enemy I mean they can go to
those third party intermediaries and ask them to cap commission at a certain amount, whether it's 5%, whether it's 7%, and what we have offered, we can place this entire thing without having to go to an outside intermediary we have offices in London we have offices in Bermuda. We have a Gallagher Re and our fee is fully inclusive of everything that we're going to do under this program, and so when you're comparing it is much different when. You know, you go out and some London broker somewhere still
Speaker 245
2:38:30
making 10% on the on the program they'll be savings in the, in the commission. I mean that that'll be a big part of where the savings come from. Remembers, any other questions? All
right, seeing none and gentlemen, thank you very much for your presentation. I appreciate you being down here for that, and we'll be in touch. Members, we're going to go into recess until 1 p.m. So
Unknown speaker
2:39:02
To, yeah. Uh, members, we were stand in recess.
All right, members, you could go ahead and grab your seat. We're gonna call
this committee meeting back to order. The next presentation is by McGriff. Thank you all for being here. If you would, uh, start wherever you want to just introduce yourselves for the record, and then you're welcome to go ahead and start
Greg Singleton
Unverified
4:00:14
your presentation. Good afternoon, everyone. My name is Greg Singleton. I'm a part of our national public entity practice for McGriff and Marshall McLennan Agency.
Johnny Fontno
Unverified
4:00:25
My name is Johnny Fontno. Um, I'm a senior executive vice president, uh, with McGriff Marsh, um, I'm actually our head of our public entity practice for uh McGriff and Marshall McLennan Agency. Um, I've been this side of the business for 32 years specializing in large property. And large property placements, um, I only work with public entities. We don't work in in the private sector, although we have lots of people in our organization that do. I'm a licensed risk manager. I'm a license alliance claims adjuster.
Uh, I'm also a chartered property casualty underwriter. Um, I have an associate degree in insurance claims and associate degree in risk management. Good afternoon. My
Speaker 293
4:01:08
name's John Palm, um, uh, I'm one of the account executives on the McGriff team. I've been with the riff going on 7 years now, but I've got a total of about 25 years of total risk management and insurance experience, about 12 of those years being as a public entity risk manager for a couple of school districts in the Dallas area. And glad to be able to talk to
Speaker 295
4:01:28
you all today. Good afternoon. I'm Keena Knight. Um, I work in mainly McGriff's construction practice. I deal with risk management, risk transfer, and builder's risk products, um, one of my main roles on this team. is to help Marshall and coordinate, uh, the vast resources of the McGriff and Marsh Network, where you have lots of specialty practice groups, um.
Just to make sure that we bring the most value possible to
Chase Rielmeyer
Unverified
4:02:06
the state of Arkansas. Hi, my name is Chase Rielmeyer. I've been working at McGriff for a little over 2 years. Um, a commercial risk advisor and the property and casualty side, uh, for both, um, commercial and public entity. All right. Thank you, and we're gonna do the same
as we've been doing with all the other presentations. You got about, you got 30 minutes for your presentation. And if you get to running
on low on time, we'll let you know where you're at and
then we'll spend the rest of the hour with the questions and answers,
Speaker 301
4:02:35
so you're, you're recognized to proceed. Thank you. We'll go as quickly
Johnny Fontno
Unverified
4:02:39
as we can. I just kinda wanna give you a big overview of who we are, um. Uh, we were Purchased by Marsh last year and, uh, the McGriff MMA part of Marsh. We do over $5 billion in annual revenues. We have 15,000 employees. We're in 300 office locations in the US we have 4 locations here in Arkansas with our main.
Uh, office here in Little Rock, uh, the head of our Arkansas office, Taylor Mitchum, uh, yesterday was his birthday and he's actually out of town celebrating his birthday with his family, uh, but, uh, uh. Chase,
Speaker 302
4:03:14
uh, works directly for Taylor. We're also in a 130 countries in association with March all around the world, um, as part of the Marsh Group. We're actually the largest brokers in the world. With over $23 billion a year in revenues.
Greg Singleton
Unverified
4:03:36
And 85,000 colleagues all around the world. Our public entity team has a lot of, as Johnny mentioned, breath and knowledge in the public sector we have multiple accounts across the country. um, we specifically work in this market only and our team is dedicated, you know, with pre our Our teams consist of 5 previous risk managers. And you know, we specialize in
governmental risk pools, self-insurance programs, offshore captives. Below the large deductible plans. We also uh focus on lost portfolio transfers we um have experience with dealing with OSIs, CSIPs, and Rosips on the construction side and also uh we deal with reinsurance placements whether it's through our own partnership uh through Marsh and other sources as well and also um we have a large surety program. Um, so all of those things kind
of feed into our governmental program. We're also one of the largest real estate, uh, placement insurance brokers in the country. And I'll pass it over to Keenan and talk about the other stuff,
Speaker 295
4:04:52
construction. So on the construction practice, we work with some of the largest general contractors and contractors in the country, um, some of the names you may recognize or, uh, Turner Construction, hit construction, um, horror construction. Uh, like Greg mentioned, uh, OSIP, CSIPs, things that you may
get into as as you build new schools, new buildings, um. Again, that's part of coordinating. Our teams, we have teams that only do OSIP, CSIPs projects. They can help you put them together, they can help you vet what your general contractor may be doing. Um, same with Builder's risk.
Johnny Fontno
Unverified
4:05:29
Along those lines. And uh the next uh slide is, uh, basically, uh, carriers, intermediaries, and, uh, so first off, what you're doing, I think is an amazing exercise, um.
Speaker 302
4:05:42
When you have the amount of um exposures that you have $50 billion in exposures, um, in the RFP, um, you have to look at alternative financing, um, starting in 2016, we went to a hard market. So I've
Johnny Fontno
Unverified
4:05:55
been doing this for 35 years, so I've seen hard markets, soft market. We're just coming into a soft market probably about 18 months ago. But in that hard market cycle, I'm sure you guys were getting increases at every
Speaker 302
4:06:07
level, uh, and I'm sure they were looking at raising deductibles and, and,
uh, so it's a great exercise, and I think putting it, basically putting together a captive or starting your own insurance company is what you're doing is a brilliant idea. Um Basically what you got to determine is what limit you want, uh, and, uh, you know, we deal with a lot of cat exposed property, um, which you have a lot of cat exposure, specifically for tornadoes and hail and and flood, I'm, I'm assuming, but, uh, You need to figure out what limit you want and what retentions you want per occurrence for a large catastrophic event and what,
what else can you pay all the basically smaller claims through the captive or insurance company, um, and when it comes to uh carriers and, and, uh, insurance companies. Um, we've been doing this a long time, and the key is developing personal relationships with those people, and so I, I just want to give kind of a list of our top domestic carriers in our top London carriers. We, we typically go over to London sometime between 3 and 5 times a year, and with all of our clients, we want face to face.
Long term meeting relationships with those direct carriers here in the US as well as the Lloyd's carriers. So some of our best top underwriters, Jerry Pascuzzi. He's in Atlanta, RSUI Ryanabelli, Boston, Berkshire, David Malcolm, Atlanta, Axis. Tim, Tim Antonoff. Atlanta, Westchester, Chubb. Laura Tallent, Atlanta, Iron Shore Liberty. Allison Oliphant, Birmingham Starstone. And then Ellie Arrauni, he's Chicago, Lexington, AIG.
