2018 FPL/MML Binding Authority Narrative
Thanks to the support of underwriters at Atrium, Dominion's binding authority, renewing October 1st of each year, continues to enjoy wide acceptance across the United States. This is due in part to key partnerships with professional associations such as the National Guardianship Association (NGA) and the Professional Fiduciaries Association of California (PFAC) through which Fiduciary Professional Liability (FPL) insurance is offered, as well as the American Association of Daily Money Managers (AADMM), which offers our Daily Money Manager Liability (MML) policy to its members. Although these programs remain on a trajectory of continued growth and profitability, we believe that trend can be accelerated by means of enhancing existing offerings and introducing at least one new line of coverage—Trust & Estate Indemnity Policy (TIP).
Dominion currently writes nearly $2.4 million in premium in its FPL program and just under $250k in the MML program. Total written premium during the 2016-2017 contract period was 2,491,862. The 2018-2019 period is projected to close out with approximately $2.65 million in renewal premium and perhaps as much as $150k in additional new business with more than 50 accounts currently in the new business pipeline.
The total policy count is holding at about 700 with the average premium per risk up by more than $100 to nearly $3,800 due primarily to new endorsed coverage offerings. Claims experience continues to improve, with the projected loss ratio holding at under 60%.
Fiduciary Professional Liability (FPL)
Premium Volume
The FPL section currently accounts for $2,394,665 in booked premium on a 419 policy count.
Competition
There has been growing pressure from competing brokers to shop our fiduciary accounts widely. Nevertheless, we are always sure to highlight Lloyd's advantages over the competition. This has been made easier by policy improvement introduced this past year. In addition, the ease of renewal using the new short-form renewal application approved by underwriters has been very well received by the insureds and undoubtedly has contributed to higher retention rates.
Claims Experience
Claims appear to have peaked and begun to retreat as a result of policy enhancements, improved claims intake and handling and risk management initiatives. These include the claims hotline designed to encourage early reporting. Also, risk reduction presentations at PFAC conferences have been well received and appear to be paying dividends in terms of reduced claims activity and severity.
Claims Handling
Furman, Kornfeld and Brennan (FKB) has acted as claims/monitoring counsel for the programs since 2007. FKB has learned much since then, which has allowed it to hone its claims handling procedures for this particular class. FKB's most recent recommendations are discussed in more detail below in the Wordings section.
Underwriting Issues
Rate Adequacy
Having just taken rate this past year and in light of improving claims experience, we would strongly caution against any rate increase this year. FPL average rates are still more than double the most popular domestic competition.
Policy Wording
As in past years, we would suggest the following policy enhancements to keep up competitive pressures and client expectations:
Elimination of Exclusion L which is overly broad and duplicative of Exclusion P.
Deletion of the phrase "independent third party escrow agent" from exclusion O.
Addition of the following covered capacities:
Escrow Agent,
Co-Fiduciary,
Court Visitor,
Court Facilitator, and
Trust Protector.
FPL competitors have been steadily improving their policy forms. We have worked to position our Lloyd's offering as the preeminent program for professional fiduciaries—differentiating ourselves on quality rather than price. Steady, prudent program improvement is important to maintaining that claim.
High Revenue Accounts
As discussed in prior years, the premium levels for Lloyd's and competing carriers diverge significantly at higher levels of firm revenue. Consequently, in order to attract and retain larger accounts, we agreed to consider additional credits for firms with
premiums in excess of $7,500 annually. Typically, these larger practices have more experienced fiduciaries, better internal policies and procedures, and better trained staff. These are the accounts we want to retain. The flexibility underwriters have extended in the past with respect to these accounts has translated into higher retention rates. Accordingly, we suggest that we continue this practice of rate relief for large accounts.
Scheduled Trust Policy (STP)
The STP program presents a significant opportunity for growth. The concept is to offer existing FPL insureds the opportunity to secure additional coverage for select trusts and estates that they administer. Thus each existing insured could spawn a number of new policies.
We would of course maintain the current FPL product as it currently exists, but also add two completely separate policies for this new product: the umbrella FPL policy, and the individual trust policy.
This is for a number of reasons but primarily because we would need separate policy numbers across the board. It also allows greater clarity over the intention of the product and means the individual trust policy can be given to the trust/estate without revealing the FPL policy limit sitting excess of it.
The FPL Umbrella Policy
Would reference each trust specifically in the declarations
Professional services limited to those named trusts or estates only - ie no drop down or % limit available for unscheduled items during this first roll out phase
The easiest way to tackle the tail issue we discussed yesterday is to have this policy cover those trusts previously scheduled but no longer providing professional services for (incentivised to stay within the programme) - suggest we list them as predecessor trusts/estates
This is mandatory to being able to purchase the individual policy
The supplemental coverages can remain and this policy would act as primary on those coverages
The Individual Trust Policy
Not a sublimit - would be a separate standalone $250k/$250k limit for each scheduled item
Separate policy for each trust/estate that can be evidenced
Does not make reference the FPL policy
Rating methodology
Each Individual Trust Policy will be rated according to the total $ value of the assets. This is the most accurate way to assess the exposure we face.
The FPL Umbrella policy will be rated on total assets of those trusts scheduled
The aim obviously is to make this a more cost effective way for the professional fiduciary to purchase their own E&O insurance
Target Market
Trusts administered by existing FPL insureds
Estates administered by existing FPL insureds
Attorneys
Accountants
Distribution Channels
Existing Fiduciary Professional Liability Insureds
Associations (NGA, PFAC and other state fiduciary organizations)
Daily Money Managers Liability (MML)
Our Daily Money Managers program continues to expand steadily. Our in-force policy count has topped 276 with gross written premiums on that book standing at $249,216. Although we did have one negative year, this book continues to be profitable.
Miscellaneous Professional Liability (MPL)
The miscellaneous placements this year remain modest. Nevertheless, this capability provides an important tool for
exploring new promising classes.
Business Surety Bond (BSB)
Although we have had minimal writings under this section, it continues to be an important discussion point with Daily Money Managers. We would suggest a marked reduction in the premium for these bonds to boost sales.
Data Consultants Liability (DCL)
While Data Consultant writings have been quite disappointing, we would like to continue to include this line in the
binding authority for the coming year as we consider better ways to approach this market.
We genuinely appreciate underwriters continued support and look forward to improving the scope and profitability of these programs moving forward.