Market conditions for insurancein the nonprofit sector have shown sure signs of a hardening overthe past six months, with prices stabilizing overall and slowlyinching upward for some classes of risk.

“After several years of price decreases in a very competitivemarket, the trend now seems to be toward steady pricing,” saysChristi Hatcher, managing director for Markel Specialty Commercial,a division of Markel Corp. in Richmond, Va.

In fact, new business at social-service organizations rose“dramatically” in 2011 after many years of a soft market, saysHatcher.

Markel, which serves a broad range of social-service classes, isseeing increasing activity in child-welfare organizations,counseling centers, and group homes and shelters.

And not only has Markel’s new business “increased significantly,but the retention rates are as high as they have been,” Hatchertells NU. “Overall, pricing has stabilized, and priceincreases are sticking on accounts that have tougher exposures orloss activity.”

Organizations with extra-scrutinized exposures includefoster-placement services; programs with clients who have emotionaland/or behavioral concerns; and accounts that have off-siterecreational activities.

Riley Binford, executive vicepresident at Charity First Insurance Services Inc. in SanFrancisco, agrees that overall the nonprofit sector is seeing afirming market, however slight.

The upward pressure on pricing is especially noticeable in thearea of property risks, which can account for a large percentage ofa nonprofit’s exposures.

“The property market is definitely changing due to the stormactivity of the spring and summer of 2011,” says Binford, whopoints out that property deductibles and other conditions are alsogetting a bit tighter.

“It’s not surprising that some types of nonprofits, for examplechurches located in Texas and Oklahoma, are a bit concerned abouttheir property insurance,” he says.

DRASTIC MEASURES OFF THE DRAWING BOARD—BUT LITTLEORGANIC GROWTH

In mid-2011, when NU last checked in on thesocial-services market, insurers reported that some social-serviceorganizations, desperately short on funds, were developing drasticrevenue-raising measures that, whatever their financial promise,would have significantly raised exposures and endangered existingcoverages.

For example, Charity First, an MGA programmanager for Travelers’ social-services business for 25 years, lastyear had to turn down a request by a children’s group home that hadhoped to hire out its teenage residents as laborers.

Fortunately, the number ofclients pursuing such extreme actions, or otherwise venturing intounknown territory to try to raise funds, has waned.

“We are not seeing this type of activity nearly as much as wedid, and it looks like most nonprofits are sticking with their corecompetencies,” Binford says.

But organic premium growth at current insureds has remainedsomewhat flat and even declined, as per the latest renewal-cyclefigures in June, according to Becky Holt, director of underwritingfor insurance and risk-management specialist Canfield InsuranceSolutions of Ephrata, Wash.

“Exposures at social-service organizations are not growinganymore. Most are getting rid of exposures by selling properties,”Holt says. “A lot of nonprofits are putting their vehicles inlay-up and not even using them because they can’t afford themaintenance.”

At least one community-action organization Holt is familiar withhas had to shutter its large Meals on Wheels program.

Some social-service groups have also not taken Canfield’sloss-control advice to upgrade facilities and are deferringrepairs. “Financially, they just can’t address those issues,” saysHolt.

Canfield also has seen some salaried-staff cuts among itsnonprofit clients as of the June 2011 renewal. “It seems likethey’re trying to use as many volunteers as they can,” saysHolt.

Insufficient funding has led some of Markel’s nonprofitorganizations to reorganize and merge with other social-serviceagencies, which obviously affects staffing, Hatcher says.

Lack of funds can lead to inadequate staff-to-client ratios andnot enough money being devoted to maintenance of premises andadequate safety programs, all of which create greater exposures,Hatcher points out.

TOP COVERAGE CONCERNS

The top insurance concerns for social-service groups remainProfessional Liability, Sexual Abuse & Molestation cover, andDirectors and Officers.

While Abuse & Molestation and Professional Liabilitycontinue to be coverage requirements for many social-serviceclasses, nonprofits overall now have a more heightened awareness ofD&O coverage and Employment Practices Liability insurance dueto recent high-profile news stories, Hatcher says. “There seems tobe a trend for executive directors and board members to trulyunderstand these coverages,” she notes.

Workers’ Comp for social-service groups is beginning to increasein some states, according to Charity First. “California is seeingsome double-digit increases on renewals,” Binford says.

“Workers’ Comp insurance aside, I don’t anticipate significantpremium increases at renewal: anywhere from flat to 5 percent,” headds. “But nonprofits will be hard-pressed to see any renewalreductions.”

Charity First is also seeing a trend in increased coinsurancepenalties applied at the time of loss. “I can only surmise thatbecause of years of very little inflation, most insureds have notupdated their insurance values for a while, resulting inunderinsured properties,” says Binford. “Nonprofits should taketime at their 2012 renewal to make sure their properties areproperly valued to avoid being underinsured at the time ofloss.”