And then over in London, uh, Blenheim,
Johnny Fontno
Unverified
4:07:59
Simon Anthony. Fidellos Michael De Vern, he's the #2 guy in the company. That company's gone from. A billion in revenue to like 5 billion in revenue in 5 years during the hard
Speaker 302
4:08:10
market. Um, he's one of the best underwriters in the business. IQ Robbie McDonald. Alchemy, which is, he's the #2 guy in their company, Ed Martin Prudho. He's a French guy. Rockstone, Tim Franklin, Dale, Simon Brumfit, Britt Tom Ayton, HCC Andrew Middleton, and Ark
Jar show. We have personal relationships with all these people, and we want to make sure you have those same relationships. Meet them face to face, talk to them, get to know them. It means the world of difference when you're getting a quote, when you have claims, and we'll talk about claims in a minute, but we're gonna talk about some big claims because ultimately, You're buying this. You're paying
Johnny Fontno
Unverified
4:08:46
premiums, so when you have a catastrophic claim and you want the best claims consultants you can have in the best relationship with your
Speaker 308
4:08:57
underwriters you can have through claims. So I'll talk a little I'll talk
Speaker 293
4:09:06
a little bit about our uh value added services that comes with um Johnny McGriff. No, any of the brokers that you're gonna talk to today can review your programs and provide insurance policies. That's the easy part of what we do, right? Um, but what comes along with that, what else do we have in place that can benefit you from a value added service, and I'll go through some of those. The first one on my list, uh, I have
as the most important, but we're gonna skip over that first and go down the line because I want to come back to the claims, but we also have analytics, we have a team of Um, our analytics group that'll take your data, take your information, um, dig into that, let you know how your losses are looking, what your, um, Maybe which are projected to see in the future. How do you compare to some of your, uh, other entities that are like and kind to you. Let me add one thing there, so uh if
Speaker 302
4:09:53
we were to be lucky enough to work with you guys. One of the first thing we do is run an
RMS and ARR report, and I, I'm assuming you guys know what those are. It's, it's so it's, we're trying to figure out what your maximum foreseeable loss from one event is. And what your average annual loss is for the, for the whole portfolio of your assets. So we would take your statement of values. Your list of all the schools, all the colleges, all the property you own and running into these models and then we come back to you and say on an average annual basis, you're gonna have this amount of claims and then
Johnny Fontno
Unverified
4:10:31
A 1 in 500 year claim you're gonna have this. 1 in a 1000 year claim you're gonna have this 1 in 10,000 you're gonna have this
Speaker 302
4:10:38
and so that gives you an idea. Um, where you want to set your limit at, your policy limit and where you want to set your retentions at and so you can analyze that and we can make recommendations. And then when we bring you options, we're gonna have options at multiple. Deductibles, multiple limits, so you can see what best fits your needs and, and, and what you're looking for to cover. But um
Johnny Fontno
Unverified
4:11:01
it's, it's an easy process, but we wanna educate you guys to
Speaker 293
4:11:07
understand what it means and and how it works. Yeah, so in addition to analytics, we also, uh, do loss control what you can do on-site lost control visits, come and visit your facilities, um. Walk through them if the insurance carrier wants to send someone down to do their own insurance inspection of your buildings we'll come down and do that as well. Uh, we can do safety training again on site safety training as needed or, um, virtual safety training.
And not just safety and loss control related, we can also do risk management related training, uh, we do training all the time for lots of our clients that revolve around uh contract reviews, uh, reviewing certificates of insurance, that sort of thing for people that do that to try to help that process along, um. We also have a full slate of uh resources a resource library. That comes with joining on with McGriff. That involves safety training meetings, um, sample policies and procedures, um.
It talks on it shows on here with on-demand safety training videos, comes with that. Uh, toolbox meetings. Again, sample contracts, uh, sample policies and procedures to all to help you do your job and risk management and managing the insurance program. It would be for any of the individual school districts or colleges. Uh, there's a community forum there to to kind of bounce ideas off other folks that that are in the same situation that you are. Uh, we provide market updates. So that you're not surprised
with for what the market's doing for when that renewal comes around and that rate's either going up and down, you're kind of, you had, you know, based on the market updates that we provide with what you can expect from that. Uh, we offer webinars. Do monthly webinars to McGriff, covers all. From A to Z insurance related topics, uh, some of those also have. I continue continuing education that applies to that if if you have someone in in your offices that wants to get continuing education for risk management related insurance related topics, um, that's available.
Uh, newsletters as well. And then our property evaluation services. Now we're not, um, professional appraiser, appraisal companies, but we do, we can help with property valuations, um, we'll, what we'd like to do from the beginning of a, of an account is come down, visit some facilities. Now, obviously we're dealing with a large schedule of values, um, here, but we can take a sample of that. We'll spend a week down here and go through your facilities, walk through buildings, see what they look like, get on roofs, see what they look like. And then when we get back we can look at your statements, your
schedules of values and try to find any outliers, anything that looks like it may be overvalued or undervalued. And then pull those out, put them into our evaluation systems and see where the numbers line up. If it looks like there's, uh, anything that's off base, then that may be a candidate for further analysis, maybe come down and see if that building has higher quality construction than some of the other buildings, and that's why it's valued higher. Maybe that building has high value equipment in there and that's why it's valued higher, um, and then it may be a candidate to get a professional appraisal to
come down and review that building and see to make sure that your values are where they need to be because at the end of the day your insurance rate. based on your property value, so we
Speaker 310
4:14:22
want to make sure that's appropriate. And especially like when you're looking at schools, all elementary schools should be kind of in the
Speaker 302
4:14:28
same price range per square foot, all middle schools should be in the same price range square foot high school should be a little bit higher price range for a square foot and we can do peer reviews with our other clients across the country and it specifically Arkansas area. And then going back up to
Speaker 293
4:14:43
claims, you know, one of the things that that we pride ourselves on is our claims management handling. Um, we're gonna be there from start to finish on a claim. From the, from the get-go, we're gonna assign a claims team to be associated or or attached to your account. Um, that are gonna be the, the first points of contact on claims. We're also gonna assign a specific adjuster to the policy so that if there is a claim there's no lag time on finding that adjuster put them in place. And it also gives you
the same adjuster for the claims that happened, um, specifically the two
Speaker 292
4:15:17
big claims adjusting firms for a commercial account like
Speaker 302
4:15:20
this or McLaren's and Engel Martin, they're considered the top in the industry, and then we get one of them designated and approved by the carriers. And then
Speaker 293
4:15:29
we're also a lot of our clients we we help with getting them set up with um emergency response restoration company contracts in advance so that there is a large loss again, there's not a delay in trying to get, um, procurement to go
through and set up, uh, you know, adequate pricing for them to come down and do that and you're not dealing with the guy, the first guy that drives up, uh, to try to get and clean it up. um, so we, we do that as well. Um, and so again, we're, we're there from We're there from start to finish, um. Just a couple of examples or one example I'll give is is for City of New Orleans. Um, and New Orleans airport for that matter, both, both clients of ours both had major, uh, tens of millions of dollars in claims
from Hurricane Ida. From the moment that happened, we had our claims team involved. They had the assigned adjuster ready to go, local adjuster. And they had their recovery and um restoration company teams ready to go to get them in place and then once that claim happened, Um, we immediately set up weekly calls with them so that we can keep track of that claim, understand all the ins and outs, where it's going from start to finish and you know, literally that claim was in uh Hurricane Ida was 2021, just last month,
we literally had our last, um, weekly claims meeting with the city of New Orleans uh on that claim and we've been there from again, weekly. Every Wednesday, I had to I had to find something to put on my calendar on Wednesdays at 100 a.m. because that was our, our Wednesday meeting for City of New Orleans claims and for um New Orleans airport as well, we're still doing claims, uh, meetings with New Orleans airport. Now we're doing them biweekly, but again our team, our claims team is there from start to finish to any claim. And as Johnny mentioned before, that's why you buy insurance so those claims are handled appropriately and so you and so you're getting the proper recovery based on the terms of
Speaker 292
4:17:17
your insurance policy. Tell you another story, so we picked up
Speaker 302
4:17:21
City Houston, uh, 13 years ago and Um, it's 4th largest city in America and so. When we picked it up, there were, uh, currently only buying $25 million in flood limit and so we did a maximum foreseeable loss, and it was saying that the maximum flood was somewhere in the 300 to 400 million range and so. We went to them and said, look, uh, this was a softer market
than the last 5 years, and so we said, look, we think we can get you additional flood limits, an additional $50 million in flood, getting you to 75 million for your same premium that you paid last year, so we did that. So the next year it was still. Relatively soft rates, so we added another 25 million. The next year, we did the same thing. That next year was Hurricane Harvey. So They had at that time, they went from 25 million to 125 million flood limit. That flood limit
was paid in 90 days because when the adjusters went through, there was over $250 million in flood damage instantly they documented and so we got that that that uh claim paid in in 90 days, but more than that, you know, we got him an extra $100 million in flood that they would not have had, um, and so one of the things we do and Combining these three pools together, these three groups together, uh, we were talking about it earlier, when you do a, a pro uh RMS reporter AR report.
If you do each one of them individually, their loss is gonna be higher. But when you group them as a group, your maximum foreseeable loss actually goes down, um, because it's spread of risk. It's what insurance companies do. You have more premium, you have more spreader risk and so um. The likelihood of having a giant catastrophic loss on one. is just as big as it is on all three. And so that spread of risk is the key. That's, that's where you're getting your savings and and getting your value.
