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PACKET Town Board Study Session 2024-10-08
October 8, 2024 5:45 p.m. – 6:45 p.m. Board Room 5:30 p.m. Dinner ACCESSING MEETING TRANSLATIONS (Accediendo a las Traducciones de la Reunión) To access written translation during the meeting, please scan the QR Code or click this link for up to 48 other languages (Para acceder a la traducción durante la reunión, par favor escanee el código QR o haga clic en el enlace para hasta 48 idiomas más): https://attend.wordly.ai/join/FLUL-1105 Choose Language and Click Attend (Seleccione su lenguaje y haga clic en asistir) Use a headset on your phone for audio or read the transcript can assist those having difficulty hearing (Use un auricular en su teléfono para audio o lea la transcripción puede ayudar a aquellos que tienen dificultades para escuchar). Public comment is not typically heard at Study Sessions, but may be allowed by the Mayor with agreement of a majority of the Board. This study session will be streamed live and available at www.estes.org/videos 5:45 p.m. Commercial/Residential Insurance Overview. (Town Administrator Machalek) 6:35 p.m. Future Study Session Agenda Items. (Board Discussion) 6:40 p.m. Comments & Questions. 6:45 p.m. Adjourn for Town Board Meeting. Informal discussion among Trustees concerning agenda items or other Town matters may occur before this meeting at approximately 5:15 p.m. AGENDA TOWN BOARD STUDY SESSION TOWN ADMINISTRATOR’S OFFICE Report To: Honorable Mayor Hall Board of Trustees From: Town Administrator Machalek Date: October 8, 2024 RE: Commercial/Residential Insurance Overview Purpose of Study Session Item: Provide a broad overview of commercial/residential insurance issues at the state level and in the Estes Valley. Town Board Direction Requested: • Does the Town Board want staff to gather any further information? • Does the Town Board want staff to explore any additional advocacy beyond monitoring upcoming legislation through the CML policy committee? Present Situation: Earlier this year, the Town Board expressed interest in learning more about the residential and commercial insurance situation in the Estes Valley. Insurance availability and affordability is a statewide concern. In 2022, the legislature passed Senate Bill 22-206 which, among other initiatives, required the commissioner of insurance to conduct a study and prepare a report on methods to address the stability, availability, and affordability of homeowner’s insurance in Colorado with a focus on stabilizing the market. That study was completed by Oliver Wyman Actuarial Consulting, Inc. in March 2023 (attached for reference). The study reports that the profitability of the Colorado market for insurers has been an issue, with insurers in the state reporting the 4th largest 5-year direct loss and Defense and Cost-Containment Expenses ratio among U.S. jurisdictions. The report also describes significant increases in homeowner’s insurance premiums, with a 51.7% increase in the average homeowner premium between January 2019 and October 2022. Rate increases observed in Colorado are measurably higher that the countrywide average, and are attributed by the report to both a more sophisticated handling of wildfire risk and inflation. While premiums are increasing significantly across the state regardless of wildfire exposure, the increases are reported to be moderately higher in areas with high wildfire risk. The report also indicates that, outside of the top five insurance carriers, carriers have been shrinking their exposures in the Colorado market since 2021, resulting in a consolidation of the market under the five largest insurance carrier groups. In response to coverage accessibility and affordability issues, the Colorado legislature passed House Bill 23-1288, which created an unincorporated public entity to provide property insurance coverage when such coverage is not available from admitted insurance companies. The state is currently working on building out the fair access to insurance requirements plan (FAIR plan), and expects it to be fully stood up by January 2025. The state is attempting to take best practices of fair plans from other states, including lessons learned, to build an effective program for Colorado. The intent is for the FAIR plan to be insurance of last resort, not as an answer to rate increases from private insurance carriers. The plan is expected to cap damage awards at $750,000. Staff also attended a webinar featuring Colorado Insurance Commissioner Mike Conway and Executive Director Carole Walker of the Rocky Mountain Insurance Association. The webinar echoed findings from the March 2023 Homeowner Availability Study, noting that the overall insurance market has become very unstable in Colorado, with increases in all costs associated with claim payouts making profitability difficult for insurance carriers. The webinar hosts noted that hail and wind were the most expensive and pervasive insured capacity in Colorado, and that insurance affordability is expected to be front and center during the next legislative session. It is important to note that condominium homeowner’s associations (HOAs) are facing distinct challenges that are separate from the overall residential market. The legislature has taken the first step to address those challenges by passing House Bill 24-1108, which requires the commissioner of insurance to conduct a study concerning the market for property and casualty insurance policies issued by insurers to unit owners’ associations of common interest communities and owners of hotels and lodging facilities. A report summarizing the results of this study is due by January 1, 2026. To complement the significant amount of statewide data available, staff developed a simple, non-scientific survey to collect data on commercial and residential insurance trends in the Estes Valley. Nearly 300 respondents completed the survey (255 residential, 40 commercial, and four real estate agents). The results from this survey are attached. Residential Results: The majority (255/299) of the respondents to the survey responded to the “Residential” category. While not every respondent answered every question, the answers provided do offer a window into the residential property insurance situation in the Estes Valley. Dwelling coverage amounts varied, but most respondents reported holding between $350,001 and $1,500,000 in coverage. Roughly half of the residential respondents provided a specific cost per year of their homeowners insurance (130/255). The average reported cost for a homeowner’s policy was $4,146 and the median reported cost for a homeowners policy was $2,800. Just over half of residential respondents (71 out of 137 responses) reported that the cost of their homeowner’s insurance policy had increased more than 25% in the past four years. Forty-seven residential respondents reported that their policy had increased by $0 - $1,000/year over the past four years, while 49 respondents indicated that their policy had increased by $1,001 - $2,000/year. Thirty-nine respondents reported cost increases over $2,001, with 10 of those respondents indicating that the cost of their homeowner’s insurance has increased by more than $4,000 over the past four years. In addition to cost escalations, 72/143 residential respondents indicated difficultly in acquiring or renewing their homeowner’s insurance within the last four years. Further, 40 residential respondents reported being dropped by their homeowner’s insurance carrier within the past four years. Among those respondents reporting difficulty acquiring or renewing their homeowner’s insurance, the vast majority reported that wildfire risk was the reason cited by the insurance company (58/72). Residential respondents report a variety of strategies employed to mitigate increased insurance costs. The most popular strategy was to shop for a new insurance company (74 respondents), followed by increasing the insurance deductible (61 respondents) and completing fire mitigation (59 respondents). Less popular strategies included decreasing the coverage amount of insurance (18 respondents) and dropping insurance/deciding to be self-insured (3 respondents). 28 respondents report taking no steps to mitigate increased insurance costs. Commercial: Forty respondents completed the “Commercial” category of the survey. Coverage amounts varied, with most respondents holding between $1,000,001 - $5,000,000 (11) or $5,000,001 - $10,000,000 (9) in coverage. Just over half of the commercial respondents provided a specific cost per year of their property insurance (26/40). The average reported cost for a commercial property insurance policy was $57,865 and the median reported cost was $42,500. The vast majority of commercial respondents (23/28) reported that the cost of their property insurance policy had increased more than 25% in the past four years. The dollar amount increases varied widely, with the most respondents indicating that their insurance increased by more than $20,000 (12), followed by $5,001 - $10,000 (5), $10,001 - $15,000 (4), $15,001 - $20,000 (4), and $0 - $5,000 (2). In addition to cost escalations, 26/28 commercial respondents indicated difficultly in acquiring or renewing their property insurance within the last four years. Further, 19 respondents reported being dropped by their insurance carrier within the past four years. Among those respondents that had difficulty acquiring or renewing their property insurance, the majority reported that wildfire risk was the reason cited by the insurance company (15/26). Commercial respondents report a variety of strategies employed to mitigate increased insurance costs. The most popular strategy was to shop for a new insurance company (24 respondents), followed by increasing the insurance deductible (15 respondents) and completing fire mitigation (11 respondents). Less popular strategies included decreasing the coverage amount of insurance (9 respondents) and dropping insurance/deciding to be self-insured (2 respondents). Only one respondent reported taking no steps to mitigate increased insurance costs. Realtors: Only three realtors responded to the “Realtor” section of the survey, all working in the residential market. Given the low response rate, staff invited the President of the Estes Valley Board of REALTORS® to attend the Study Session and provide a summary of real estate impacts. Homeowners Associations While there was no survey section specific to homeowner’s associations (HOAs), multiple respondents completed the survey from the perspective of an HOA. These responses appeared in both the “Residential” and “Commercial” survey sections. HOAs appear to be some of the most impacted entities in the Estes Valley based on the survey results, personal conversations, and statewide news coverage. Large HOAs for multifamily structures (e.g. townhomes and apartments) are having difficulty finding insurance carriers willing to cover the full replacement cost of properties, with at least one HOA resorting to a policy that offers only partial insurance. As noted above, the State is in the process of completing a study concerning the market for property and casualty insurance policies issued by insurers to unit owners’ associations of common interest communities and owners of hotels and lodging facilities. A report summarizing the results of this study is due by January 1, 2026. Finance/Resource Impact: N/A Level of Public Interest High. Attachments 1.2024 Town of Estes Park Commercial/Residential Insurance Survey Results 2.Colorado Department of Regulatory Agencies – Division of Insurance 2023 Homeowner Availability Study 3.Commercial/Residential Insurance Overview Presentation 2024 Commercial/Residential Insurance Survey Town of Estes Park 10/08/2024 Town Board Study Session ATTACHMENT 1 Town of Estes Park Commercial/Residential Insurance Survey 85.28%255 13.38%40 1.34%4 Q1 What type of property insurance would you like to provide information about? Answered: 299 Skipped: 0 TOTAL 299 0%10%20%30%40%50%60%70%80%90%100% Residential Commercial Real Estate Agent ANSWER CHOICES RESPONSES Residential Commercial Real Estate Agent 2 Residential 3 Town of Estes Park Commercial/Residential Insurance Survey 2.80%4 4.90%7 17.48%25 24.48%35 21.68%31 21.68%31 2.10%3 4.90%7 Q2 What is your Homeowners Insurance Dwelling Coverage Amount? Answered: 143 Skipped: 156 TOTAL 143 #MORE THAN $2,000,000 (PLEASE SPECIFY)DATE 1 Condo complex, $750,000 per building, 4 buildings each with 4 units, 16 owners in the small condo complex 9/4/2024 10:55 AM 2 Condo with 6 units 8/30/2024 6:19 PM 3 2024 HOA Coverage for 16 units (dwelling coverage $3.245 million)8/27/2024 9:09 AM 0%10%20%30%40%50%60%70%80%90%100% $200,000 or less $200,001 - $350,000 $350,001 - $500,000 $500,001 - $750,000 $750,001 - $1,000,000 $1,000,001 - $1,500,000 $1,500,001 - $2,000,000 More than $2,000,000 (please... ANSWER CHOICES RESPONSES $200,000 or less $200,001 - $350,000 $350,001 - $500,000 $500,001 - $750,000 $750,001 - $1,000,000 $1,000,001 - $1,500,000 $1,500,001 - $2,000,000 More than $2,000,000 (please specify) 4 Town of Estes Park Commercial/Residential Insurance Survey 4 HOA coverage for 24 units - $7,257,600 8/25/2024 5:45 PM 5 $2,071,000 8/24/2024 1:49 PM 6 2,264,074 8/23/2024 3:06 PM 7 it is for an HOA with 41 units- exterior only 8/23/2024 1:10 PM 5 Town of Estes Park Commercial/Residential Insurance Survey Q3 What is the cost of your homeowners insurance per year? Answered: 137 Skipped: 162 #RESPONSES DATE 1 I live in a condo, both the HOA cost has gone up as well as my "studs in" policy.9/13/2024 1:29 PM 2 $5243 9/13/2024 1:05 PM 3 $2,168 9/12/2024 1:55 PM 4 3,000 9/11/2024 3:16 PM 5 2853 9/10/2024 8:29 PM 6 $3,397 (with discounts of $1,786 due to auto and home combination, home age discount, claims free discount, loyalty discount, and connected home discount) 9/7/2024 8:48 PM 7 $4,368 9/7/2024 11:37 AM 8 $3,600 9/5/2024 6:10 PM 9 1800 9/4/2024 9:00 PM 10 7600 9/4/2024 6:43 PM 11 $6,000 - Note- the $750,000 coverage per building is under what our previous insurance (American Family) had us covered for ($920,400 per building). Several owners within the HOA feel we are now under covered but the new insurance will not cover us for that amount. The high risk insurance that American Family offered us when they advised they would no longer cover us, was over $34K a year and we couldn't afford that. I called so many insurance companies, before we found Fionna Insurance Agency in Thornton, CO (The actual insurance is through Westfield Insurance), who would give us coverage at a reasonable afforedable rate, similar to what we previously had. From what I was told, many insurance companies dropped coverage for Condo Assoc. in our area. 9/4/2024 10:55 AM 12 $3,332.00 9/3/2024 10:37 AM 13 $4,325 9/3/2024 9:19 AM 14 $2250 9/2/2024 8:48 PM 15 1200.00 9/2/2024 10:12 AM 16 $2,675 9/1/2024 4:01 PM 17 $844.00 9/1/2024 12:04 PM 18 $7258.00 8/30/2024 9:04 PM 19 $2,800 8/30/2024 8:52 PM 20 $30,000 for building, external. Each unit pays $2400 for internal 8/30/2024 6:19 PM 21 1500 8/29/2024 7:25 PM 22 1545.00 8/29/2024 3:45 PM 23 2412 8/29/2024 11:11 AM 24 1,800.00 8/28/2024 2:55 PM 25 Unknown 8/28/2024 12:20 PM 26 approx. $2500 8/28/2024 10:18 AM 27 $4400 8/27/2024 10:17 PM 6 Town of Estes Park Commercial/Residential Insurance Survey 28 330 8/27/2024 6:21 PM 29 $1,304 8/27/2024 5:33 PM 30 2655.00 8/27/2024 1:53 PM 31 1500 8/27/2024 12:45 PM 32 $2,897 8/27/2024 10:17 AM 33 $28,000 8/27/2024 9:09 AM 34 5456.00 8/27/2024 7:26 AM 35 $2800 8/26/2024 6:53 PM 36 1506 8/26/2024 4:59 PM 37 1,360 8/26/2024 4:55 PM 38 2500 8/26/2024 3:54 PM 39 $4430 8/26/2024 1:13 PM 40 $2743/yr 8/26/2024 12:49 PM 41 3200 8/26/2024 12:44 PM 42 6707 8/26/2024 11:25 AM 43 910 8/26/2024 10:52 AM 44 3,500.00 8/26/2024 9:56 AM 45 $2304 8/26/2024 9:48 AM 46 $10,000 8/26/2024 8:19 AM 47 $2200 8/25/2024 9:06 PM 48 $37,300 8/25/2024 5:45 PM 49 2250 8/25/2024 12:00 PM 50 $6113 8/25/2024 11:17 AM 51 We live in a condo, so we pay insurance for the inside of the home at $1200/yr. We pay HOA dues for the outside property insurance, unsure of the amount but $400/mo. 8/24/2024 10:10 PM 52 3400 8/24/2024 7:39 PM 53 2150 8/24/2024 4:33 PM 54 $3854 8/24/2024 3:11 PM 55 $6,400 8/24/2024 1:49 PM 56 $8000 8/24/2024 11:50 AM 57 $2,200 8/24/2024 11:15 AM 58 $2600.00 8/24/2024 8:04 AM 59 $3000 8/24/2024 6:54 AM 60 N/A 8/24/2024 6:32 AM 61 $3000 8/23/2024 10:11 PM 62 4500 8/23/2024 9:54 PM 63 1700.00 8/23/2024 9:52 PM 64 1450 8/23/2024 9:50 PM 65 1250 8/23/2024 8:01 PM 7 Town of Estes Park Commercial/Residential Insurance Survey 66 $1690 8/23/2024 7:52 PM 67 5800 8/23/2024 7:36 PM 68 1970.00 8/23/2024 7:17 PM 69 $3,600 8/23/2024 6:30 PM 70 7000 8/23/2024 5:29 PM 71 $2800.00 8/23/2024 5:23 PM 72 reasonable 8/23/2024 5:06 PM 73 $651 8/23/2024 4:47 PM 74 $2,500 8/23/2024 4:33 PM 75 $2100 8/23/2024 4:19 PM 76 2200 8/23/2024 4:08 PM 77 3400 8/23/2024 3:35 PM 78 7800 8/23/2024 3:33 PM 79 3028.00 8/23/2024 3:06 PM 80 $1,300 8/23/2024 2:36 PM 81 $4,460 8/23/2024 2:33 PM 82 1431.00 8/23/2024 2:30 PM 83 $2,254 8/23/2024 2:24 PM 84 $7200 —went up over 65% this year!8/23/2024 2:09 PM 85 $1,500 8/23/2024 1:53 PM 86 $2658 8/23/2024 1:47 PM 87 2800 8/23/2024 1:43 PM 88 $555.41 8/23/2024 1:25 PM 89 $1420.00 up $283 from 2023 8/23/2024 1:14 PM 90 $34,917.00 8/23/2024 1:10 PM 91 $4,074 8/23/2024 1:07 PM 92 3000.00 8/23/2024 12:47 PM 93 $2334 8/23/2024 12:47 PM 94 $6000.00 8/23/2024 12:41 PM 95 $5800.00 per year 8/23/2024 12:31 PM 96 1848.00 8/23/2024 12:30 PM 97 4300.00 8/23/2024 12:17 PM 98 3057 8/23/2024 12:14 PM 99 $1,008 8/23/2024 12:13 PM 100 $2164 8/23/2024 12:11 PM 101 $3950.00 8/23/2024 12:08 PM 102 $2400 8/23/2024 11:59 AM 103 $2200 a year 8/23/2024 11:57 AM 8 Town of Estes Park Commercial/Residential Insurance Survey 104 $1,900 8/23/2024 11:34 AM 105 $2,450.00 8/23/2024 11:32 AM 106 1500 8/23/2024 11:28 AM 107 2000 8/23/2024 11:12 AM 108 $10,000 8/23/2024 11:04 AM 109 3,727 8/23/2024 11:03 AM 110 2,100.00 8/23/2024 11:01 AM 111 $1,800 8/23/2024 11:00 AM 112 ~2600 annually 8/23/2024 10:43 AM 113 1700 8/23/2024 10:41 AM 114 4200 8/23/2024 10:41 AM 115 $2750 8/23/2024 10:41 AM 116 $4,200 8/23/2024 10:36 AM 117 6500 8/23/2024 10:30 AM 118 A lot 8/23/2024 10:28 AM 119 3800 8/23/2024 10:20 AM 120 $2722.00 8/23/2024 10:17 AM 121 $1500.8/23/2024 10:07 AM 122 $2,600 8/23/2024 10:04 AM 123 $5000 8/23/2024 10:04 AM 124 $3000 8/23/2024 10:03 AM 125 $4,117/year 8/23/2024 10:02 AM 126 $2,000 8/23/2024 9:59 AM 127 $0 - insurance renewal denied 8/23/2024 9:57 AM 128 We acquired a property in 2023. We do not currently have homeowners insurance because we're unable to find a provider that will cover our property due to wildfire risk. 8/23/2024 9:56 AM 129 $5,250 8/23/2024 9:52 AM 130 8000 8/23/2024 9:50 AM 131 4,393.00 8/23/2024 9:50 AM 132 $3000 8/23/2024 9:47 AM 133 3500 8/23/2024 9:45 AM 134 $3,500.00 8/23/2024 9:44 AM 135 $2000 8/23/2024 9:43 AM 136 Almost $4000 8/23/2024 9:43 AM 137 $2,800 plus flood insurance (additional $1,000)8/16/2024 8:53 AM 9 Town of Estes Park Commercial/Residential Insurance Survey 50.35%72 49.65%71 Q4 Have you had difficulty acquiring or renewing your homeowners insurance within the last four (4) years? Answered: 143 Skipped: 156 TOTAL 143 0%10%20%30%40%50%60%70%80%90%100% Yes No ANSWER CHOICES RESPONSES Yes No 10 Town of Estes Park Commercial/Residential Insurance Survey 49.15%58 0.00%0 35.59%42 15.25%18 Q5 If you have had difficulty acquiring or renewing your homeowners insurance, what was the reason cited by the insurance company? Answered: 118 Skipped: 181 TOTAL 118 #OTHER (PLEASE SPECIFY)DATE 1 Wanted us to removal all trees within 30 yards of our home. And we live IN the city limits of Estes! This was due to wildfire risks associated with Estes Park 9/3/2024 9:19 AM 2 Various. Including wild fire 8/30/2024 6:19 PM 3 Wildfire risk and because we have a log home 8/27/2024 10:17 AM 4 Age of dwelling, wildfire risk, wood siding 8/26/2024 6:53 PM 5 Insurance provider no longer offering insurance in the state.8/26/2024 12:49 PM 6 Insurance companies do not want to work with condos 8/24/2024 10:10 PM 7 Insurance companies pulling out of the estes valley/front range market 8/23/2024 6:30 PM 8 No difficulty, but always site increases due to wind, hail and fire in the valley 8/23/2024 5:06 PM 9 Not insuring multiple condo units in a building 8/23/2024 4:19 PM 10 HOA insurance has been difficult to even get a quote for due to wildfire risk.8/23/2024 1:25 PM 0%10%20%30%40%50%60%70%80%90%100% Wildfire risk Other natural disaster risk N/A Other (please specify) ANSWER CHOICES RESPONSES Wildfire risk Other natural disaster risk N/A Other (please specify) 11 Town of Estes Park Commercial/Residential Insurance Survey 11 HOA - too many units 8/23/2024 1:10 PM 12 HOA was denied coverage, had to purchase as an individual 8/23/2024 12:47 PM 13 Company left the state 8/23/2024 12:41 PM 14 After 18 years of insuring, they are not sure if our unique architecture is even insurable 🤔8/23/2024 11:32 AM 15 hoa all the above 8/23/2024 11:25 AM 16 Was told I had a rock behind my cabin. I said who doesn’t have a rock behind their cabin in the canyon. 8/23/2024 11:12 AM 17 Didn’t want to carry condo 8/23/2024 11:01 AM 18 wildfire risk and being a log cabin 8/23/2024 10:17 AM 12 Town of Estes Park Commercial/Residential Insurance Survey 1 / 2 71.43%100 28.57%40 Q6 Have you been dropped by your homeowners insurance carrier in the past four (4) years? If yes, please include the name of the insurance carrier below. Answered: 140 Skipped: 159 TOTAL 140 #YES (PLEASE INCLUDE THE NAME OF THE INSURANCE COMPANY THAT CANCELLED YOUR POLICY) DATE 1 State Farm 9/13/2024 1:29 PM 2 AutoOwners 9/11/2024 3:16 PM 3 American Family Insurance in Estes Park 9/4/2024 10:55 AM 4 State Farm 8/30/2024 8:52 PM 5 But I was threatened with cancellation until I spent $15,000 on tree mitigation.8/27/2024 10:17 PM 6 Allstate 8/27/2024 1:53 PM 7 Lemonade (won't be renewing us in October)8/27/2024 10:17 AM 8 American Family 8/27/2024 9:09 AM 9 American Family 8/27/2024 7:26 AM 10 American Family Insurance 8/26/2024 6:53 PM 11 American Family 8/26/2024 4:59 PM 12 Auto-Owners and Secura 8/26/2024 12:49 PM 13 American Family 8/26/2024 8:19 AM 14 American Family Insurance as of 11/1/24 8/25/2024 5:45 PM 15 Progessive 8/25/2024 12:00 PM 0%10%20%30%40%50%60%70%80%90%100% No Yes (please include the name of the... ANSWER CHOICES RESPONSES No Yes (please include the name of the insurance company that cancelled your policy) 13 Town of Estes Park Commercial/Residential Insurance Survey 16 again, with the HOA, so I believe American Family 8/24/2024 10:10 PM 17 Nationwide 8/24/2024 3:11 PM 18 Progressive 8/24/2024 11:15 AM 19 Only State Farm will insure us and we are worried they will drop us 8/23/2024 10:11 PM 20 Progressive Home 8/23/2024 9:50 PM 21 American Family 8/23/2024 9:33 PM 22 Cannot remember 8/23/2024 7:17 PM 23 On a condo HO6 policy. American Family Insurance who had the most HOA condo policies in Estes Park canceled almost all of its HOA policies at the end of 2023. 8/23/2024 6:30 PM 24 American Family in Estes Park 8/23/2024 4:33 PM 25 Too many units in a condo association 8/23/2024 4:19 PM 26 Don't know 8/23/2024 4:08 PM 27 American family 8/23/2024 1:10 PM 28 HOA was dropped by Am Fam 8/23/2024 12:47 PM 29 Auto-Owners Insurance 8/23/2024 12:41 PM 30 National General Insurance 8/23/2024 11:34 AM 31 our HOA has 8/23/2024 11:25 AM 32 Can’t remember 8/23/2024 11:12 AM 33 American Family 8/23/2024 11:01 AM 34 Nationwide, American Family, Safeco 8/23/2024 10:04 AM 35 Progressive 8/23/2024 10:03 AM 36 State Farm and State Auto 8/23/2024 9:59 AM 37 Philadelphia Insurance Co 8/23/2024 9:57 AM 38 State Farm 8/23/2024 9:50 AM 39 American family 8/23/2024 9:45 AM 40 Allstate 8/23/2024 9:44 AM 14 Town of Estes Park Commercial/Residential Insurance Survey 7.30%10 5.11%7 6.57%9 8.03%11 21.17%29 51.82%71 Q7 How much has your homeowners insurance increased over the past four (4) years (on a % basis)? Answered: 137 Skipped: 162 TOTAL 137 #MORE THAN 25% (OPEN RESPONSE)DATE 1 Unsure of the exact %9/12/2024 1:55 PM 2 89%9/11/2024 3:16 PM 3 59% increase from 2019 to 2023 (~14% per year)9/10/2024 8:29 PM 4 35%9/7/2024 8:48 PM 5 28%9/7/2024 11:37 AM 6 at least 40% this year 9/4/2024 6:43 PM 7 approx. 38% increase over past 4 years (27% in last year)9/3/2024 10:37 AM 0%10%20%30%40%50%60%70%80%90%100% 0% - 5% 5.1% - 10% 10.1% - 15% 15.1% - 20% 20.1% - 25% More than 25% (Open Response) ANSWER CHOICES RESPONSES 0% - 5% 5.1% - 10% 10.1% - 15% 15.1% - 20% 20.1% - 25% More than 25% (Open Response) 15 Town of Estes Park Commercial/Residential Insurance Survey 8 Over 50%9/2/2024 8:48 PM 9 Premium increase is 151%; Property Insured increase is 65%9/1/2024 4:01 PM 10 38%8/30/2024 9:04 PM 11 Rates go up for the same coverage with an allowance for inflation.8/30/2024 8:52 PM 12 5k to 30k 8/30/2024 6:19 PM 13 none 8/29/2024 7:25 PM 14 268%8/28/2024 2:55 PM 15 33%8/27/2024 10:17 PM 16 More than 100%8/27/2024 1:53 PM 17 We just moved here in October of 2023 8/27/2024 10:17 AM 18 260%8/27/2024 9:09 AM 19 51 8/26/2024 4:59 PM 20 40%8/26/2024 12:44 PM 21 over 100%8/26/2024 11:25 AM 22 This is with Auto Owners Insurance. The increase is a combination of our adding new coverage items and the insurance company's annual increase. 