April 13, 2023

Action Items

Cyber Corner: Texas City Employee Falls Victim to Cyber Criminals

A city employee recently wired almost $1 million to a cybercriminal posing as a vendor. If you see anything in an email that makes you suspicious, DO NOT click on links, supply any type of personal or work information, send money, reply to the email, attempt to contact senders, or open attachments. Instead, follow your cybersecurity plan, which would typically include contacting the sender directly (outside of the email chain itself) to confirm legitimacy, reporting to IT, and/or deleting the email. And, if someone in your organization accidentally falls for a phishing scam, contact the Risk Pool IMMEDIATELY. Each Member with liability and/or property coverage automatically has a base level of cyber coverage, and more is available. As always, contact your Member Services Manager if you have questions regarding cyber prevention or cyber coverage, and check out the Pool’s cyber resources.

Updates and More

Rerate Process in Full Swing: Spotlight on Reinsurance

The Risk Pool’s Board of Trustees will adopt rates for the 2023-2024 fund year at its April 28 meeting. As with any year, many factors will influence the Board’s decisions. This time around, the cost of purchasing “reinsurance” is a major one.

What is reinsurance? Just as the name implies, it’s basically insurance for insurance. The Pool uses it to transfer portions of our risk – typically for catastrophic losses – to reinsurers. This reduces the likelihood of the Pool bearing the brunt of a very large loss, thereby reducing Member equity.

In the broader insurance market (not only in Texas, but worldwide) the property/casualty insurance markets are seeing rising rates and less coverage available. Several factors are driving the overall increases in property reinsurance coverage:

• Global catastrophes continue to push rates higher, brought about by – among other things – an active hurricane season in Florida last year.
• Rising interest rates mean many investors are leaving the reinsurance business.
• Construction inflation means building (or rebuilding) costs are rising.
• Supply chain disruptions, while evening out somewhat, continue to present significant challenges.
• Global conflicts (like the war in Ukraine) present significant risks to predictable loss patterns.
• Those that “reinsure the reinsurers” are less willing to gamble against catastrophic losses.

Recent industry reports forecast increasing reinsurance prices along all lines of coverage, with some areas – such as cyber – seeing 100 percent increases. Texas property and workers’ compensation for public safety make our market especially hard hit. All that is to say the underlying protection provided by the Pool’s reinsurance structure will become increasingly more expensive. As always, even in the face of adversity, the Board and staff will take every step necessary to adhere to the Pool’s mission of providing a stable course of risk financing to its Members.

Risk Management Minute

When did the TML Risk Pool become “full service (e.g., begin to provide workers’ compensation, property, and liability coverage)?”

In 1974, the Texas Municipal League created the TML Risk Pool to provide workers' compensation coverage to municipal employees. In 1982, cities saw other coverages becoming scarce and expensive. In response, TML created a liability fund that year and a property fund the following year. (In the mid-1980s, the U.S. insurance market essentially crashed. According to Time Magazine, that was “a time of frantic efforts to obtain insurance that, at best, was available only in limited amounts with high retentions at exorbitant rates.”) Today, the Pool provides liability coverage to 1,169 cities and property coverage to 1,142 cities. In addition, the Pool offers coverage for cyber incidents. Each Member that has liability and/or property coverage receives a base level of cyber coverage (with the option to purchase more), along with resources to stop cyber-attacks in their tracks. Please contact your Member Services Manager with questions about coverage.