Chase Rielmeyer
Unverified
4:19:27
So, I work in the Little Rock office here, uh, McGriff is actually right down the street, so we are a local office and we help, uh, Johnny and his team with anything that we do in the state. We also have two other offices, one up in Northwest Arkansas and one in Texarkana, and we represent about Nearly 150 employees like myself over here. The next slide is team members and uh.
Speaker 302
4:19:58
Really, I, I just want to focus on the claims people, um. Not only are we're gonna have a designated adjuster that's approved by the carriers, but you're gonna have one of our
Johnny Fontno
Unverified
4:20:08
designated adjusters who are all commercial property experts, and, and so one example, we'll go to the next slide, John, uh, we're on this
Speaker 293
4:20:15
for a little bit. Yeah, one of, we want to mention a little bit about our, our, our team members. Um, again, as, as Chase mentioned. Primary contact for ABLR is gonna be our local office in
Little Rock and then our team, our public entity team again in which Johnny mentioned we only do public entity is, uh, uh, our Dallas, our team in Dallas. But we put the team together and I wanted to make sure we note on our, on our list that, uh, 4 of the team members on your account are gonna or public former public entity risk managers, myself included, uh, Johnny included. Um, I was. I was for about 12 years first manager of a couple of um School districts in Texas, as I as I mentioned in my intro.
Um, I've Put uh Insurance programs together from start to finish for those for those programs, um, I've. Purchased insurance from. Um, governmental risk pools for those programs so know how the ins and outs of that works, but um. You know, I don't know that any other group is gonna have 4 former public entity risk managers assigned to your team that you can call for any related issues whether it's insurance claim rela related issue just a risk management related issue. We have those
folks available and if any one of us don't know the answer, we have those
Johnny Fontno
Unverified
4:21:36
other folks to go to and get those answers from. And I think because we worked in government, uh, we understand timelines, we understand budgets, uh, we understand having forecasts for budgets in advance a long time. in advance and then we also know how to get a packet together. Whether it be for a school board or you guys in a packet where you understand your options, you understand what, what the options you're getting, the
Speaker 302
4:22:02
options you're, we're giving you, and, and you can make a, an informed decision based
Speaker 293
4:22:08
off of that, yeah. We've sat on the other side of this table and interviewed brokers for to come in and be our, our brokers for our entities as well, so, uh, and just going through quickly through our team members, we have uh client executives, all three here being Johnny, uh, Keenan and Chase. We have our account executives myself and Greg here on the team. Um, our account service was our account service representatives are gonna be doing the background work, the invoicing
certificate of insurance issuance. Your marketing marketing account executives are going to be dealing with directly with the underwriters placing policies. Uh, again, we have lost control representatives and analytics and training. Doug Keefer over that team. Then we have our claims team uh involved as well. And so as you can see from our list we have backup after backup of people in place so that the ball is not gonna get dropped on your account, and we really wanna be risk management partners for ABLR. We tried, we hope that our all of our clients see us as extensions of their
Johnny Fontno
Unverified
4:23:05
risk management department and that's really what we strive to do when we come on board. The next, next list of sample client lists and um What I wanted to uh say on this one is one of, I don't even know if they're on this list, but, uh, Port of Houston is one of our clients and um Uh, Hurricane Ike hit, uh. 2008 and, uh, the Port of Houston risk manager I had worked with
Speaker 302
4:23:29
in prior prior. But he was with a different broker, and the broker sent out an adjuster and their policy was
through Lloyd's and the adjuster looked at, you know, some of their roofs and did an overall walkthrough of some of their buildings with him. And afterwards, um, she sent in a report and said, They basically had It's like ill 2 and damages, but their deductible was above that, and that basically they had no claim. And so he called me up and said, hey, would you send one of your claims consultants out and so our, our claims consultant, main guy at that time was a guy named David Peterson. And so David, I called David and I said, hey, look, well you got
me with uh Mr. Birdwell and just walked through the buildings and bring a roofing consultant because I wanna make sure, you know, that it's evaluated properly. So, basically, of two days of walking buildings that claim went from 0 to they got a check for $8.9 million and so. His boss at the time said, Who is that guy that you called? We wanna hire him. We want him representing us. So that whole story is to say we're gonna be your advocate. So we want to put you in a position that when you have a catastrophic event, you
get paid, you get paid quickly and you get paid what you deserve, that you're not
Speaker 293
4:24:46
short chained from any carriers. Yeah, uh,
Speaker 302
4:24:50
you know, we just, we, we have, um, a pool that we write in Texas, that's all schools, um, and they're about 16 billion in in values. Uh, when we took it over, um, they were about. 4.5 billion in values and they've grown every year. It's Texas political subdivision, um.
Johnny Fontno
Unverified
4:25:10
They had a bad year, um. 2 years ago, um, and Basically we're running about a 200% loss ratio, which means for every $1 they were paying and in premium they were getting $2. But we were able to um do a renewal this year at a flat renewal, even though they had that large claim, um, so, um, you know, the market is changing, you're in a good position right now, um, these carriers have made money the
Speaker 302
4:25:43
last 2 years and the carrier is getting very, very competitive right now. So the proposal price, so we quoted a flat fee of $147,000 and we do this every day, and so we understand you guys wanna save money and have budget and we, you guys understand we have to be compensated for that, but we think it's a very fair uh fee, uh, we, we, we will not take any commissions. Now, um, I know the consultant was asking us a question about uh wholesale brokers and Lloyd's brokers
taking commissions. We don't control that, but we We have done in the past is got them to cap their commissions at like 4 or 5% and so you're controlling that cost because some of these uh wholesale brokers will want 15 points or 10 points and so. You definitely need to cap their, their fees, their, their brokerage commissions. Um. The only other thing I was gonna say there was, uh, um, I don't know if any of the members. Have to buy flood policies. So like if you've ever been paid by
FEMA for a flood, they have obtained and maintained requirements, and so they may have to have an, an individual flood policy on one of the schools or whatever flooded the building that flooded and so if we do place a flood policy by federal law, we have to take commission on that. It's a standard 10% commission for those flood premiums are normally small. They're very, I think that's it, um, we try to go as fast as we can. Want to give you guys as much information as we could. good, but I really appreciate
the opportunity, would love to work with you guys. Yes, sir. Thank you for that presentation. We have
Senator Jonathan Dismang
Unverified
4:27:25
a couple of questions. Senator Disma, you're recognized. I thank you and just, uh, first question is, is this time frame, you know, our goal is to try to get this thing stood up best we can by July in July. Is that something you feel like is achievable for your firm? Absolutely. OK, um. And then my, my next, and if you don't mind, you can elaborate on that if you'd like just because what you, how you'd see that timeline, so the key I think
Speaker 302
4:27:49
would be getting underwriting information. I'm assuming you all, you all have that, which would be statement of values and any lost history. Got you. 5
Senator Jonathan Dismang
Unverified
4:27:58
year loss history is all we need with statement of values. Got you. All right. And then as far as if I'm looking at. Uh, the value add-ons. Walk me through how
Speaker 323
4:28:06
that would work with the firm. So are those extra services that they need to provide everything is included
Speaker 302
4:28:13
in the annual fee. And so there's no limit, so it. on, you know, if like you needed
to lost control at a specifically specific location or specific school. Um, that's included. OK, because an inventory I think is something
Senator Jonathan Dismang
Unverified
4:28:25
that we're lacking like for instance, uh, you know, condition of roofs and that sort of thing which then plays into the what we're gonna have to pay an insurance, um, and so that would be a part of this process for y'all or what, what would we look at doing that? So, so John was saying,
Speaker 302
4:28:41
so typically on a on a new account like this, we would look at all the, let's we'll pick a number, but 5 million. So every location that
Johnny Fontno
Unverified
4:28:50
has over 5 million in in value. Uh, John and one of our team. would come out. Uh, with whoever the building maintenance people
Speaker 302
4:28:58
are of verify the square footage. verify that this is the only location, and then we would, what we do is we call it desk appraisals. And so we, we go in, we have Marshall Swift Beck, um, and CoreLogic, which is it's a program. It's, it's an appraisal program and we. entered all the data we include
that data to the underwriters and then we submit it and it gives us a value and then based on that value, we,
Speaker 310
4:29:27
uh, correlate it, like I said, to other middle schools, other high schools, whatever the, the kind of Admin
Speaker 302
4:29:36
building, same thing. Got you. All right, thank you. If you wanted a full blown property appraisal, then we'd have to subcontract that out and get a quote for it. But we, but we have like uh City of Houston and our contract with them, they do about 2025. property appraisals.