8/26/2024 10:52 AM 23 52%8/26/2024 9:48 AM 24 Last year - HOA condo insurance went up from around $1k to $9k / year 8/26/2024 8:19 AM 25 305% (that is not a typo)8/25/2024 5:45 PM 26 This year alone went up over $20k 8/24/2024 10:10 PM 27 30 8/24/2024 4:33 PM 28 28%8/24/2024 3:11 PM 29 69% from 2019/2020 to 2023/2024 8/24/2024 1:49 PM 30 200%8/24/2024 11:15 AM 31 100%8/23/2024 10:11 PM 32 30%8/23/2024 9:50 PM 33 Had to go with a surplus lines carrier.8/23/2024 9:33 PM 34 Approximately 50%8/23/2024 8:01 PM 35 26%8/23/2024 7:36 PM 36 30%8/23/2024 5:29 PM 37 Close to 100% if not more 8/23/2024 5:23 PM 38 Doubled 8/23/2024 4:19 PM 39 HOA wasn't able to provide insurance anymore so we had to buy a complete replacement policy 8/23/2024 4:08 PM 40 50% last year 8/23/2024 3:35 PM 41 N/A - first year of owning 8/23/2024 3:33 PM 42 43%8/23/2024 3:06 PM 43 45%8/23/2024 2:30 PM 44 162%8/23/2024 2:24 PM 16 Town of Estes Park Commercial/Residential Insurance Survey 45 Over 65% in the last year alone!8/23/2024 2:09 PM 46 80%8/23/2024 1:53 PM 47 40%8/23/2024 1:10 PM 48 It's gone up over 73% is just the last four years.8/23/2024 1:07 PM 49 HOA vs individual 8/23/2024 12:47 PM 50 33%8/23/2024 12:41 PM 51 $2100 increased to $5800 8/23/2024 12:31 PM 52 300 percent 8/23/2024 12:30 PM 53 129%8/23/2024 12:14 PM 54 50%8/23/2024 12:08 PM 55 43%8/23/2024 11:34 AM 56 100% + / rate in 2020 was $1,036 8/23/2024 11:32 AM 57 our share as homeowner has gone up 200%8/23/2024 11:25 AM 58 4x 8/23/2024 11:04 AM 59 It keeps increasing every year 8/23/2024 11:03 AM 60 35%8/23/2024 10:41 AM 61 ?8/23/2024 10:41 AM 62 50%8/23/2024 10:20 AM 63 46%8/23/2024 10:17 AM 64 50%8/23/2024 10:07 AM 65 40%8/23/2024 10:04 AM 66 67% - was $1,334 in 2020 and $4,117 in 2024 8/23/2024 10:02 AM 67 75%8/23/2024 9:59 AM 68 43%8/23/2024 9:52 AM 69 30 8/23/2024 9:50 AM 70 250%8/23/2024 9:47 AM 71 Over 25% per year 8/23/2024 9:43 AM 17 Town of Estes Park Commercial/Residential Insurance Survey 34.81%47 36.30%49 11.85%16 9.63%13 7.41%10 Q8 How much has your homeowners insurance increased over the past 4 years (on a $ basis)? Answered: 135 Skipped: 164 TOTAL 135 #MORE THAN $4,000 (OPEN RESPONSE)DATE 1 $4500 8/30/2024 9:04 PM 2 Same iiii kkk 8/30/2024 6:19 PM 3 We just moved here in October of 2023 8/27/2024 10:17 AM 4 2023 annual premium was $10,690 2024 new premium at $27,887 8/27/2024 9:09 AM 5 See above 8/26/2024 8:19 AM 6 $28,100 8/25/2024 5:45 PM 7 N/A 8/23/2024 3:33 PM 8 Over $25,000 in 2024 8/23/2024 1:25 PM 9 10,000 8/23/2024 1:10 PM 10 $6K 8/23/2024 11:04 AM 0%10%20%30%40%50%60%70%80%90%100% $0 - $1,000 $1,001 - $2,000 $2,001 - $3,000 $3,001 - $4,000 More than $4,000 (Open Response) ANSWER CHOICES RESPONSES $0 - $1,000 $1,001 - $2,000 $2,001 - $3,000 $3,001 - $4,000 More than $4,000 (Open Response) 18 Town of Estes Park Commercial/Residential Insurance Survey 19.72%28 42.96%61 12.68%18 52.11%74 41.55%59 2.11%3 5.63%8 Q9 Which of the following steps (if any) have you taken to mitigate increased insurance costs? (Check all that apply) Answered: 142 Skipped: 157 Total Respondents: 142 #OTHER (PLEASE SPECIFY)DATE 1 added leak detection to obtain a reduction, stayed with same company to obtain loyalty discount 9/7/2024 8:48 PM 2 Lowered Auto Insurance 9/2/2024 8:48 PM 3 Replaced roof with steel roof 8/28/2024 10:18 AM 4 were made to get rid of fire pit/grill, repaving the drive, and having electrician look at updating electrical in all units 8/24/2024 10:10 PM 5 Improve road for better emergency access 8/23/2024 12:14 PM 0%10%20%30%40%50%60%70%80%90%100% None of the above Increased deductible Decreased coverage amount Shopped for a new insurance company Fire mitigation Dropped insurance/self- insured Other (please specify) ANSWER CHOICES RESPONSES None of the above Increased deductible Decreased coverage amount Shopped for a new insurance company Fire mitigation Dropped insurance/self-insured Other (please specify) 19 Town of Estes Park Commercial/Residential Insurance Survey 6 Monitored alarm system 8/23/2024 11:34 AM 7 HOA and owners cooping coverage 8/23/2024 11:25 AM 8 New roof to Larimer County requirements resulted in significant premium reduction 8/23/2024 10:30 AM 20 Town of Estes Park Commercial/Residential Insurance Survey 2.84%4 97.16%137 Q10 Do you have flood insurance? Answered: 141 Skipped: 158 TOTAL 141 0%10%20%30%40%50%60%70%80%90%100% Yes No ANSWER CHOICES RESPONSES Yes No 21 Town of Estes Park Commercial/Residential Insurance Survey Q11 If you have flood insurance, how much does it cost annually? Answered: 9 Skipped: 290 #RESPONSES DATE 1 None 8/30/2024 6:19 PM 2 0 8/29/2024 7:25 PM 3 this is unk, this is covered by HOA dues 8/24/2024 10:10 PM 4 1248.00 8/23/2024 7:17 PM 5 Got a quote for over $2000 - not affordable 8/23/2024 3:33 PM 6 1800 8/23/2024 11:12 AM 7 N/A 8/23/2024 11:01 AM 8 N/A 8/23/2024 10:17 AM 9 $1,000 8/16/2024 8:53 AM 22 Commercial 23 Town of Estes Park Commercial/Residential Insurance Survey 1 / 1 14.29%4 39.29%11 32.14%9 10.71%3 0.00%0 3.57%1 Q12 What is your Commercial Property Insurance Coverage Amount Answered: 28 Skipped: 271 TOTAL 28 0%10%20%30%40%50%60%70%80%90%100% $1,000,000 or less $1,000,001 - $5,000,000 $5,000,001 - $10,000,000 $10,000,001 - $25,000,000 $25,000,001 - $35,000,000 More than $35,000,000 ANSWER CHOICES RESPONSES $1,000,000 or less $1,000,001 - $5,000,000 $5,000,001 - $10,000,000 $10,000,001 - $25,000,000 $25,000,001 - $35,000,000 More than $35,000,000 24 Town of Estes Park Commercial/Residential Insurance Survey Q13 What is the cost of your commercial property insurance per year? Answered: 26 Skipped: 273 #RESPONSES DATE 1 $27,018 9/7/2024 9:08 PM 2 last year was $40,000 and it's gone up over $50,000 for this year from the same exact companies 9/5/2024 12:09 PM 3 $54,008 9/5/2024 11:11 AM 4 $26,000 9/4/2024 3:33 PM 5 62000 9/3/2024 11:14 PM 6 It was about $15,000 in 2023. American Family stopped providing coverage to HOAs and refused to renew. After contacting numerous agents and brokers in Estes and Loveland we were finally able to obtain a policy for $31,700, more than double! 9/1/2024 2:42 PM 7 21,000 8/28/2024 3:35 PM 8 $57,000 8/27/2024 5:36 PM 9 $175,000 up from $18,000 last year 16 condo units 8/27/2024 5:08 PM 10 $72,500.00 8/27/2024 12:10 PM 11 12k+ 4k just liability one property they will not cover for less than 100k due to historic nature 8/27/2024 9:00 AM 12 35000 8/23/2024 6:42 PM 13 $17,316 8/23/2024 5:26 PM 14 $25,000 8/23/2024 2:47 PM 15 $52,000 8/23/2024 2:14 PM 16 $10,919 8/23/2024 1:48 PM 17 This year it almost tripled to $68,327. We are an HOA of 41 units/9 buildings.8/23/2024 1:43 PM 18 Over 60K. We have. 4 million dollar property with only 750 in coverage now. We lost our business because of this and now have been canceled again. 8/23/2024 12:55 PM 19 $343,000 8/23/2024 12:54 PM 20 3000 8/23/2024 12:43 PM 21 $28,000 8/23/2024 12:42 PM 22 12,000 8/23/2024 11:52 AM 23 150K 8/23/2024 11:46 AM 24 Over $50000 8/23/2024 11:12 AM 25 $50k+8/23/2024 10:28 AM 26 $7700 8/23/2024 9:57 AM 25 Town of Estes Park Commercial/Residential Insurance Survey 92.86%26 7.14%2 Q14 Have you had difficulty acquiring or renewing your commercial property insurance within the last four (4) years? Answered: 28 Skipped: 271 TOTAL 28 0%10%20%30%40%50%60%70%80%90%100% Yes No ANSWER CHOICES RESPONSES Yes No 26 Town of Estes Park Commercial/Residential Insurance Survey 57.69%15 3.85%1 38.46%10 Q15 If you've had difficulty acquiring or renewing your property insurance, what was the reason cited by insurance companies? Answered: 26 Skipped: 273 TOTAL 26 #OTHER (PLEASE SPECIFY)DATE 1 More than 10 buildings 9/7/2024 9:08 PM 2 Wildfire is new this year, previous years has been threat of Hail storms 9/5/2024 12:09 PM 3 Just recently advised that policy would be non renewed 8/28/2024 3:35 PM 4 wildfire risk #1, flood risk #2 8/27/2024 5:36 PM 5 American Family no longer insured condos 8/27/2024 12:10 PM 6 No sprinklers 8/27/2024 9:00 AM 7 All of the above 8/23/2024 11:52 AM 8 Both wildfire and flood risk 8/23/2024 11:46 AM 9 Wildfire, wind, type (HOA), costs 8/23/2024 11:12 AM 10 Wild fire risk and age of structure 8/23/2024 9:57 AM 0%10%20%30%40%50%60%70%80%90%100% Wildfire risk Other natural disaster risk Other (please specify) ANSWER CHOICES RESPONSES Wildfire risk Other natural disaster risk Other (please specify) 27 Town of Estes Park Commercial/Residential Insurance Survey 0.00%0 0.00%0 3.57%1 3.57%1 10.71%3 82.14%23 Q16 How much has your commercial property insurance increased over the past four (4) years (in %)? Answered: 28 Skipped: 271 TOTAL 28 #MORE THAN 25% (OPEN RESPONSE)DATE 1 66%9/7/2024 9:08 PM 2 Close to 30%9/5/2024 12:09 PM 3 121% in one year 9/5/2024 11:11 AM 4 New carrier almost doubled what State Farm quoted 9/4/2024 3:33 PM 5 300%9/3/2024 11:14 PM 6 2023 = $15,000. 2024 = $31,700 9/1/2024 2:42 PM 7 More than doubled: with old carrier, would have been 7 times increase in 1 year 8/27/2024 5:36 PM 0%10%20%30%40%50%60%70%80%90%100% 0% - 5% 5.1% - 10% 10.1% - 15% 15.1% - 20% 20.1% - 25% More than 25% (Open Response) ANSWER CHOICES RESPONSES 0% - 5% 5.1% - 10% 10.1% - 15% 15.1% - 20% 20.1% - 25% More than 25% (Open Response) 28 Town of Estes Park Commercial/Residential Insurance Survey 8 Way more 8/27/2024 5:08 PM 9 double 8/27/2024 12:10 PM 10 In 2019 was 6k a year now over 12k and had separate some insurance.8/27/2024 9:00 AM 11 300%8/23/2024 6:42 PM 12 70%8/23/2024 5:26 PM 13 183%8/23/2024 2:14 PM 14 Over 185% $3820 in 2023 to $10,919in 2024 8/23/2024 1:48 PM 15 In 2020 it was $11,650.00. In 2024 it was $68,326.57 8/23/2024 1:43 PM 16 100%8/23/2024 1:38 PM 17 Over 100%8/23/2024 12:55 PM 18 170%8/23/2024 12:54 PM 19 Tripled 8/23/2024 11:52 AM 20 It has doubled.8/23/2024 11:46 AM 21 Over 200%8/23/2024 11:12 AM 22 200%8/23/2024 10:28 AM 23 $3500 in 2023 to $7700 in 2024 8/23/2024 9:57 AM 29 Town of Estes Park Commercial/Residential Insurance Survey 7.41%2 18.52%5 14.81%4 14.81%4 44.44%12 Q17 How much has your commercial property insurance increased over the past four (4) years (in $)? Answered: 27 Skipped: 272 TOTAL 27 #MORE THAN $20,000 (OPEN RESPONSE)DATE 1 $29,878 in one year 9/5/2024 11:11 AM 2 40000 9/3/2024 11:14 PM 3 $51,000; with old carrier would have been $130,000 8/27/2024 5:36 PM 4 $150,000 8/27/2024 5:08 PM 5 $34,500.00 8/27/2024 12:10 PM 6 $31,000 8/23/2024 2:14 PM 7 We increased from $3820 in 2023 to $10,919 in 2024 8/23/2024 1:48 PM 8 See comment above for question 6 8/23/2024 1:43 PM 9 $323,000...increased from $20,000 to $343,000.8/23/2024 12:54 PM 10 75K 8/23/2024 11:46 AM 0%10%20%30%40%50%60%70%80%90%100% $0 - $5,000 $5,001 - $10,000 $10,001 - $15,000 $15,001 - $20,000 More than $20,000 (Open Response) ANSWER CHOICES RESPONSES $0 - $5,000 $5,001 - $10,000 $10,001 - $15,000 $15,001 - $20,000 More than $20,000 (Open Response) 30 Town of Estes Park Commercial/Residential Insurance Survey 11 $30000-40000 8/23/2024 11:12 AM 12 $40k 8/23/2024 10:28 AM 31 Town of Estes Park Commercial/Residential Insurance Survey 3.57%1 53.57%15 32.14%9 85.71%24 39.29%11 7.14%2 21.43%6 Q18 Which of the following steps (if any) have you taken to mitigate increased insurance costs? Answered: 28 Skipped: 271 Total Respondents: 28 #OTHER (PLEASE SPECIFY)DATE 1 looked at other insurance approaches than HOA insurance 9/5/2024 11:11 AM 2 Looking to have our unit owners gt their own insurance 8/27/2024 5:08 PM 3 Some fire mitagation; banned the use of all grills, cooking equipment and other open flame devices on decks, porches or any structure within 10 feet of a structure. Charcoal grills are totally banned everywhere. 