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UC DAVIS: VICE CHANCELLOR - ADMINISTRATION December 8, 2003 DEANS, DIRECTORS, DEPARTMENT CHAIRS AND CAMPUS ADMINISTRATIVE OFFICERS RE: THE REGENTS INSURANCE PROGRAM FOR 2003-2004 At the recent OOA Planning Workshop, the Provost advised that UC Davis must “protect our highest priorities.” The Regents Insurance Program is one way to ensure the protection and continuation of campus operations should the campus suffer a loss of assets. Given the contribution of this Program to our protection efforts, I’d like to brief you on the outcome of the insurance program renewal for July 1, 2003, through June 30, 2004. Executive Summary This year the University experienced a slight decrease in the overall insurance premiums. This renewal indicates that the insurance market is stabilizing from last year’s reaction to the losses of 9/11 and the downturn in the economy. The University experienced some relief in the property coverage market that enabled securing higher limits of coverage. It also allowed a reduction in the property self-insured retention, the first dollar cost of loss that the University assumes. The liability market has shown increased coverage capacity, but hospital professional liability remains a very difficult market with a limited number of carriers providing this coverage. The marine and aviation markets continue firm and premiums continue to increase in these lines of coverage. Major changes to all these programs are contained in the accompanying attachment. In addition, underwriters continue to scrutinize all accounts and look closely at the risk exposures and appropriate premium pricing and selection of risk. Insurers are unwilling to negotiate or are declining to quote coverage if an accurate picture of the exposure has not been identified and cannot be articulated. The insurance market continues to be affected by low investment returns, record high natural catastrophe losses, high loss cost trends, adverse development from prior years and changes in the reinsurance market. Most lines of coverage have exclude terrorism. With the passage of the Terrorism Risk Insurance Act of 2002 (TRIA), insurers are required to offer Terrorism coverage as defined by TRIA. Offers to purchase TRIA coverage are expensive and coverage is restrictive. For example, it only applies to foreign acts of terrorism, thus excluding domestic terrorism, such as the Oklahoma bombing. Also excluded are acts committed in the course of war. The University decided not to purchase TRIA coverage for its property, liability, aviation and marine programs, given the costs and the level of risk for the University. Mitigating Campus Risk Insurance is simply a way to finance post-loss costs. Since the campus is responsible for these costs of risk, it is important, particularly in times of budget uncertainty, to reduce the exposure to loss through pre-loss risk assessments and implementation of loss controls. With the following changes to the University’s insurance program, I urge you to contact Deborah Luthi, Director, Risk Management Services at dmluthi@ucdavis.edu. Helping you to “protect our highest priorities” and manage the future, Risk Management Services provides guidance in identifying the risks associated with your objectives and the opportunities for management of these risk to reduce property and liability losses, as well as enhancing academic, research and business priorities. Stan Nosek Vice Chancellor Administration 03-141
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