A year on buildings and it's like $100 a year. It's not that
expensive. I got a question. The, as you can imagine, the proposals are kind of all over the place with the fee structure. So if we
were to choose you, can you tell me how much the state of Arkansas would be paying for your services. $147,000. That's it. Yes, sir. OK. And then you've got some, I guess there's some notes in here about um intermediary commissions for domestic wholesalers. Can you, I, I'm not an insurance agent, can you walk
Johnny Fontno
Unverified
4:30:23
me through that? Yeah, so typically on a complex
Speaker 302
4:30:27
program like this, um, we're gonna have to use, so the, the, the big wholesalers in the United States or CRC. Amins, um, RT specialty. These are wholesale brokers, so we are retail brokers, so we go to primary carriers. When you have a big program like this, there's a a. Line of coverage called excess
and surplus lines. So these are not approved by states. And so the wholesale carrier has to go to the ENS lines domestically. So all those underwriters I went through, that those are our main ones on almost all of our accounts, and they're very competitive and, and, and we'll go, I, I was probably 2030 markets, but we'll go to hundreds of markets. And then the same thing. Um, if you go to Lloyd's, you have to have a Lloyd's broker and, and so Price Forbes,
Miller, BMS are the big Lloyd's brokers and so, um. And And so we go to the Lloyd's brokers and then we negotiate with them, and then they also go to Bermuda. So typically Lloyd's brokers also have a Bermuda branch. And so, uh, we'll get quotes from Bermuda carries too, and there's a couple of Bermuda areas that have gotten really, really, uh, competitive in the last two years. Senator Hester. Over here
Senator Bart Hester
Unverified
4:31:55
Uh, so you said you guys are the, the largest brokers in the world, largest real estate carers in the, in the US. Looks like you cover for the University of Arkansas. Do you manage any captives in Arkansas or not managed or
Speaker 302
4:32:09
your broker for any captives in Arkansas, uh, no, not Arkansas, but we manage, we have uh two captive management divisions,
Senator Bart Hester
Unverified
4:32:18
so whole divisions, yeah, I mean, yeah, clearly you're. Um Big operators, so you've got, you've got 33 offices currently
in Arkansas with 160 employees that a lot of people. The, um, so I asked this question of everybody, so is it, is, are we gonna be surprised by anything if, if we worked with you guys that wouldn't align with kind of where Arkansas is on, uh, you know, ESG DEI climate, any of these social issues like you get, I'm not gonna read
in the news that y'all refuse to work with a gun company, right? No, sir. Nothing like that. Thank you.
Speaker 329
4:32:57
You, you good? I'm good. OK. Senator Boyd.
Senator Justin Boyd
Unverified
4:33:02
Thank you, Mr. Chair. Um, So, you know, the world of being a broker is
complex and you've discussed some of that about how you got to work with other entities and so on and so forth and so that provides opportunities and like other parts of insurance were brokers may seemingly get paid other ways, um, I'm not saying that happens in property casualty. I don't know, but in the health, health care world that seems to
be happening, right? So what assurances can you give me that you will act at all times in the best interest of
Speaker 302
4:33:36
Arkansas taxpayer. Well, the, the first assurance is if we're not acting that way, we, then we have problems, uh, you guys could file criminal charges against us are, are, uh, airs and emissions charges against us, so. You know, ultimately our word is our word, but, you know. Um, so I was a public servant for 9 years and part of the reason John was as well. Part of
the reason we do this is we like helping. People were ultimately all public servants and so. Um, our goal is gonna get you the most competitive. Policy with the best conditions and terms at the best price at whatever limit and deductible you, you, you deemed best for your citizens and if you have a claim, we're gonna be there 100% to support you to get everything you deserve from that claim. And, and, and the way it works on the wholesale and, and the
London brokers, they're separate entities and so that we, they wouldn't kick back anything to us. We can't take like an override from them, um, now, like some retail brokers get overrides like on retail business. So like, If you guys were a typical small entity and, uh, we wrote all of um, Your policies with Chubb. And as an organization, we did, you know, 50.
$500 million which the company will get an override from Chu at the end of the year, but it does not, it's not us. We're not getting any of that money. But none of this would be placed in a retail. It would be wholesale and. London And I, I
Greg Singleton
Unverified
4:35:18
appreciate. Go ahead. Well, and even like on, on a more personal level, you know, like I'm a licensed insurance agent, you know, it's my livelihood, that's how I feed my family, and I have 2 kids, a wife, you know, and, and that all of that stuff matters to me. You know, so I try to bring integrity, you know, and purpose
to this business and, and I think that, you know, that's something that rings through our entire team, you know, we're like a family, we care about each other, we care about the clients that we work with, you know, and that's really important to us. You know, and that's, you know, at the end of the day, our integrity is all we have in this business, right? So that's, you know, that's how we carry ourselves and that's how we that's the standard that we have for our organization and our teammates, so hope, hope
Senator Justin Boyd
Unverified
4:35:56
that helps. Now that I, I appreciate that and I appreciate the clarity you, you provided. Uh, the second question is just if we
hire you, what is the likelihood of us being surprised by any government or civil actions
Speaker 335
4:36:11
against your firm. Uh, you'd be shocked, and I would be shocked, you know, so uh hopefully we we're neither
Senator Justin Boyd
Unverified
4:36:18
one of us are shocked and then the third question, obviously you're a large firm, um, if you're the largest in the world, uh, I'm guessing that means you're doing business elsewhere, one in Bermuda, what have you. Arkansas has multiple initiatives which focus on securing America first. Would
our America first attitude create any problems for you with your global presence. So, and, you know, as
much as we're interviewing you, you're interviewing us, and I just want to know, would that be a, would that
Chair
Unverified
4:36:48
be an issue? No, sir. Thank you. All right. Thank you, Senator Representative Ladyman. You recognized. Thank you, Mr. Chairman over here. Um
Representative Jack Ladyman
Unverified
4:36:54
You talked about your, uh, risk reduction programs what I call it the site audit site visits, and you talked about also evaluating the value of the property and helping, helping us in that way.
But these uh risk audits. Uh, I've actually been a part of that when companies came out and and inspected factories where I was a risk guy. And uh those can be very um Uh, very good, uh, you know, because sometimes you don't see the trees for the forest, right? If you're there all the time. So those can be very good, uh, do you have examples of where you've been successful in doing those kind of audits. I mean, are they as successful in
Johnny Fontno
Unverified
4:37:38
schools as they are in industry. Uh, so, We do have a guy who's, um, a member of our team, Tom Kill, who's not here today, but, um, he's, he's an ex-police officer. He's an ex-firefighter. Uh he was uh a a safety person in the Coast Guard, um, and, uh, he does a lot of that work for us. He's actually in in another interview
Speaker 302
4:37:58
today, but um, One of the things he does is like some of our clients have had to have audits by the state, specifically like, Um,
hazardous waste communication, you know, if you have chemicals that need to be labeled locked out, and he'll actually go in and do a pre-inspection. Before the state comes and inspects them and it's very, very helpful and he's, he's helped quite a few of them pass audits before the state inspection came, but working with carriers as well, uh, we just did a walkthrough with the city of Tampa with uh one of their carriers, uh, specifically their, uh, what utility departments. It was after the um
last hurricane, so they, um, the state was coming in and auditing the, uh, the water department, and so we went through and did pre. Pre-inspections and it was very helpful. You know just a couple, I'm sorry,
Speaker 293
4:38:54
go ahead, go ahead. Just a couple of things that um that I'll add, um. You know, we've Doing these inspections, you always find things that you think are are um hazardous or dangerous and help them put in the procedures in place are correct items, um, you know, you never know what you've presented, prevented from happening because it didn't happen, but we've definitely
seen um lots of uh. Interesting issues from walking through facilities and seeing what, what folks have in place and help them to correct those. The other thing is that I'll mention is that, um, You know, as Johnny mentioned, our relationships with the the other brokers and the underwriters, you know, we. We take the information that we know and we, they, they like to know that we're there, uh, looking through those facilities as well, and we use all that information anytime we're doing a renewal, we're, we're talking to the underwriters, we're saying, hey, We're there looking at their,
their buildings as well as they are. We're using that to kind of leverage to get the
Speaker 18
4:39:50
best rate that we can and try to, um. Tell a good story for those underwriters so they know what they're dealing with and
Representative Jack Ladyman
Unverified
4:39:56
they're not just insuring something they're not, they don't know the whole story. So, so you do you do these, uh, uh, like randomly or if, if we requested it or is it? How do you do them, not just in response to a uh uh
Johnny Fontno
Unverified
4:40:08
an insurance company, but yes, sir. So initially,
Speaker 302