8/23/2024 1:43 PM 4 Lost it all together for 1/2 of our property 8/23/2024 12:55 PM 5 are rewriting our declarations to allow owners to assume more insurance and HOA less.8/23/2024 12:54 PM 0%10%20%30%40%50%60%70%80%90%100% None of the above Increased deductible Decreased coverage amount Shopped for a new insurance company Fire mitigation Dropped insurance/self- insured Other (please specify) ANSWER CHOICES RESPONSES None of the above Increased deductible Decreased coverage amount Shopped for a new insurance company Fire mitigation Dropped insurance/self-insured Other (please specify) 32 Town of Estes Park Commercial/Residential Insurance Survey 6 Budget cutbacks, decreased hours of operation 8/23/2024 11:12 AM 33 Town of Estes Park Commercial/Residential Insurance Survey 32.14%9 67.86%19 Q19 Has your policy been cancelled by your commercial insurance carrier in the past four (4) years? If yes, please include the name of the insurance carrier below. Answered: 28 Skipped: 271 TOTAL 28 #YES (PLEASE INCLUDE THE NAME OF THE INSURANCE COMPANY THAT CANCELLED YOUR POLICY) DATE 1 American Family 9/7/2024 9:08 PM 2 Nationwide 9/5/2024 12:09 PM 3 American Family Insurance (HOA Policy)9/5/2024 11:11 AM 4 State Farm quoted and then wouldn't bind.9/4/2024 3:33 PM 5 state farm 9/3/2024 11:14 PM 6 American Family 9/1/2024 2:42 PM 7 AMERICAN FAMILY 8/28/2024 3:35 PM 8 American Family - non renewed 8/28/2024 3:07 PM 9 American Family 8/27/2024 5:08 PM 10 American Family 8/27/2024 12:10 PM 11 Auto-Owners insurance 8/23/2024 5:26 PM 12 American Family 8/23/2024 1:48 PM 13 American Family 8/23/2024 1:38 PM 14 Multiple companies 8/23/2024 12:55 PM 15 American Farm...not cancelled but non-renewed.8/23/2024 12:54 PM 0%10%20%30%40%50%60%70%80%90%100% No Yes (please include the name of the... ANSWER CHOICES RESPONSES No Yes (please include the name of the insurance company that cancelled your policy) 34 Town of Estes Park Commercial/Residential Insurance Survey 16 Church Mutual 8/23/2024 12:42 PM 17 American family 8/23/2024 11:52 AM 18 State Farm, AmFam 8/23/2024 11:12 AM 19 American family 8/23/2024 10:28 AM 35 Real Estate Agent 36 Town of Estes Park Commercial/Residential Insurance Survey 100.00%3 0.00%0 0.00%0 Q20 What type of real estate makes up the majority of your business? Answered: 3 Skipped: 296 TOTAL 3 0%10%20%30%40%50%60%70%80%90%100% Residential Commercial Equal ANSWER CHOICES RESPONSES Residential Commercial Equal 37 Town of Estes Park Commercial/Residential Insurance Survey 66.67%2 33.33%1 Q21 Has access to insurance been a barrier to closing real estate sales in the past four (4) years? Answered: 3 Skipped: 296 TOTAL 3 0%10%20%30%40%50%60%70%80%90%100% Yes No ANSWER CHOICES RESPONSES Yes No 38 Town of Estes Park Commercial/Residential Insurance Survey Q22 Approximately how many times have your personally seen access to insurance be a barrier to closing real estate sales in the past four (4) years? Answered: 3 Skipped: 296 #RESPONSES DATE 1 really just the past year - most of our clients have found it difficult to find insurance but they have opted to pay the additional cost and close on the property. 8/27/2024 9:06 AM 2 Once 8/23/2024 6:09 PM 3 Flip have seen it increase specifically over the last 6 months. I think 4 years is a difficult timeframe as it has been a topic for 2 years and we are seeing the effects of limited opportunities over the last 6 months 8/16/2024 8:41 AM 39 Town of Estes Park Commercial/Residential Insurance Survey Q23 Approximately how many times have you personally seen affordability of insurance be a barrier to closing real estate sales in the past four (4) years? Answered: 3 Skipped: 296 #RESPONSES DATE 1 We haven't had any closings fail due to property insurance but in my last transaction sellers were paying $2,000/year for insurance and the buyers ended up paying $6,000/year. Definitely an affordability issue! 8/27/2024 9:06 AM 2 Once 8/23/2024 6:09 PM 3 3 8/16/2024 8:41 AM 40 Town of Estes Park Commercial/Residential Insurance Survey Q24 Please use the text box below to share any specific scenarios you have personally encountered where insurance accessibility/affordability has impacted a real estate transaction in the Estes Valley. Answered: 3 Skipped: 296 #RESPONSES DATE 1 As I stated above, most (if not all) buyers find it very difficult to even find someone to insure their property. Once they find insurance they end up paying much more than the previous owner. This is definitely a problem that needs to be addressed. Most people need to shop out of Estes Park to get insurance where in the past we have always recommended using local insurance companies. 8/27/2024 9:06 AM 2 Homeowners insurance is tough for attached condos.8/23/2024 6:09 PM 3 Client buying and selling in the Estes Valley, seeing quadruple increase in coverage for a more fire safe home. Seeing in town insurance providers not able to cover or even bid on coverage. Seeing properties being deemed uninsurable once on the market for sale. 8/16/2024 8:41 AM 41 A business of Marsh McLennan Homeowner availability study Colorado Department of Regulatory Agencies (DORA) – Division of Insurance Prepared by Oliver Wyman Actuarial Consulting, Inc. March 2023 ATTACHMENT 2 CONTENTS Section Description Page 01 -Executive Summary Background & key findings 3 02 -State of the Market Industry profitability trends over time & across states 12 03 -Wildfire Exposure in Colorado Assessment of the wildfire risk in Colorado 16 04 -Quantitative Analysis: Availability & Affordability Assessment of trends in insurance data surveyed from carriers 24 05 -Qualitative Analysis: Pricing, Underwriting & Availability Programs Assessment of trends in carrier pricing & underwriting practices; Review of existing property risk sharing programs 37 06 -Appendix: Industry Survey Methodology Description of data surveyed & collected 43 07 -Disclaimers and Limitations Data limitations, Qualifications, Assumptions, & Limiting conditions 49 Executive Summary 01 4© Oliver Wyman BACKGROUND Assessing the stability, availability and affordability of Insurance •In the context of recent wildfires in the State of Colorado, Senate Bill 22-206 was passed, seeking ways of addressing the stability, availability, and affordability of homeowner insurance in the Centennial State. •The Division of Insurance (DOI) is responsible for the fulfillment of this mandate and engaged Oliver Wyman to conduct a study on its behalf, evaluating the situation of insurance availability & affordability for homeowners in Colorado. •In order to evaluate the situation, Oliver Wyman performed two types of assessments: •A quantitative assessment which analyzes granular data collected from insurance carriers, and •A qualitative assessment which summarizes feedback provided by carriers and industry associations regarding insurance availability/affordability in Colorado and possible approaches to address these issues. Execution of the Study For each component of the availability & affordability assessment, our work involved the following steps: A. Quantitative Assessment •Create a data collection framework that will enable a granular analysis of availability & affordability of homeowners insurance products in Colorado. •Manage the data collection process with insurance carriers. •Assess recent trends in Colorado homeowner insurance, with a specific focus on whether affordability and availability of coverage is currently under pressure in some regions. •Assess whether these trends are tied to the wildfire exposure in the state, which has caused significant losses in the recent years. B. Qualitative Assessment •Survey insurance carriers on their current underwriting & pricing methodologies, with a particular focus on their treatment of wildfire risk. •Research existing property insurance availability programs in other states and provide recommendations for Colorado regarding development of a similar program. 5© Oliver Wyman KEY FINDINGS: SUMMARY Observations Profitability of the “Homeowners Multi-Peril” Market •From a profitability standpoint for the insurance industry, the Colorado market has been struggling in recent years, reporting the 4th largest 5-year direct loss & DCC1 ratio of all US jurisdictions. •Significant wildfire activity (e.g., East Troublesome & Marshall fires) have exacerbated these high loss ratios. Some of Colorado’s areas at high risk of wildfire run close to the densely populated areas of the state, increasing the potential for large losses to insurers. Trends in Premium Increases •Premiums have been increasing significantly in Colorado over the last three years. Between January 2019 and October 2022, the average homeowner premium is up +51.7%, or +11.5% annually. •Measured on an annual basis, the pace of premium increases is also accelerating from +6.75% in 2020, to an average premium increase in 2022 (as measured through October) of +14.84%. •Rate changes (including more sophisticated handling of the wildfire peril), as well as inflation, appear to be the most likely drivers of those increases. Rate increases observed in Colorado are measurably higher than the countrywide average. Trends in Written Exposures •On a unit basis (i.e., number of homeowner risks insured), we observe that the market has expanded modestly in all years under study (2020 through 2022). This likely reflects new housing development. •However, we further observe that outside of the top 5, carriers have been shrinking their exposures in the Colorado market since 2021. Specifically, 76% of carrier groups shrank their exposures in 2022 (through October), with 32% of carriers shrinking by more than 10%. In other words, The market is currently consolidating under the largest 5 carrier groups. •Furthermore, we see that the pace of growth of the industry is trending downwards significantly over time, nearly leveling off to 0% growth as of October 2022 (time of the survey). If these trends continued in late 2022 and into 2023, this would suggest some homeowners will face insurance availability issues in 2023. Correlation between industry trends and wildfire exposure •Premium increases are significant across many regions of the state regardless of the wildfire exposure, although the increases are moderately higher in high-risk areas. •At the industry level, we do not see more shrinkage of exposures in high-risk areas, although some carriers are selectively non-renewing the policies that they perceive to have the highest risk level. Affordability & Availability Implications Affordability •The magnitude of premium increases that are accumulating year after year are impacting affordability. •The accelerating nature of the premium increases may also suggest that the affordability issue may be continuing to deteriorate beyond the period measured in this study (which was through October 2022). •With pressure from wildfire losses, inflation, a hardening reinsurance market, and historically unprofitable results in Colorado, insurers are likely to continue to seek premium increases. Availability •While the exposure data provided by carriers does not indicate a significant decrease in homes insured overall, there is a clear shift in the market. The fact that most carriers have been shrinking their exposures in the state in 2022 –some very materially –suggests some turmoil for policyholders and instability in the market. •An additional source of concern is the downward trend in the industry growth in exposures. The industry growth fell to 0% by the end of our analysis period (2022-Q3). If these trends continue, it may lead to year-over-year shrinkage, which would lead to exacerbated availability concerns. •Some carriers report non-renewal actions and new business restrictions based on wildfire risk, which corroborate the shifts observed in the data and aligns with the market turmoil. Conclusion and Recommendations •If recent trends continue or exacerbate, it is reasonable to expect that the homes that insurers perceive to have the highest level of risk will face insurance availability issues. •A Residual Market Plan would provide a market of last resort that would allow high-risk homes to secure coverage during this time of market transition and turmoil. •Such a Plan should consider the appropriate underwriting criteria, product offering, and price point, in order to avoid undue disruption to the voluntary insurance market. •Attention to wildfire mitigation measures should also be explored as a means to control fire damage, reduce insurance losses, and improve stability of the insurance market. 1: DCC stands for Defense & Cost-Containment Expenses. It refers to the costs of adjusting a specific claim. 6© Oliver Wyman 5-Year Loss Ratio Assessment The Colorado “Homeowners Multi-Peril” market has been struggling over the recent years from a profitability standpoint. Colorado’s Loss & DCC1 ratios have consistently been above countrywide averages, leading each time to an underwriting loss for the industry: KEY FINDINGS: STATE OF THE COLORADO MARKET Source: S&P Market Intelligence, Oliver Wyman Analysis. Copyright © 2022, S&P Global Market Intelligence.Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party.S&P and their content providers are not responsible for any errors obtained as a result of usage of such Content and will not be liable for any damages in connection with the use of this content. 1: DCC stands for Defense & Cost-Containment Expenses. It refers to the costs of adjusting a specific claim, and represents roughly 1%-2% of Earned Premiums for the “Homeowners Multi-Peril”. 129 76 71 93 75 74 60 68 71 0 20 40 60 80 100 120 140 20212017201820192020 Di r e c t L o s s & D C C R a t i o 85 Calendar Year Colorado Countrywide Approved rate changes by year –Homeowners MP –Selected Carriers1 1: Derived from the rate filings of top national carriers (~Top 10) in each state. The magnitude of the difference between rate adjustments undertaken in the state vs the rest of the country highlights the industry’s perspective on the profitability of homeowner policies in the state. 6.1% 3.3% 2018 3.3% 2019 2.6% 5.8%5.0% 2020 6.4% 3.9% 2021 Colorado Countrywide Source: S&P Market Intelligence, Oliver Wyman Analysis. 