When it comes to insurance, there is power in numbers.
That’s the idea behind a risk purchasing group, or RPG. An RPG is essentially a co-op of companies coming together to collectively purchase umbrella coverage at a discounted rate, with enhanced coverages. RPGs are most successful when all organizations in the group face minimal, similar risks and exposures.
The problem is that real estate Risk Purchasing Groups have become less disciplined in their underwriting in the last few years. Many now include companies with greater liabilities and losses than the core risk profile group the RPG was designed for.
The economies of scale have tipped to the point that a major insurance carrier pulled out of the RPG market in late 2018, leaving numerous habitational and commercial businesses to look for a new umbrella solution ahead of their 2019 renewal.
Real estate organizations with “vanilla” risk will still be able to move to another RPG. While their premium rates will likely increase, the difference shouldn’t be significant.
Organizations with greater risk, i.e. those located in riskier urban areas, or with loss activity, will likely no longer be eligible for an RPG. In this case, premium rates will dramatically increase, some escalating hundreds of percentage points, compared RPG premium costs.
Real estate organizations abandoned by their Risk Purchasing Group will want to consider the following:
- Know that although your RPG umbrella policy may not be renewed in 2019, there will be other options - albeit more costly - available in the marketplace.
- Organizations with minimal risk, or few to no claims, may still be eligible for an RPG and should work with their broker to find another RPG ahead of the 2019 renewal.
- Explore cost savings option to reduce policy limits on a new umbrella policy. While the typical umbrella policy covers businesses for up to $100M per occurrence, some organizations that are forced to exit the RPG market should consider choosing policies with $25M per occurrence coverage to reduce premiums.
- If loss history is the issue, work with your broker to take advantage of risk control opportunities and marketplace relationships to secure new umbrella policies at the best possible rates, ahead of 2019 renewals.
For more information on your current umbrella policy and its limits, how to prepare for your RPG renewal or what other options to consider, contact your HUB Real Estate Specialist.