4:40:11
we would take whatever. Number we wanted, like, let's
say every building that's over 5 million and do it on all of those initially and then as needed, if y'all had a certain school district or one of the members that said, hey,
Johnny Fontno
Unverified
4:40:25
we want somebody to come out and look at this or look at that. We would do that. I know this can be very important
Representative Jack Ladyman
Unverified
4:40:31
like the sprinklers as an example or fire extinguishers and people say, well, OK, you say I need a fire extinguisher over here, but you don't really know where you need fire extinguishers until you have a fire and then you have, how far you have to go to get one, right? So sometimes outside
people see that and, and these can be more beneficial, even though they're minor things. Uh, from your rate schedule that can be
more beneficial than most people think. Tom, Tom has found multiple problems
Speaker 302
4:40:56
and brought it to the building facilities manager. At the at our clients and and they're like, well, I didn't know that was. Stored there either, you know. So a lot of times they're surprised at what they find when they walk out there because they're not in every building all the time. And it's also a good exercise to, you know, get ahead of those things so when
Greg Singleton
Unverified
4:41:18
the carriers come out we've already seen it. You know, we've already, you know, kinda come up with a strategy game plan on how to approach that situation and we have those difficult conversations with the insurance companies. We've already done it, you know, so it makes it a whole lot easier to, you know, get The carriers in agreement with what's going on and and a and a plan. You know, and that's what they really wanna see. They wanna see that, I mean, every, every city, every state, they, they all have issues that they're working through this you know trying to manage and keep up with things
getting old over time or changing over time, you know, but, you know, our job is to try to help you paint the best picture possible and present that to the marketplace so we can get the best
results and save you the most money. It's been my experience. You can do that. Absolutely. Oklahoma City. Thanks. Thank you, Representative Senator Hester, you recognized. Yeah, over here, so,
Senator Bart Hester
Unverified
4:42:09
uh, a question I meant to ask earlier and maybe this is just educating me and it doesn't bother me to not necessarily understand this all. You, you talked some in your presentation about helping set
parameters, um, like with risk, uh, is that, is that the role of the broker or the role of the manager? How does that you work together on
Johnny Fontno
Unverified
4:42:31
that? How does that work? I would say we work together, so, um, All of our Large clients, um,
Speaker 302
4:42:36
they want to have a good idea of what their risks are and so. Like us doing the desk appraisals, we're gonna come to you guys and say, we, this one building is valued at. $100 million and we think it should be valued at $80 million
or we think it should be valued at $130 million. The other thing we've done, um, and I'm not gonna name any names, but we've picked up accounts and we go out there and we have this big list and normally we'll go over and look at every building over a million dollars in value and so we had this list and we found this location that was on the, on the, on the schedule for $25 million and we go there and there's nothing there. And so then we go back to them
and say, you got this location insured at $25 million and there's nothing there. And they go and find out that this was tore down like 3 years ago, and they had left it on the schedule and then we found another location that was scheduled for a million dollars, and there was like a $50 million building on that schedule. So You're gonna find stuff like that when you have a schedule as big as yours, 50 billion in TIV you're gonna find stuff like that. Thank you.
Representative Keith Brooks
Unverified
4:43:52
Representative Brooks. Thank you, Mr. Chair over here. Thank you, gentlemen for being here and for all of your work on this and know that, uh, it's not a light amount of work, so I appreciate that very much. So, uh, some of the other presentations, uh, and really the last 18 months that we've been involved in this or are very heavy on some of the specifics that we have, there's not a lot in your presentation relative to the specific situation that that we have been in and where we're trying to go. Obviously we're trying to, to, to solve a very complex need here. So what are based on what you know of Arkansas's, uh,
Current standing with, with our three programs and where we wanna go, what are some of the biggest challenges that you see to implementing this, um, effectively and also within a time frame that
Speaker 303
4:44:39
we need to. I think the time frame's OK. I think getting those 3
Speaker 302
4:44:44
different entities to agree. On everything, it's always a challenge when you're working with 3 different groups. Y'all have the power to, of course, enforce that and make them work with you. And I think that the
fact that you're helping them finance this is critical, um, and so. You know, I, I, I think it's a brilliant idea. Like I said earlier, you're taking, you know, 3 separate exposures. And each one individually. is going to be rated higher. You take all three of them together, you're spreading the risk more. You're, uh, have more premium volume and so it's, it's perfect for a captive. It's what insurance companies do is it's how insurance companies started.
Representative Keith Brooks
Unverified
4:45:28
And follow, Mr. Chair, what would, uh, if, if you could Um Really categorize one why, what, what would be that one why for McGriff to be the one that we would choose in this situation.
Speaker 302
4:45:43
Um, I, I would say a couple of things, but one, we're so used to working with governmental entities. And 2, we've handled some huge, huge property exposures. I've been doing this 30 years. We've handled some of some huge claims, uh, we know all the underwriters domestically,
London, Bermuda, and we have personal relationships with all them. I've been going over to London for 30 years now, and typically go over there 3 or 4 times a year. Members, any
other questions? All right, thank you, gentlemen, very much for your presentation. Uh, we'll be in touch. Thank you. Thank
you. Members are gonna take a few minutes to reset the room and we'll be starting over.
Good afternoon if you guys are ready, we can get started a little early. All right, um. Last proposal that we're gonna hear today, I believe this is Steven's Group, so if you
would just introduce yourself for the record and then you can
Speaker 351
4:51:58
go ahead and begin your proposal. Yes, I appreciate the time. JR Bizzle, Stevens Insurance, uh, located here in Little Rock, Arkansas. Ted Grace, executive
Speaker 353
4:52:06
vice president of Stevens Insurance here in Little Rock, Arkansas. Kurosaba, I'm the
Speaker 355
4:52:09
president and CEO of Stevens Insurance. I'm also based here in Little Rock.
Speaker 358
4:52:20
Miles Stevens, co-CEO of Steven's Inc. You go right ahead. Good afternoon. As I mentioned, I'm, I'm Miles Stevens,
Speaker 360
4:52:34
I'm co-CEO of Steven's Inc. Prior to becoming co-CEO of Steven's Inc. I served as CEO of Stevens Insurance from 2019 until about a month ago. As uh I guess JR mentioned.
And, and Karoche, um, we are all Arkansans and, and Steven's lifers that, uh, that have been with the company for, for 10+ years. I want to thank you all for allowing us to present today. The state has been very good to us and it'd be an honor to, to handle this program. We wouldn't be here if we didn't know that we could do a great job. There are other brokers in this process that are that are bigger and have better looking stats on a page.
But Arkansas faces that same issue when we compare ourselves to other states. We know those numbers don't tell the whole story. And I hope that you all will look through those tactics and focus on the people. That'll be servicing this account and their desire to do a great job for the state. We have the desire and the expertise to do a great job and we'd be honored to have the opportunity. Thank you. Yes, we wanna say thank you
Speaker 362
4:53:53
again for allowing us to present. We're gonna try to keep this, we know you've been through a lot of meetings talking about insurance, so we're gonna try to keep this short and sweet and then open it up to as many questions as you guys have. You obviously have seen our RFP which kind of provided you our technical and analytical approach that we would take to this captive. The key takeaways we'd really like you to take away today is that Stevens is committed to protecting the state and the district assets. Our captive expertise we have proven track records of not only
forming but optimizing captives in the state of Arkansas. We think that July 1st, uh, date is not only feasible, but we also think it's very advantageous. Uh, we're gonna show you and we're gonna be completely transparent with our fees and all fees, not only our retail broker fees, but also the intermediary fees. We think this project's gonna have a very long term positive impact on the state going well beyond just property insurance we think once the captive gets established, you're gonna see
other opportunities and we'd be very happy to talk about that in
Speaker 365
4:54:59
in the question and answer. Cros, you
Speaker 357
4:55:06
wanna talk about next? Yeah, thank you all for the opportunity to to present to you, um, I wanted to. Hit on 3 things that you see on on page 3 here, um, the first is that we are an independent firm. We are owned by one Arkansas-based family. And with that independence
affords us is to take a long term view on how we manage our business and how we interact with our clients and partners. What that in uh independence also affords us is that we have the flexibility to work with intermediaries and other partners on behalf of our clients that are in the best interest of our clients. Uh, the second point is, um, That while we have a local presence, we have a global reach.