7© Oliver Wyman Measured annually, average premiums have increased significantly between 2019 and 2022, and at an accelerating pace. Measured on a monthly basis, the magnitude of increases is even clearer, standing at +51.7% between January 2019 and October 2022. KEY FINDINGS: TRENDS IN AVERAGE PREMIUMS •The industry average premium is up +51.7% over the analysis period (46 months), or +11.5% annually. •Inflection points are observed concurrent with the major wildfires. •Inflation and efforts to improve rate adequacy are likely other key contributors to the increases over time. •The increase since the beginning of 2022 is +18.6%, or +22.7% annually. Marshall FireEast Troublesome Fire Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Oliver Wyman Analysis. Average premiums have been increasing significantly over the last 3 years, and at an increasing rate. In terms of total exposures written,the industry is still growing on a year-to-date basis, although the trend is headed downwards with time. In fact, on a quarterly basis growth is now reaching 0% as-of 2022-Q3 (see next slide). Industry movements in premiums & exposures –October 2022 year-to-date 8© Oliver Wyman The growth in written units observed at the industry level is driven by the largest carrier groups; others have been shrinking in the last 2 years. A majority of carrier groups have been shrinking their exposures in the state in 2022 (YTD-October) KEY FINDINGS: TRENDS IN WRITTEN EXPOSURES 8 1 2 5 3 2 1 3 0 6 2 4 8 Nu m b e r o f C a r r i e r g r o u p s [-12.5% to -10.0%[ [-10.0% to -7.5%[ [-7.5% to -5.0%[ [-5.0% to -2.5%[ [-2.5% to 0.0%[ [0.0% to 2.5%[ [2.5% to 5.0%[ [5.0% to 7.5%[ 7.5% or above Distribution of carrier-level variation in written units –2022 year-to-date •The industry as a whole has been growing (at a generally declining pace) since 2020. However, outside of the top 5 carrier groups, exposures have been materially shrinking since 2020-Q4. •Growth in the overall industry & Top 5 carrier groups has leveled off, just reaching 0% growth for the first time in 2022-Q3. Larger concerns may lie ahead if the largest carriers are also starting to reassess their appetite. •A market consolidation appears to be taking place in Colorado, with the largest carriers taking a bigger piece of the pie. Through October 2022 year-to-date, 76% of carrier groups have written fewer policies than during the same period last year. Furthermore, a material 32% of carrier groups are even down more than 10%over the period. At the industry level this is offset by some larger carriers picking up a portion of the risks left out by others. Growth Shrinkage Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Oliver Wyman Analysis 9© Oliver Wyman KEY FINDINGS: COLORADO WILDFIRE EXPOSURE Source: Guy Carpenter’s wildfire risk score, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis Color Scale Disclaimer Any ZIP code not depicted with the darkest shade of green presents some exposure to areas with high-or-above risk of wildfire. Note: Blank shadings indicate areas where a score was not available. Different ZIP code extraction dates between GC and OW are causing a handful of discrepancies. Representation of wildfire risk in Colorado at the ZIP code level Measured as the % of building structures found in areas of “high”, “very high” or “extreme” risk Wildfire Exposure in Colorado Wildfires are believed to have played a material role in Colorado’s loss experience in recent years, and such it is anticipated that at least some of the measures implemented by carriers (such as non-renewals and tightening underwriting criteria) are targeted at controlling this risk. There is indeed significant wildfire exposure in the state. The map on the left combines Guy Carpenter’s wildfire risk score and satellite imagery to estimate the level of wildfire exposure found in each ZIP code of the state. This wildfire exposure is largely concentrated in two bands of land that run across the state from North to South, with the easternmost band running close to the densely populated areas of Denver, Colorado Springs & Fort Collins. High-or-Above Areas of Wildfire Risk The wildfire map segments the US territory into zones representing exponentially more risk of wildfire.The risks starts becoming more material once we reach the “High”zone and above. The exposure at the ZIP code level is estimated by counting the building structures that fall under high-or-above areas using satellite imagery.Overall this represents 16.64%of building structures in Colorado. High-or-above % 100% 80% 60% 40% 20% 0% 10© Oliver Wyman KEY FINDINGS: CORRELATION WITH WILDFIRE RISK Growth in written units vs wildfire risk in the ZIP code –2022 YTD 0 5 10 15 20 25 30 35 40 45 50 55 1.0% 2.5% 1.5% 2.0% 0.0% 0.5% 3.0% 51% Portion of buildings in “high-or-above” wildfire area 21%Po r t i o n o f C O Z I P C o d e s i n r a n g e Gr o w t h i n d i r e c t u n i t s w r i t t e n – 20 2 2 Y T D 0.37% <= 0.01% 1.61% 18% ]0.01% to 15%] 1.56% 5% ]15% to 30%] 1.96% 5% ]30% to 50%] 1.96% > 50% Written Units Growth Portion of ZIP Codes Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Guy Carpenter’s wildfire risk score, Oliver Wyman Analysis It does not seem like high-risk areas have been subject to greater shrinkage in exposures in 2022. While some policyholders may be facing significant restrictions in these areas at the carrier level, this is not the case at the industry level. Average premium increase vs wildfire risk in the ZIP code –2022 YTD 0 5 10 15 20 25 30 35 40 45 50 55 13% 10% 11% 12% 15% 14% 16% 17% ]0.01% to 15%] Portion of buildings in “high-or-above” wildfire area Po r t i o n o f C O Z I P C o d e s i n r a n g e In c r e a s e i n a v e r a g e p r e m i u m – 20 2 2 Y T D 15% 14% 51% 17% <= 0.01% 14% 18% 15% 5% ]15% to 30%] 5% 21% ]30% to 50%]> 50% Average Premium Increase Portion of ZIP Codes Although this graph highlights a positive correlation between the size of premium increases and the exposure to wildfire risk, it is important to note that the amplitude between the smallest and the largest increases remains relatively small (+14% to +17%). This suggests that the rating actions currently taking place in Colorado are probably much broader in scope than the wildfire peril alone, although there seems to be some segmentation with respect to the wildfire peril. 11© Oliver Wyman ADDITIONAL FINDINGS: INDUSTRY COMMENTARY AND RESIDUAL MARKET PLANS Based on survey responses from major carriers, the insurance industry response to recent Colorado wildfire activity is mixed: •Some carriers report no efforts to withdraw from high-risk territories. •Other carriers are reporting non-renewal initiatives that target a small percentage of Colorado homes with the most extreme levels of wildfire risk, particularly in instances where loss mitigation measures have not been taken. •Wildfire risk is being considered in evaluating applications for new business, with carriers increasingly relying on external wildfire scoring models to evaluate eligibility. •Other issues (not directly related to wildfires) are also putting upward pressure on homeowners’ insurance premium levels. These factors include widespread inflation and a hardening reinsurance market. Residual Market Plans: •Many jurisdictions within the U.S. have property residual market plans that provide a market for difficult-to-insure policies. •Colorado (along with several neighboring states with increasing wildfire risk) does not currently have a residual market plan for property risk. •Given recent concerns about insurance availability for high-risk homes, Colorado is exploring developing a residual market plan. •Stakeholders have provided guidance regarding items that Colorado should consider if a residual market plan is developed. This guidance is targeted at: 1.Ensuring the Plan can provide an insurance market for high-risk properties; 2.Limiting disruption in the voluntary market; 3.Making sure there is not an undue financial burden on the insurance industry or taxpayers. INDUSTRY COMMENTARY STABILITY PROGRAMS In developing a residual market plan, consideration should be given to the product offering, pricing, operational structure, and underwriting criteria to ensure that it complements (and does not compete with) the voluntary market. State of The Market 02 13© Oliver Wyman LOSS RATIO ANALYSIS: COLORADO HOMEOWNERS MULTI-PERIL The Colorado homeowners’ insurance market has been consistently reporting underwriting losses over the last 5 years. 5-year Direct Loss & DCC Ratio by state –Homeowners Multi-Peril (%)Direct Loss & DCC Ratio by year –Homeowners Multi-Peril (%) 129 76 71 93 75 74 60 68 71 0 20 40 60 80 100 120 140 2017 2018 2020 20212019 85 Di r e c t L o s s & D C C R a t i o Calendar Year Colorado Countrywide Colorado has reported the 4th highest Loss & DCC ratio in the US over the last 5 years (out of 51 jurisdictions –including DC), exceeded only by Louisiana, Iowa & California. Colorado loss ratios have consistently been above countrywide averages, leading each time to an underwriting loss for the industry. Source: S&P Market Intelligence, NAIC report on profitability (2023), Oliver Wyman Analysis 1: DCC stands for Defense & Cost-Containment Expenses. It refers to the costs of adjusting a specific claim, and represents roughly 1%-2% of Earned Premiums for the “Homeowners Multi-Peril”. Copyright © 2022, S&P Global Market Intelligence.Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party.S&P and their content providers are not responsible for any errors obtained as a result of usage of such Content and will not be liable for any damages in connection with the use of this content. 14© Oliver Wyman RATE CHANGE ANALYSIS: COLORADO HOMEOWNERS MULTI-PERIL These profitability struggles have generated rate increases that materially outpaced the countrywide averages. Approved rate changes by year –Homeowners –Selected Carriers1 Implications for this Study 1.Environment of persisting high Loss & DCC ratios: In light of these findings regarding the performance of the Colorado market, it is not surprising to see carriers making upward rate adjustments. 2.Impact of wildfires on these results: It is widely known that the state of Colorado has experienced significant wildfire activity over the recent years, which contributed –at least partially –to the high loss ratios. As such, we anticipate that at least some of the profitability measures implemented by carriers in the state may have been targeted towards the wildfire risk. 3.Availability/Affordability considerations: Extended periods of unprofitability coupled with catastrophic exposures may force some carriers to implement drastic pricing and/or underwriting measures in order to restore adequate profit margins, which –at least in the short term – may lead to availability and/or affordability concerns for the population seeking coverage. The time is right to get a pulse of the market and assess whether major shifts are currently taking place. Source: S&P Market Intelligence, Oliver Wyman Analysis 1: Derived from the rate filings of top national carriers (~Top 10) in each state. The magnitude of the difference between rate adjustments undertaken in the state vs. the rest of the country highlights the industry’s perspective on the profitability of homeowner policies in CO. Disclaimer: This graph displays rate increases, which refers to direct changes to the rate levels and parameters in the insurers’ rating plans. In addition to this, certain changes in policy features can lead to a premium increase beyond that which is driven by a rate increase. Examples of changes to policy features include: addition of new endorsements, revisions to reconstruction cost estimates (generally due to inflation), and adverse claim activity which could trigger surcharges at renewal. 2020 6.1% 2019 3.3% 2018 3.3% 5.8% 2.6% 5.0% 6.4% 3.9% 2021 Colorado Countrywide Copyright © 2022, S&P Global Market Intelligence.Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party.S&P and their content providers are not responsible for any errors obtained as a result of usage of such Content and will not be liable for any damages in connection with the use of this content. 15© Oliver Wyman MARKET DYNAMICS OF FOR COLORADO HOMEOWNERS INSURANCE The Colorado market is much more consolidated under the largest carrier groups than the rest of the country. Market Shares (Direct Premiums Written) held by the Top 5 carriers –Homeowners Multi-Peril Market Shares (Direct Premiums Written) held by the Top 10 carriers –Homeowners Multi-Peril 62.9%63.1% 2020 48.0%48.2%62.8% 2017 47.4% 2018 2019 63.3% 46.8% 65.0% 47.2% 2021 CountrywideColorado 2018 85.3% 63.8% 2017 85.8% 63.3% 86.6% 63.1% 2019 87.2% 62.8% 20212020 87.7% 63.5% Colorado Countrywide Source: S&P Market Intelligence, Oliver Wyman Analysis Copyright © 2022, S&P Global Market Intelligence.Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party.S&P and their content providers are not responsible for any errors obtained as a result of usage of such Content and will not be liable for any damages in connection with the use of this content. Trend in the level of concentration It is also worth noting that the level of concentration of market shares held by the Top 5/10 carriers has been increasing over the recent years in Colorado, which was not the case at the countrywide level. Overall level of concentration The Colorado market is much more concentrated than the countrywide average. In 2021, the Top 5 carriers held 17.8 more percentage points of market shares (24.2 more percentage points for the Top 10). Also, in 2021 the list of top 10 carrier is the same at the state and the countrywide levels (although the order differs). This means that the vast majority of premiums in Colorado are sold by large national carriers. Possible implications of this higher concentration of national carriers in Colorado may include: -Colorado-specific catastrophes do not represent as significant a solvency threat to national carriers as they would to small regional carriers; -However, if large national carriers find Colorado to be too risky or unprofitable a market, they can shrink in (or withdraw from) the state without losing a significant share of their countrywide premiums. This is a potential threat to the stability of the Colorado market. -Additionally, when the market is concentrated among a few groups of carriers, major pricing or underwriting reassessments from any of them could quickly put the market in turmoil. Wildfire Exposure in Colorado 03 17© Oliver Wyman GUY CARPENTER’S WILDFIRE RISK SCORE This tool will allow us to reconcile the availability findings with each region’s wildfire exposure The Tool Applications for this projectSpecifications •Enhanced & repurposed version of the US Forest Service’s (USFS) Wildfire Hazard Potential for insurance usage. •Classifies the US territory into 6 categories of wildfire hazard grades, from Very Low to Extreme. •Developed for P&C insurers to enable an evaluation of wildfire risk at the location level. •Scores are updated periodically to reflect updates to data sources & refinements in methodology. Baseline: USFS1 •USFS’s Wildfire Hazard Potential represents a combined view of wildfire likelihood & intensity. •It uses multiple spatial datasets: •Data produced for the Large Fire Simulator •Fuel & vegetation data (LANDFIRE) •Past fire occurrences (1992-2015). •Primary purpose is to identify areas that require vegetation treatment, not explicit wildfire risk. Adjustments •Fire Intensity: Based on conditional flame length, adjusts for the potential for structure damage. •Fire Suppression: Adjusts for enhanced suppression response in highly populated areas. •Spatial Smoothing: Reduce cell-to-cell volatility and capture ember transport. •Ignition Frequency: Adjust score in areas without recent ignitions. Local Enhancements •Apply a factor based on granular 30m resolution data, considering fuel, slope, and aspect. 1: From the US Forest Service’s website. Source: Guy Carpenter Risk Assessment •This model can identify Colorado’s high-risk areas at a very high level of granularity. •This wildfire exposure can be translated at the Zip Code level using satellite imagery, by counting the building footprints falling under each hazard grade. Interpretation of recent trends in industry data •We will then be able to compare our findings in terms of premium increases & coverage restrictions to each area’s wildfire exposure. Important Note •While the model is highly granular (30m resolution), the full benefit of this granularity is not realized when the results are summarized at a zip code or county level. 18© Oliver Wyman COLORADO WILDFIRE MAP (1/2) High-risk areas are composed of 2 bands that cross the state on the North-South axis This is a downscaled version of the original map for illustrative purposes; the real map has a 30m resolution. Extreme Very High High Moderate Low Very Low •This map shows the GC Wildfire Risk Score allocation for the state of Colorado. •Per the model, several Colorado regions are classified as High risk or above. •These same regions are highlighted on Open Street Map in the next slide, making it easier to visualize areas of interest Source: Guy Carpenter, Oliver Wyman Analysis 19© Oliver Wyman COLORADO WILDFIRE MAP (2/2) The Eastern band runs very close to the densely populated areas of Denver & Colorado Springs. Source: Guy Carpenter, Oliver Wyman Analysis 20© Oliver Wyman 2. Localization of buildings on the wildfire map All buildings get located on GC’s wildfire map 1. Microsoft Building Footprints Estimation of all building structures in the US using AI & Satellite imagery. 4. Percentage of Structures in High to Extreme Areas* The proportion of buildings with a wildfire score of “high or above” within a Zip Code is used to assess the wildfire exposure in that area. 3. Wildfire score assignation Each building receives a score based on the area of the wildfire map they fall into. ESTIMATION OF WILDFIRE EXPOSURE BY ZIP CODE The detailed wildfire map has been translated at the Zip Code level using satellite imagery https://www.microsoft.com/en-us/maps/building-footprints Source: Guy Carpenter, Oliver Wyman Analysis 21© Oliver Wyman INTERPRETATION OF THE WILDFIRE SCORE The wildfire map segments the US territory into zones based on their level of wildfire risk. Relative frequency1 of wildfire occurrence by zone High-or-Above Areas Wildfire risk grows exponentially as we advance through the zones defined by the model. The risk starts becoming more material once we reach the “High”zone and above;this represents 16.64%of building structures in Colorado (estimated with satellite imagery -includes commercial). As such,we will define wildfire exposure as the %of buildings found in a high-or-above area in a given region (e.g.,zip code,county)over the course of this study. Note that the wildfire frequencies and building %shown here are measured very precisely at the individual building level (i.e.,prior to combining information at the ZIP code or county level). 1: Frequency vs Intensity of Wildfires In practice,the “danger”associated with wildfires in a given area depends on both the frequency of ignitions and the resulting intensity of the fire. While both are considered in the determination of the score,only the frequency piece is depicted above.It means that in practice,the relative “danger”between “Very Low” and “Extreme”is probably even larger than depicted on this graph. Source: Guy Carpenter’s review of 2000-2019 US wildfires, Oliver Wyman Analysis 20% 0% 300 5% 40% 30% 500 150 25% 10% 0 35% 250 15% 100 50 200 350 450 400 550 Wildfire frequency relative to “Very Low” % of Colorado Buildings found in each wildfire zone High 7.80% 38.15% Very Low Moderate 31.38% Low 8.82%13.84% Very High Extreme 0.02% Relative Frequency of Wildfires Portion of CO Buildings in the zone 22© Oliver Wyman PERCENTAGE OF BUILDINGS IN “HIGH-OR-ABOVE” AREAS BY ZIP CODE This Zip Code-level map will allow us to compare wildfire exposure with zip code-level data collected from carriers. Source: Guy Carpenter’s wildfire risk score, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis Color Scale Disclaimer Any ZIP code not depicted with the darkest shade of green presents some exposure to areas with high-or-above risk of wildfire. Note: Blank shadings indicate areas where a score was not available. Different ZIP code extraction dates between GC and OW are causing a handful of discrepancies. 100% 80% 60% 40% 20% 0% Zip Code-level Scores This representation of wildfire risk at the zip code level will allow us to measure potential correlation trends in insurance availability & affordability. We will compare this map with areas where industry data highlights significant shifts in average premium & total exposure sold (collected at the Zip Code level). High-or-above % 23© Oliver Wyman COLORADO POPULATION DENSITY Most of Colorado’s large cities lie on the north-south axis right beside the wildfire band. Proximity with densely populated areas This map highlights that the easternmost band of wildfire risks runs very close to the densely populated areas of Fort Collins, Denver & Colorado Springs. The edges of Denver & Colorado Springs, which are materially exposed to wildfire risk, still have a quite high density of population. As such, in the event where insurance carriers would be reassessing their appetite for wildfire risk, this could have an impact on a material group of Colorado homeowners. Source: ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis 1000+ 800 600 400 200 0 Population per square mile Quantitative Analysis:Availability & Affordability 04 25© Oliver Wyman •“Written units” represents the number of homes for which insurance policies are sold each month. •For “Homeowners” policy types, one written unit represents one personal property insured for one year (e.g., one HO-3 policy). •An industry-wide decrease in written units would indicate that fewer households are protected by insurance policies year-over-year. •Average premium is defined as Written Premiums / Written Units. •It represents the average annual premium per written unit. •Carriers will increase rates when in their perception, the current premium will no longer be high enough to cover the projected loss and expense levels. •For example, this would happen if actuarial analyses highlight an increasing frequency and/or severity of losses vs prior estimates. Written Units Trends Average Premium TrendsVS METHODOLOGY SUMMARY These two metrics are key indicators of the availability/affordability situation in the state Additional Reporting Considerations •“Homeowners” policy types only: The following exhibits are specifically focused on pure homeowner policies (i.e., excluding Renters & Condos). •Year-to-date figures: These exhibits contain data from January through October for each year. •Group-level figures: The data call was made at the company level, but then rolled up at the group level for analytical purposes. Each group only contains the volume from its underlying entities writing more than $5M in direct premiums in the state of Colorado. •Top 5 carrier groups: Where applicable, any reference to “Top 5 Carrier groups” is intended to represent the 5 largest groups in the state: State Farm, Liberty Mutual, USAA, American Family & Allstate. In 2021, these 5 groups represented 65% of the “Homeowners Multi-Peril” market in Colorado.1 Please not that additional details regarding the surveying methodology and subsequent manipulations can be found in Section 6 of this report. 1: S&P Market Intelligence 26© Oliver Wyman INDUSTRY YEAR-TO-DATE TRENDS Recent trends in the homeowners market highlight significant premium increases over the recent years. Premiums are growing at an accelerating pace The average premium’s pace of increase is accelerating, now approaching +15% on a YTD basis. Carriers may be implementing pricing corrections to their homeowner portfolio given the profitability struggles highlighted earlier. These figures are also likely influenced by the high inflationary environment. Industrywide growth in insured exposures has significantly tapered off over the last 2 years In a saturated homeowner insurance market like the US, we would expect the homeowner insurance industry to grow in alignment with the market of new housing developments reaching the market. We would also expect the industrywide growth to be relatively steady year-over-year. However, in Colorado we observe a material shift in the figures over the last 2 years. More research into the Colorado housing trends would be required to fully understand if 2020 is the outlier or if 2021 & 2022 are. These figures may also be skewed to some extent by the COVID-19 pandemic. This could be an indicator that some carriers are reviewing their appetite within the market, and that the risks being cancelled are not all picked up by other carriers. Industry year-to-date variations (Jan-Oct) of the various metrics surveyed: Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Oliver Wyman Analysis 27© Oliver Wyman INDUSTRY YEAR-OVER-YEAR UNIT GROWTH BY MONTH Outside of the top 5, carriers have been shrinking their exposures over the recent year, leading to market consolidation. •While the industry as a whole kept growing since 2020, outside of the top 5 carrier groups, exposures have been materially shrinking since 2020-Q4. •The industry & Top 5 trends are also significantly down over the period, just now reaching 0% growth for the first time in 2022- Q3. •Larger concerns may lie ahead if the largest carrier groups are also starting to reassess their appetite. A market consolidation is taking place in Colorado; the largest carrier groups keep taking a bigger piece of the pie. Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Oliver Wyman Analysis Growth Shrinkage 28© Oliver Wyman DISTRIBUTION OF EXPOSURE VARIATIONS BY CARRIER GROUP (2022-YTD) A majority of carrier groups are currently shrinking their unit counts in Colorado, offset by growth under some larger brands. Distribution of variation in written units by carrier group –2022 year-to-date 8 1 2 5 3 2 1 3 4 0 1 5 2 3 6 7 8 % of variation in direct units written –2022 year-to-date Nu m b e r o f C a r r i e r g r o u p s [-12 . 5 % t o -10 . 0 % ) [-10 . 0 % t o -7. 5 % ) [-7. 5 % t o -5. 0 % ) [-5. 0 % t o -2. 5 % ) [5 . 0 % t o 7 . 5 % ) [-2. 5 % t o 0 . 0 % ) [0 . 0 % t o 2 . 5 % ) [2 . 5 % t o 5 . 0 % ) 7. 5 % o r a b o v e Offset by some growing carrier groups At the industry level exposures are still growing year- over-year as of October 2022. This highlights that the remaining minority of carrier groups are picking up a large amount of the risks that have left the other carriers. Despite showing growth in 2022, the industry trend is clearly downwards quarter-over-quarter, which highlights that some of these groups may also be in the process of reassessing their appetite. Most carriers are shrinking Through October 2022 year-to-date, 76% of carrier groups have written fewer policies than over the same period last year. Furthermore, 32% of carrier groups are even down more than 10%over the period. Minimum (0th percentile) First Quartile (25th percentile) Median (50th percentile) Third Quartile (75th percentile) Maximum (100th percentile) -12.33%-10.52%-3.83%-0.11%61.48% Summary Statistics: Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Oliver Wyman Analysis 29© Oliver Wyman INDUSTRY AVERAGE WRITTEN PREMIUM BY MONTH Premiums have increased significantly in Colorado over the analysis period, and the pace has accelerated in 2022. •The industry average premium is up +51.7% over the analysis period (46 months), or +11.5% annually. •The increase since the beginning of 2022 is +18.6%, or +22.7% annually. Marshall FireEast Troublesome Fire Recent wildfire activity, most notably the East Troublesome & Marshall fires, appear as inflection points on the graph; each time leading to accelerated growth in average premium charged following the event. Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Oliver Wyman Analysis 30© Oliver Wyman Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis Amplitude of the scale is moderate However, it is worth noting that the amplitude of the scale of premium increases is moderate. The highest increases are not orders of magnitude above the average of the state. GEOGRAPHICAL ANALYSIS OF PREMIUM INCREASES Larger rate hikes appear correlated with the 2 bands of wildfire risk, although the correlation is imperfect. Increase in average premiums by ZIP Code –2022 year-to-date Note: blue/yellow color markings are there for reference only and as such are approximative. Crossing of the low-risk band However, it appears that the areas most impacted by premium increases cross into the low-risk band in between (broadly depicted in yellow on the map). This may be due to considerations other than wildfire exposure or may be caused by a differing view of where the wildfire risk lies. Avg. Premium Increase (%) 24% Correlation with wildfire bands Upon visual inspection, it appears there is a link between the areas with the largest rate hikes and the two bands of wildfire risk that run along the state (broadly depicted in blue on the map).22% 20% 18% 16% 14% 12% 10% 31© Oliver Wyman CORRELATION ANALYSIS: WILDFIRE RISK VS PREMIUM METRICS Although there is some correlation, it seems rate hikes have a much broader scope than wildfire exposure. Average premium increase vs wildfire risk in the ZIP code –2022 YTD Average premium vs wildfire risk in the ZIP code –2022 YTD 0 5 10 15 20 25 30 35 40 45 50 55 11% 12% 10% 16% 13% 14% 15% 17% Portion of buildings in “high-or-above” wildfire area Po r t i o n o f C O Z I P C o d e s i n r a n g e 21% In c r e a s e i n a v e r a g e p r e m i u m – 20 2 2 Y T D 5% 14% 51% <= 0.01%]30% to 50%] 5% 14% 18% ]0.01% to 15%] 15% ]15% to 30%] 15% 17% > 50% Average Premium Increase Portion of ZIP Codes 0 5 10 15 20 25 30 35 40 45 50 55 0 2,350 2,250 2,550 2,500 2,150 2,450 2,200 2,300 2,650 2,400 2,600 > 50% Portion of buildings in “high-or-above” wildfire area 5% Po r t i o n o f C O Z I P C o d e s i n r a n g e 21% 2,238 Av e r a g e w r i t t e n p r e m i u m – 20 2 2 Y T D ]15% to 30%]<= 0.01% 18% ]0.01% to 15%] 2,489 51% 2,398 ]30% to 50%] 2,117 2,572 5% Average Premium Portion of ZIP Codes It is also clear that regions with material wildfire exposure (15%+ of buildings in high-risk areas) tend to pay more for insurance, which highlights that wildfire exposure may be factored in the price of several carriers. However, It is important to note that this analysis is only one-dimensional. In practice, a variety of information is used by insurers to set insurance premiums, such as building features and cost of living. This information may differ greatly between wildfire areas and the rest of the state. Although this graph highlights a positive correlation between the size of premium increases and the exposure to wildfire risk, it is important to note that the amplitude between the smallest and the largest increases remains relatively small (+14% to +17%). This suggests that the rating actions currently taking place in Colorado are probably much broader in scope than the wildfire peril alone, although there seems to be some segmentation to that regard. Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Guy Carpenter’s wildfire risk score, Oliver Wyman Analysis 32© Oliver Wyman Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis GEOGRAPHICAL ANALYSIS OF EXPOSURES TRENDS Correlation between units growth/shrinkage and wildfire risk is not as clear. Variation in written units by ZIP Code –2022 year-to-date Correlation with wildfire bands The correlation with wildfire risk is a lot less clear when looking at the growth/shrinkage in written units. Pockets of shrinkage are frequently found outside the bands, sometimes even quite far from them. Note: blue/yellow color markings are there for reference only and as such are approximative. Shrinkage observed in urban areas and other low- risk areas One very notable difference between wildfire risk and variations in written units is the situation in urban areas. A lot of purple (shrinkage) can be observed inside Denver and Colorado Springs, although the wildfire exposure is very low. Multiple other shrinkage pockets can be found in the eastern half of the state, which also has a very low wildfire exposure. However, these areas have such low population that year-over-year variations may appear large in %. This may also be an indicator of underwriting measures focused on things other than wildfire risk being at play in the state. Units Variation (%) 4% 2% 0% -2% -4% Most Growth Most Shrinkage 33© Oliver Wyman CORRELATION ANALYSIS: WILDFIRE RISK VS UNIT METRICS In fact, a more thorough analysis of the correlation does not suggest significant shrinkage in high-risk areas. Growth in written units vs wildfire risk in the ZIP code –2022 YTD 0 5 10 15 20 25 30 35 40 45 50 553.0% 0.5% 0.0% 1.0% 1.5% 2.0% 2.5% 1.61% Portion of buildings in “high-or-above” wildfire area Po r t i o n o f C O Z I P C o d e s i n r a n g e 18% > 50% Gr o w t h i n d i r e c t u n i t s w r i t t e n – 20 2 2 Y T D 5%0.37% 51% <= 0.01% 21% ]0.01% to 15%] 1.56% ]30% to 50%]]15% to 30%] 1.96% 5% 1.96% Written Units Growth Portion of ZIP Codes Unexpectedly, it does not seem like high-risk area are more subject to shrinkage in exposures. While some policyholders may be facing significant restrictions in these areas at the carrier level, this is not the case at the industry level. Possible Interpretations 1.Localization of new housing developments If there is a higher relative concentration of new housing developments in some of the more exposed areas, this could also lead to more growth at the industry level in these zones. 2.Volatility High-risk areas are generally less densely populated, as they tend to be more rural. Small movements may trigger large variations in % on a year-to-year basis. Also, if these regions were already largely avoided by carriers, the insurance take- up rate would be low, further magnifying the potential for volatility. 3.Pricing Sophistication It is possible that insurers have improved their wildfire modeling capabilities over the recent years, allowing them to set prices commensurate with risk in regions they used to completely avoid. Alternatively, more sophisticated models may may allow them to further refine their definition of "high risk" areas, to better identify those that are truly outside of their respective risk appetites. 4.Risk Awareness Recent wildfire activity may have increased the risk awareness of the population, leading to an increase in the take-up rate of homeowners insurance in the high- risk areas. Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, Guy Carpenter’s wildfire risk score, Oliver Wyman Analysis 34© Oliver Wyman Increase in average premiums by County –2022 year-to-date Growth/Shrinkage in written exposures by County –2022 year-to-date GEOGRAPHICAL ANALYSIS OF COUNTY UNITS GROWTH & AVERAGE PREMIUM INCREASE Pitkin & San Miguel Counties have been the most impacted counties under each metric. Disclaimer: Data was collected at the ZIP code level. County-level figures and shapes were estimated using the official county assignation of each ZIP code (imperfect). Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis 35© Oliver Wyman Disclaimer: Data was collected at the ZIP code level. County-level figures were estimated using the official county assignation of each ZIP code. COUNTY-LEVEL RANKINGS OF AVERAGE PREMIUM INCREASE (2022 YTD) State Average Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis County Average Premium Increase (2022 YTD)Rank County Average Premium Increase (2022 YTD)Rank County Average Premium Increase (2022 YTD)Rank County Average Premium Increase (2022 YTD)Rank 36© Oliver Wyman COUNTY-LEVEL RANKINGS OF VARIATION IN WRITTEN UNITS (2022 YTD) State AverageDisclaimer: Data was collected at the ZIP code level. County-level figures were estimated using the official county assignation of each ZIP code. Source: Colorado “Homeowners MP” data surveyed from carriers as-of October 2022, filtered on “Homeowners” policy type, ESRI dataset of U.S. ZIP Codes (from ArcGIS), Oliver Wyman Analysis County Written Units Variation (2022 YTD)RankCounty Written Units Variation (2022 YTD)RankCounty Written Units Variation (2022 YTD)RankCounty Written Units Variation (2022 YTD)Rank Qualitative Analysis:Pricing, Underwriting & Availability Programs 05 38© Oliver Wyman KEY TAKEAWAYS FROM INDUSTRY SURVEY –UNDERWRITING AND PRICING In general, carriers report not actively attempting to shrink the volume of homeowners business written in Colorado. However, some carriers have new business restrictions and non-renewal strategies that are impacting properties with the highest level of wildfire risk. Some carriers report revamping their pricing strategies due to recent Colorado wildfire activity; some do not. Some of these efforts were already underway due to wildfire activity in other states. Wildfire is increasingly being filed as a separate peril, leading to the ability to apply discounts and surcharges specifically based on the home’s wildfire risk characteristics. Wildfire risk scores are widely used to inform decisions regarding eligibility, premium rating, non-renewals, and/or loss mitigation requirements. Most carriers anticipate reinsurance premiums to materially increase in 2023 (across all states and lines). This will impact premiums charged for Colorado Homeowners policies but will generally not impact carriers’ appetite to write these policies. Underwriting Appetite Pricing Sophistication Use of Wildfire Scores Reinsurance Costs Carriers are increasingly considering wildfire mitigation measures (such as clearing of combustible materials near homes and using fire-resistant building materials) in underwriting decisions. Focus on these items will likely make it easier for customers to find insurance coverage and will also increase the likelihood of a more favorable outcome in the event of a wildfire. Mitigation Measures 39© Oliver Wyman PROPERTY RESIDUAL MARKET PLANS 33 jurisdictions have Residual Market Plans for Property These Plans provide a market for difficult-to-insure risks. Many of these plans are commonly referenced as FAIR Plans – (Fair Access to Insurance Requirements) There are 36 Plans; some states have more