Um, we are a top 50 US property and casualty broker. Um, and what you don't see on, on this page is that, um. We've got an office in in London as well as Frankfurt. And then lastly, Um, our team is capable and does today manage some of the most complex risks. Both in the state of Arkansas and across the United States. It's our clients today include Fortune 500 companies. Um Nonprofits as well as public entities.
Speaker 358
4:56:28
This next page, page 4. Um, highlights our team, which, which we're very proud of. We, we have a
Speaker 360
4:56:34
great team and, and one thing, That I'd like to emphasize is that the team in front of you today would stay on this account for, for the duration. You would never be passed off to another team under our model. As you can see by the, the logos besides some of the names, the majority of of the people on this team that would be working on this account or are located
here in Arkansas. I think that's particularly important with the loss control piece. Those guys are here and available to to assess the properties that are in the program. I also think it's important on the claims side. I'd like to highlight them as well. Courtney McClarty leads to that group and she does a great, great job for us. Another thing I'd like to say it's just that, you know, this isn't a bunch of names that we just threw on a piece of paper for the presentation today. These people are, are available
and willing to to work on this account. You all, um, like all of our clients would
Speaker 351
4:57:38
obviously perceive our very best. Yeah, building on what corrosion miles have have stated on, on, on kind of our team structure. We also differ from our competitors in a, in a pretty key facet, particularly for this placement, uh, we've merged both our, our reinsurance broking services, or risk management services, as well as captive strategy and consulting and optimization details all into one team. You're seeing that
team here, you're seeing him on the page before, uh, and what I mean by that, I think we think it's most important from an optimization standpoint. You must, you must equally know the marketplace when we're broking your insurance as well as uh the captive opportunities that exist, so you can truly optimize and benefit the state and districts in the most uh important manner, which is both cost savings, risk management, and, and risk transfer where appropriate. We also use data analytics. I'm sure you've heard that word a lot today. We didn't bore you
with all the slides. We have internal, uh, proprietary models. We also utilize models that other peers use as well. We use a collective approach. We have internal uh evaluation tools and things of that nature that we can get into if, if needed, um, additionally, You know, we actively monitor that data, so we're giving you live updates on what is the market doing, what would that mean for a long term captive solution. Another point, I think it's one of the highlights on the page, because we are captive focused and, and we're really specialized in Arkansas
captives. We currently write 25% of the captives we've helped form and we currently help uh consult on and optimize those captives to date. But not to overshadow the global reach that we keep trying to stress. We're, we've, we've really built a strong foothold in Arkansas that's allowed us to expand outside of the borders, um, 50% of our top clients, uh, currently utilize and, and actively monitor and optimize their captives that we helped form. Another note I'd like to add, because we're independent, not only on the intermediary
brokerage services, but on other services as well, so, uh, we know you've had conversations with captain managers. We've worked with, uh, over 6 plus captain managers in the captives we managed today. We work with 4 different captain managers in the state now. The point of that is, is, is we're a team player, we'll work with any partner and we have no issue working with any, um, um, you know, affiliated captive manager. The other thing I would note is. Um, with that team, and then obviouslyer Knight who helped build a very nice actuary, uh,
feasibility report. That team collectively can evaluate the risk as a, as a, as a defined unit as opposed to separate entities we help advise on things as simple as lines of coverage, uh, additions, retention changes, as well as helping investment strategies of the premium that flow into the captives. We've, we've, uh, we have solutions we currently employ and, and, and we just want to stress that, uh, we aren't just insurance brokers we have. a multifaceted use of tools that
Speaker 362
5:00:37
we can deploy on behalf of the state. We know that the committee's goal is to have this up and running by July 1st, and we believe that that is very doable in fact, uh, we see it as a real opportunity, uh, we were just in London 3 weeks ago, met with over 40 different insurance companies, and we see the environment in the insurance marketplace right now, being as broad and as competitive as it's been in 4 to 5. 6 years and so we not only think
that it's doable, but we think that delaying it could actually lead to higher cost or if, if another hurricane hits the coast, you may actually see reduced capacity later in the year. So we think it's right now is the time to do it. We think we're the team to be able to do that. We have a timeline that we would, uh, that we wanna visit, uh, share with you one is that if we were named broker on March the first. We have a schedule already in place to go to London in the first two weeks of, of, um, of
April. Uh, if we're the broker, we would present your program during those first two weeks in April and then we would immediately submit the reinsurance, uh, applications to all those markets immediately upon our departure from London. Um, we think that the captive formation and the regulatory approval can be done by June 1st or June 15th. We've actually worked with the state insurance department. Where they couldn't get the uh application approved and they backdated the captive force, so
we went ahead and put the insurance in place and then we actually got uh a date backdated so we think it's very doable, um, and then of course, we would launch the captive and the reinsurance renewal would be on July the first. So we think it's very feasible we actually think it's uh a great time right now to put this consolidated
Speaker 357
5:02:35
program together. I wanted to provide some context around our um proposed fee and
the structure, uh, but before doing that, I, before getting into the Stevens pro proposal. I want to take a step back and Um, let y'all know where the compensation and the costs associated with placing this business will come from, so there's, there's two. categories that um the state will be paying for. There is the retail brokerage fee. Or compensation and the retail broker would be. Stevens and then there's another category of costs, and that category is the payment.
To intermediaries to access. Uh, international markets like London. And so on the right side of the page, you'll see the Stevens's proposal. What we're proposing is a fully disclosed transparent fee. And then a matching fee for a third party, uh, intermediary to help us access the London market. The left side of the page is illustrative. But what it shows is what we
often see, which is a broker, a retail broker fee. That is low. Uh, but is accompanied by intermediary costs that are much higher. And those intermediary costs are not always fully disclosed or fully transparent. Oftentimes they're a percentage of premiums, um, that is embedded within your premium. Um, and so we just wanted to highlight that. Um, what we also wanted to highlight was that if you don't know the dollars.
That you'll be paying for both of those categories. Um, then you don't know the total costs. For this program. The last thing I wanted to hit on was that our compensation, like I mentioned, is fully transparent. There is no other compensation as a result of placing your program. Whether it's us having contracts with the insurance carriers for consulting agreements, data sales, or any other arrangements where you see it's all here. Tittle pass back to you.
Speaker 376
5:04:50
So in summary, uh, Stevens is committed to this program. We're committed
Speaker 362
5:04:54
to protecting the assets of the state. We think we have the experience and the proven success record in forming and optimizing captives in the state of Arkansas. We're fully ready to launch this program by July the first. Uh, we're gonna provide full transparency on all the compensation, not just Steven's compensation, but all the compensation, including the intermediaries. Um, we have a, a local strong local
presence here in Arkansas. I think we have, I think what 700 employees here in the state. But we also have strong London connections and Bermuda connections and we have the market leverage that you need to get the best pricing in those markets, uh, and with that we'll open up to any questions. All right. Thank you, gentlemen, for the presentation. Members, are there any
questions? Senator dismay. I mean, and I think you guys have probably seen enough, at
Senator Jonathan Dismang
Unverified
5:05:51
least of the videos from committee meetings or whatever that
we've had and I think, you know, so obviously we want to be innovative in what we're doing. That's the reason we've come up with this proposal and, and then hopefully the reason you're sitting here, which is gonna take, you know, quite, I think quite a bit of coordination between a broker and a captive manager to make sure that in a way we're managing the schools and what they need to be doing to be lowering our ultimate risk, um, kind of talk to me about how you would see that relationship with. the captive manager to be able
Speaker 362
5:06:22
to achieve some of those hopefully future savings. Yeah, so, as we mentioned, we work with multiple different captive managers and Stevens, we see ourselves as kind of the tip of the spear so we're gonna work with you in design and in optimization of the captive not only in the set up formation phase, but then in the following up years, because one of the things that we found is is that the market changes very rapidly and in order for us to keep that program going, we have to have our fingerprint on the market,
as well as the ability to Adjust the captive as needed and so we, we currently work with many, uh, captive managers and many clients and we're optimizing and changing that on a yearly basis or on a monthly basis. We think that's what makes us nimble, because we're there, we're the ones negotiating the reinsurance contracts and so when we see a change in that we can immediately pivot, work with Per night, work with your captive managers to make sure that we keep that captive
optimized and it's not always in the negative, it may be that the market gets softer. So we need to pull back risk that we're taking in the captive and so it, it goes
Speaker 351
5:07:32
both ways. I would add, I think that's an important point. We do not want to discount the fact that it's not just the captive manager and the, the insurance broker. It has to be all parties involved. That's also the, all the way down to the districts and, and, and the school boards all the way up to the actuary as well because I think having a relationship with the actuary, a strong relationship with the
actuary, the captain manager, and the broker all aligned, all understanding what the goal is and understanding the conceptual concepts that could be put in place in the future is vitally important for long-term success. Uh, Representative Brooks, you recognized. Think it
Representative Keith Brooks
Unverified
5:08:11
was chair over here. Appreciate you guys. Thanks for all your work on this. A couple of questions, uh, so obviously,
as we approach this, you've got a lot of different complexities, uh, from a just a general
individual property basis. So we've got, um, thousands and thousands of properties across the state that you would be insuring $50 billion to insure value. Um, talk to me a little bit about how we ensure that, um, the risks that are out there are, are probably properly covered, uh, given the fact that we may not have been where we need to be up to this point, uh, that's, that's a pretty time consuming process for me as an insurance background. Gosh, it's, it's time consuming to go look at one house, right? Uh,
so, so how do we make sure that, that we keep the deliverables that that we would want from a time frame perspective, but ensure that that our properties
Speaker 362
5:09:05
are covered as such we want them to be. Yeah, great question, thanks, thanks for asking that question so we face this issue with all of our clients, obviously the schedule of locations is very large on this program. We have a data analytics program that goes out and and pulls public data that can zero in on the valuation and then that, that
typically red flags the locations that we need to to spend more time on. And that may mean that we do a Marshall Swift evaluation in-house or it may mean that we have to send a lost control engineer out there in person to visit with those with those districts and those building managers so that we can get some of the secondary construction factors that, that are
Speaker 382
5:09:46
important in valuing that building. I would also note, uh, on
Speaker 351
5:09:51
evaluation program over the life of this what, 18 month process that we've been able to kind of
follow the thousands of pages of data. Your primary, uh, cope data as you all probably heard, which is the most important structural details, but then the secondaries to Ted's point, your primaries are in in a good spot. I think when you look at the peers, you're in the market already. I think to Ted's point, we would need to filter out and find the, the ones that we need to address first. I think it's the most strategically um strong strategy then over the course of the year we we attack all of the schools. I'm not saying we can't do that early, but I think we really focus on the ones that
are gonna cause heart er for the market because that's the goal. They are too, they also are going to be running the same models, the same evaluations, and, and we're gonna need to have a good understanding of who are the ones they're going to need us to talk about more. The other item is, there's a lot, a lot of technology being developed on appraisals, uh, that, that can guide on that. We have multiple services we've engaged on, on other large accounts to help guide them on making that decision, uh, it's a really difficult, uh, thing for a company to understand the replacement cost value.
versus a praise value and, and we can help God in that. And then when we say, uh, our fee was built on predicated on us being the tip of the spear. This would be one of those things. I think when we factor in to do this right, um, we, we would want to deploy full assets. We have to Miles's point earlier, we have 4 loss control specific individuals within the state alone that could be deployed to really go target those, those highlighted locations in the early innings of this process. So again, um, it's very important to one understanding the risk that we've got. so you can tell the better story
and we understand Arkansas really well from, you know, geographically, but I think also being narrow it down to the schools specifically is important for London to understand.
Representative Keith Brooks
Unverified
5:11:39
Follow up. And I think I'm gonna add tip of the spirit to my boots on the
ground as being our, our two things we have, have a good, uh, good consistent uh phrasing. I love that, by the way, I'm just kidding. Uh, so relative to fees, you talked a little bit about Excuse me, the, the base feed to, to Stevens, but then also intermediary fees, uh, on here
it says is, is the 950,000 intermediary fee, not to exceed that or that's what an average expectation of that
Speaker 387
5:12:09
might be. It's not to exceed that. Thank
Speaker 351
5:12:12
you Mr. Chair. I would add, if you don't mind, just to follow up to that. I think when you comparatively, we, we negotiate fees and why do we do that? Because as you grow, if we were to add additional schools, additional lines, additional risks if you're on a percentage base, they grow when you grow, and Stevens is a fee-oriented firm, as we mentioned, we think we should
grow when we need to grow with you guys if we've done the work and it's necessary, we will do that. But as a, as a component, we typically see a percentage-based. Premium built into the premium on the intermediaries can range anywhere from 4 to 7%. And I think you probably heard that today. And that's to corrocious's point earlier. If we have not heard a defined number today from our peers, uh, a 5% just for perspective, 5% on the low water mark of per night's report expectation of
$35 million of premium would be 1.7 million in intermediary cost alone and on the 40 million high water mark, it would be over 2 million alone just an intermediary fees, not inclusive of the retail broker fees or any other wholesale fees. So 950 is negotiated, we can stamp that that is the number that it will not exceed. Good. Alright. And on, on
Speaker 358
5:13:22
our feed, um, I'd like to add that. You know, the last thing we wanted to do was, was lowball
Speaker 360
5:13:28
a number and if we're fortunate enough to win, then come back
and and try and jack it up in a year or two and we feel good about the 950 for, for years to come and are are comfortable working at that number
for the foreseeable future. Thank you. All right, Senator
Senator Justin Boyd
Unverified
5:13:47
Boyd, you recognized. Thank you, Mr. Chair. So I've, I've got 3 questions, um, and a couple of them I'm asking to everybody, so just bear with me if they seem to apply more or less than maybe they did with somebody else, but yeah, the, as we've learned as I've learned more and more about insurance and then the role of the broker,
there's some concerns and I think you've addressed a lot of them is why I say, why I prefaced it that way with this fee or, or, or this payment or this behind the door thing. So. Other than you're located in Arkansas and you're paying taxes in Arkansas. What assurances can you give me that whatever you do, you're gonna have the Arkansas taxpayer in mind with, uh, how you conduct business
Speaker 390
5:14:36
with, um, I think that. The uh The best we can do there is just lay out a transparent.
Speaker 360
5:14:44
and and have that number out there and everyone um. Everyone knows about it and we're all on the same page on, on, on that front. And uh As you mentioned, you know, we certainly, you know, we live here and uh. You know, always try and operate with the best interests of the state and and our clients, um,
in mind. I don't know if y'all add anything. Uh, and I,
Speaker 351
5:15:11
I'd be curious just to if, if the idea is fees that may not be tied into the fee, but the global parent received something in, in return for working for the state. I think we see that a lot as well, and I think Karoche alluded to that in um some of that data and I may let him kind of chime in because in his prior role in Miles' prior role, they saw this a lot more than I did.
Speaker 367
5:15:31
No, to Miles's point, um, that's right, like I said it earlier too, and what you see.
Speaker 357
5:15:39
Is that's it, um, we don't have agreements with carriers domestically or globally for consulting agreements or data sales or any other arrangement, um, it truly is the
Speaker 390
5:15:49
950. OK. And when you, when you think about these percentage of, of premium
Speaker 360
5:15:55
setups. I mean, that's kind of a, um, perverse incentive, right? I mean, the more premium that people are paying. The, the higher the commission. To the, to the intermediary. And uh that's, that's why, you
know, we think it's so important to be on a fee, and if we can save the the state money, you know, we make the same amount of money in, in that case, um, versus if, if premiums
Senator Justin Boyd
Unverified
5:16:20
went up. So yeah, we, we also learned the term override in another one of
the presentations right like the the the the language is complex and whether we call it a kickback or an override or incentive payment, whatever it is, it's out there and the taxpayers are looking at us to make sure we're doing the best job for them, which means we got
to look at you, um, the second one is really kind of unique to you because you are in Arkansas, um, but we set the laws as might be obvious, right? And so I think it's important that whatever we do. follow the laws and so can you give me some assurance that you're fully aware and you will stay up to date on Arkansas laws and we're not gonna hear about how we're, we're skirting the laws and that's unfair for the what the legislature does versus what other companies, other entities are doing. OK. And then the final question
is, if we hire you, what is the likelihood of us being surprised by any
Speaker 384
5:17:20
government or civil actions against your
Speaker 367
5:17:22
firm. I hope low. Yeah, it's our knowledge there isn't any action or pers uh you know, potential action. And one other
Speaker 357
5:17:31
thing I'd, I'd add, um, both to your, your first two questions and um. You know, we do have a a reputation to to hold up in the
state, um, we've worked really hard for it, you know, the families. Start the business over 90 years ago, um, and I mean, our name means a lot. It's on, you know, building downtown Little Rock, um, and so, uh, you know, outside of us being state taxpayers, you know, protecting their reputation is very important for us. Uh, Senator Hester. Thanks. I've,
Senator Bart Hester
Unverified
5:18:03
I've started off a lot of my questions trying to make sure that people understood Arkansas and that, and we understood them, I think, uh, you guys just looking at your
map, uh, you've you've got an office of some sort in all four congressional districts and I think one of the things that matters the most in the, in the broker situation is when we have a Rogers, Arkansas win, Arkansas Little Rock, Arkansas that, uh, that, that, that the people they representing understand what's going on and have, uh, local empathy, uh, and, and, and can represent us well. I mean, I heard you say you got 700. State employees, which would be in all 4 congressional districts that, that, that, that means, that means a lot to me and I think it matters to the people of Arkansas.
But but on to the next step, that one's, uh. Pretty clear, you guys say you stood up 25% of the captives you manage. How many, how
many captives do you manage? How many in Arkansas? Do you have any
Speaker 399
5:18:54
Arkansas captives? We do. We currently and, and, and. Transparent,
Speaker 351
5:18:57
you can find it on the website. There's, there's 16 current active captives in the state of Arkansas as of the data, late 23, early 24, obviously, end of 24 has not been produced yet because a lot of people most likely could form at the end of 24. Uh, within
that math, 25% is for active captives. We consulted on multiple others that either, uh, decided to choose a different state or, uh, naturally it didn't come to fruition, but I think one thing we would know a lot of our clients are looking at them and, and we'll put them in place down the down. the path. Uh, I would say that of those four, all are have met with and and exceeded expectations for the state and I think we're actively engaging with the regulator within the state. We're monitoring the, I think one of the questions around legislation that comes
out and staying above the law, I think there's a, a constant monitoring of can we improve or does the state and, and I think you all have proven that have, have improved the captive opportunity for businesses and, and we're always monitoring that. Outside of the state, we, we actually manage another 5 captives with 1 being formed uh very soon, um, and so I think naturally our team has a pretty broad range when you look at the number of clients we currently have, and that's another thing I would be a super focus. We pick the right risk. A lot of these
captives that are being formed or have formed have significant property risk that we are utilizing a captive to help support. OK,
Senator Bart Hester
Unverified
5:20:24
so, so some of these we've met with some of the biggest operators in the world and you being independent is, is certainly unique, uh, in that, but the, but the name Stevens around the world stands for itself, uh, the, the ability to go, you know, work in London, um, I heard y'all say Germany, uh, that seems to be a key factor here. Clearly you have, uh, Uh
Clearly you guys can do that. How can you, uh, as an independent go in there and and cap these in rates in in London if some of the biggest operators in the world or maybe you're just choosing to offer they offer that
Speaker 351
5:20:59
and they're not. Great question. Let's, uh, I'll, I'll take that into two parts. I think the reach, you know, we, we, at the end of the day, as Miles alluded at the very beginning, this is not uncommon territory for us to be competing against some of the largest brokers in the world. I mean, we do it on a daily basis. So, uh, we are naturally hearing this pitch and we have to defend ourselves constantly. What I
would say is the independence is important to stress because we can use any intermediary or wholesale partner or any insurance carrier that's out there, we can get access to them. Like any other big broker, what differentiates us is we don't have to use our internal intermediary. We're not required to use our internal guys. What we are required to do is prove that we have done the right thing for the state by picking the right intermediary that meets your all's needs. So when I say we've come in with the expectation of that fee. That's
the second part. How have we negotiated the fee? Um, we have partners that are both independent and we also, I would, uh, uh, let you know that we use some of the biggest intermediaries that are affiliated with Maybe some peers that interviewed here today, uh, but with those independents that are some of the largest independent intermediaries in London, they're not, they're like us, they are not affiliated to anybody. So they are hungry to go out and succeed and get the right pricing for the right partner that we have two on record that will meet and exceed any pricing that that ultimately
we're doing and I think in this case high level, they'll meet this target and we
Senator Bart Hester
Unverified
5:22:25
can promise that. And I, I like, I think you found a word that I was almost looking for that so many of these companies are so big, which brings some comfort level, uh, but maybe eliminates the hunger, uh, that somebody like an independent would bring to us. I thought the last question I have is for uh uh miles, so Miles, I've asked this of everybody, um, is, is there, is there anything that we would be surprised with, uh, following
ESG DEI climate change that would, that your company would stand for that that would not align with us. I think you're the only. pri n ci ple that I'm
Speaker 296
5:22:58
able to ask that question to. No, I think, I think we would be in alignment with, with you all on
Speaker 360
5:23:03
that front and, uh, Yeah, I feel good about everything. Uh, in terms of us being a meritocracy and, and not having any sort of any of those programs. Thank you. Yeah. Senator dismay. Alright, thank
Senator Jonathan Dismang
Unverified
5:23:16
you. And alright, so I wasn't prepared for the cap. So, because I think in RFP
we contemplate a 5 to 7% range, I think, and then now we have this cap in place so I've been trying in my mind work through what that means exactly. And so I think if I'm thinking through it correctly and I, and I don't know if this may be part of your rationale too. And you've set a cap on what you're willing to pay in fees to other people, and we've announced it to everybody that's willing to play ball. Right? And so there's a ceiling. Which creates some incentive to have early on conversations or you're going to be outside the ceiling. I would think, and then it's gonna create some incentive.
For them to obviously drive down their rates so they can be a part of the program. Uh, but then also when we talk about an overall estimated insurance cost that's also incentive for those premiums to be lower than they might have been otherwise because if they're not and they're demanding even a 4% fee. Then you could cap yourself out really quickly, which is to your detriment because you're going to have to pay more significant fee than. You know, uh, you know, we're on the hook for the 950, you'd be on hook for more is what way I'm kind of thinking through this process would be is that?
Speaker 351
5:24:25
That is correct. And I would also add on that percentage, the way we view it too is every percentage saved is a percentage back to the state's pocket. As opposed to going to the third parties, you know, as that is on intimate percentage premiums, those are, those are built into that premium dollar. So historically, you don't see them. So in this, in the case of the combined programs, it's $69.7 million of premium being paid to date. Well, if you put 5 to 7 points on that number, I bet you guys can appreciate, that's a very large intermediary
fee that's currently leaving the state that we are actively trying to put back into our pocket, your all's. to, you know, taxpayers' dollars to both prop up this captive structure or self-insurance structure, depending on how you all proceed and, and those dollars are then deployed and put back into the state schools as opposed to going to pockets. But in y'all are comfortable with having shifted the risk back
Senator Jonathan Dismang
Unverified
5:25:17
onto yourself because I mean, that's the way that I interpret what this would do. I mean, you're, you're going to be
having to buy, you know, a lower price premium. And then also having to negotiate those rates, I mean, it's kind of a, it's a different
Speaker 390
5:25:37
concept than what we've been talking about unless I'm missing it. So And you'll jump in, but the premium is separate
Senator Jonathan Dismang
Unverified
5:25:44
from the fee. And so the percentage of commission would be calculated on the premium.
Speaker 390
5:25:49
So, so there's two different models so you can either do the percentage of
Speaker 360
5:25:56
commission model and that would substitute for a fee. Or you can do a flat fee. And so what we're saying is our fee would be 950 and then When we go to London and use an intermediary, intermediary over there. They would be compensated another 950 that would come from the state as well. But we're comfortable saying that it won't be higher than 950. And I think your question was, is there not is the intermediary
Speaker 367
5:26:28
is 950 a percentage and our intent is that it's
Senator Jonathan Dismang
Unverified
5:26:31
not a percentage, it's a fee to them as well, but I think you're forcing a negotiation by having a cap at your 950, which shifts some risk to y'all to some degree, right? We're gonna have to buy enough insurance to, to fill the buckets.
Speaker 390
5:26:48
One way or the other, so they. They Basically for the 950, they'll be fully able to do their job and, and Place whatever
Speaker 360
5:26:55
coverage we need to place in the, in the London market. All right, perfect.
Thank you. Our members, any other questions? Seeing none. Thank you, gentlemen, very much for being here. We appreciate the proposal and we will be in touch. Thank you all. Thank you. Members seeing no other business, we are adjourned.
Agenda
A. Call to Order
B. Presentations of Brokerage Services
C. Other Business
D. Adjournment
Documents
Speakers
Representative Les D. Eaves Chair
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Mike Kennicott
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Chair
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Representative Jack Ladyman
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Senator Justin Boyd
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Senator Jonathan Dismang
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Senator Bart Hester
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Representative Keith Brooks
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Mark Sulli
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Doug May
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Representative Jeff Wardlaw
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Greg Singleton
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Johnny Fontno
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Chase Rielmeyer
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