than one Plan. Source: “2022 Compendium of Property Insurance Plans” by The Property Insurance Plans Service Office, Inc. History and Objectives of Property Residual Market Plans •The first residual market plans were created to cover perils related to civil unrest in urban areas, amid allegations that the insurance industry was discriminating against homes in areas deemed “undesirable” (redlining). •Subsequently, numerous other residual market plans were created to cover perils related to extreme weather events in coastal markets. •Residual market plans were generally established by legislation in the 1960s and 1970s. No new residual market plans have been established in the past several decades. •Size and market share of these plans varies widely, largely depending on whether the plans offer pricing and policy features that are competitive with the voluntary market. FL, $1.1B NC, $423M TX, $390M MA, $300M CA, $297M All Other* *The largest state in the “All Other” group is LA at $55M. 2020 Habitational Premium Volume in Residual Market PlansSeveral states in the western region (at risk of wildfires) do not have a residual market plan for property. (MT, ID, WY, NV, UT, CO, AZ, AK). This creates a potential opportunity to collaborate with other states if CO develops a Plan. 40© Oliver Wyman Market of Last resortPricing & Underwriting Operation •Rates should either be set to actuarially sound levels or set to be x% higher than available rates in the voluntary market. (It has been cited that these differentials have been set in ranges from 10% to 25%, and in some cases, 10% may not be “high enough.”) Affordability must also be considered. •Price should be commensurate with risk, to avoid large subsidization. Be mindful of risk transferring to the insurance industry, the state, the taxpayers, and other insurance consumers (including those who live nowhere near the high-risk areas). •Underwriting guidelines are critical and should ensure proper incentives (such as loss mitigation measures). A detailed application, robust inspection process, and targeted use of surcharges and/or higher deductibles for less desirable risks are highly encouraged. •Homes should be insured at a minimum of 80% of replacement cost as a measure to avoid the risk of underinsurance. •Consider using other states’ Plans as servicing entities; this can be an effective expense control and reduce start-up costs. •Seek sophisticated and diversified funding stacks (e.g., retained layers, reinsured layers, industry assessments, etc.) that will help protect the Plan’s longevity and reduce the impact to the broader market. •Depopulation programs (a.k.a “Takeout Plans”) should be considered. These programs incentivize carriers to insure policyholders that had previously been insured by the residual market plan. Such incentives can result in lower assessment levels for carriers that voluntarily depopulate the residual market plan. •Carriers express a preference for timely delivery of annual participation ratios, quarterly financial statements, and quarterly member activity by plan year. Additionally, they prefer when there is no ambiguity regarding whether assessments can be passed onto policyholders. MARKET CONSIDERATIONS –RESIDUAL MARKET PLANS Feedback from PIPSO, Insurers, and APCIA includes the following. •A residual market plan should not compete with voluntary carriers; should be a market of last resort. Consider requiring declinations from voluntary carriers as part of eligibility criteria for Plan. Consider limiting geographic scope to high-risk areas with availability issues. •Coverage options should be limited in scope, and coverage limit options should be capped. The product should not be more attractive than a policy available in the voluntary market. •Avoid inappropriate incentives regarding unsustainable development practices, unwise land-use policies, and buildings that are not sufficiently well-constructed to withstand the risks. •Some carriers expressed preference for a properly functioning voluntary market that provides customers choice (in the admitted market or in surplus lines companies) at an adequate price. If a residual market is being considered by policymakers, evaluation should occur to determine whether the overall market environment in the state is hindering and/or discouraging insurers from writing higher-risk consumers. 41© Oliver Wyman OPERATIONAL CONSIDERATIONS –RESIDUAL MARKET PLANS •Plans are in a reactive position relative to the actions and appetites of the voluntary market. •Volumes may increase after a period of natural disaster which leads voluntary market to non- renew the riskiest policies in their portfolio. •Volumes may then decrease as the voluntary market develops more innovative means of identifying favorable vs. unfavorable risks (e.g., big data, predictive modeling, etc.) and increases its appetite to selectively write policies in a risky segment. •Opportunities for expense efficiency include outsourcing: •AIPSO (Automobile Insurance Plans Service Office) for rate filing services and web hosting •Well -established Plans (e.g., New York) for policy issuance and servicing •PIPSO (Property Insurance Plans Service Office) provides services to its members, including: education, audits, conferences, distribution of ISO circulars, negotiating leverage with vendors, and compilation of industry reports. •Plans of Operation are generally on file with State Insurance Departments; PIPSO may be able to assist in providing several such documents for Colorado’s reference. •Many Plans originated with a Servicing Carrier Model (in which a voluntary carrier would issue and service policies and be reimbursed by the Plan for its expense). •Over time, the vast majority of Plans have migrated to a Syndicate model, where the operations are handled by the Plan (or outsourced to another Plan). This change reduced overhead costs. Plan Volumes are Cyclical Shared Services Organizational Source: Discussion with PIPSO 42© Oliver Wyman Product Offering •Consider the market being served. Strive for a product suitable for high-risk property- owners without taking unreasonable risk, competing with the voluntary market, or requiring a large subsidy. •Explore the notion of high deductibles for wildfires (similar high hurricane deductibles). •Most property residual market plans use standard policy forms (ISO/AAIS). Participation and Cost Allocation •Typically, carriers are assessed based on market share, sometimes adjusted for credits from depopulation programs. In states with depopulation programs, carriers can get credit against their assessments for voluntarily insuring homes that had previously been insured by the residual market plan. •Some states allow industry assessments to be passed on to policyholders. Underwriting Criteria •Property residual market plans are generally not “take all comers” like Auto and Workers Compensation residual market plans. •Many property residual market plans will not offer coverage to properties that are vacant or are subject to extreme risk due to poor maintenance or other risk factors. Sources of Capital •Policy premiums. •Assessments to insurance carriers (based on market share). •Some plans purchase reinsurance to enhance capacity. Governing Committees •Residual market plans generally have Governing Committees that typically include representation from insurance carriers, agents, and state regulators. Some governing committees also include other stakeholders and experts such as public representatives and property engineers. Composition of Residual Market Plan •Residential / Commercial / Both? •Combined or Separate Plans? ADDITIONAL CONSIDERATIONS –RESIDUAL MARKET PLANS Source: Discussion with PIPSO, PIPSO publications, carrier surveys. Appendix:Industry Survey Methodology 06 44© Oliver Wyman Main Goals: •Obtain a timely snapshot of industry trends, as it was anticipated that the situation is evolving quickly. •Identify which areas of the state are the most problematic, if applicable. Due to timeline limitations, scope was limited as follows: •Homeowners Multi-Peril policies only, broken down by policy type. •Data Fields readily available in carriers’ standard reporting frameworks. Type of data collected -at the Zip Code level and on a monthly basis: •Premiums & Exposures: On a written, earned & in-force basis. •Losses: On an accident-month basis. Main Goals: •Identify practices currently in place to limit coverage. •Understand the recent trends in pricing sophistication, primarily as it relates to wildfire models. •Identify the impact of recent wildfire activity on methodologies. Themes surveyed: •Current underwriting & pricing methodologies. •Impact of reinsurance agreements on prices. •Third-party vendors: CAT models & reconstruction costs. •Perspective on availability & stability programs. Data Collection Template (Quantitative Analysis) Survey Questions (Qualitative Analysis) The survey was sent to all subject companies on November 21, 2022, with a response deadline on December 16, 2022: DATA COLLECTED All companies writing more than $5M direct Homeowners premiums in Colorado in 2021 were subject to this data call 45© Oliver Wyman CARRIER GROUPS RESPONSE SUMMARY The study includes 95.3% of the market, which we believe gives an accurate picture of the whole industry. Rank in the survey Group Name Companies Surveyed Market Share Surveyed (2021) 1 State Farm 1 21.0% 2 Liberty Mutual 6 13.4% 3 USAA 4 11.7% 4 American Family Insurance 5 9.5% 5 Allstate Corp 7 8.9% 6 Farmers Insurance 5 7.9% 7 Travelers 3 6.3% 8 Nationwide 5 3.7% 9 Chubb 4 2.9% 10 Progressive 1 1.3% 11 CSAA Insurance Exchange 1 1.2% 12 AIG 1 0.9% 13 The Hartford 3 1.0% 14 Amica 1 0.9% 15 COUNTRY Financial 1 0.9% 16 Auto-Owners Insurance 1 0.8% 17 American National 1 0.7% 18 Southern Farm Bureau Casualty 1 0.5% 19 Tokio Marine 1 0.5% 20 Munich Re 1 0.4% 21 QBE 1 0.4% 22 Acuity A Mutual Insurance Co.1 0.3% 23 Lemonade Inc.1 0.2% 24 The Cincinnati Insurance Cos.1 0.2% 25 California Casualty 1 0.2% Exclusions During the survey process,some carrier groups initially reported figures that generated data integrity concerns (such as unrealistically high unit counts or premium volume).These surveys materially distorted the metrics analyzed in this study. For the sake of time,only those with material market shares were contacted for resolution.At the time of writing this report, all large carrier groups subject to these concerns have provided amended surveys that meet our data integrity standards. The remaining exclusions represent a 1.5%market share,which is immaterial in our view. Data Not Received Only one carrier has failed to provide their survey at the time of writing this report,representing 0.4%market share.It appears unlikely to have any material impact on our analysis. Survey Status Surveys #Surveys %Mkt Share % Included 57 93.4%95.3% Excluded 3 4.9%1.5% Not Received 1 1.6%0.4% Not Surveyed n/a n/a 2.7% Source: S&P Market Intelligence, Oliver Wyman Analysis List of companies included in our study 46© Oliver Wyman B. Written Premiums Reconciliation –NAIC1 C. Other ExclusionsA. Average Premium Reasonability Check $2,262 Average “pure” Homeowner premium (2022 YTD) Below $650 Average Premium 1.5% of Market Shares (2 Groups) Above $1440 Average Premium 95.4% of Market Shares (25 Groups) 2% Proportion of premiums reported in PO Box Zip Codes 4.5%4.7% 86.1% 4.7%1.5% 95.4% 3.1% DATA VALIDATIONS While the overall validity of the surveys received is high, issues identified may have material impacts on our analysis •Some carriers initially reported average premiums below $300 for “pure” homeowners (i.e., HO-3). •This highlighted an issue where some carrier reported unrealistic unit counts. •Largest carriers have been contacted for revision, smaller ones have been excluded from the analysis. Material Discrepancy in 2021 4.5% of Market Shares Material Discrepancy in Older Years 4.7% of Market Shares all years Reconcile (+/-3.5%) 86.1% of Market Shares 90.4% Proportion of included Mkt Shares that reconcile •Largest discrepancy observed on valid surveys is of +22%. •Discrepancies could impact the findings depending what is missing/in excess. PO Box vs Standard Zip Codes Non-Standard Products & other entries ~0.02% Proportion of premiums reported outside of Homeowners, Renters or Condos combined with premiums reported for zip codes outside of Colorado. These were excluded from the analysis. •While the overall figure is low, some carriers reported up to 15% of their volume in PO Box Zip Codes. •PO Box data has not been retained, as this study largely relies on geographical considerations. Not included Not included/ Excluded in step A 1: Reconciliation has been performed using NAIC’s 2021 market share report data, pulled through S&P Market Intelligence. 47© Oliver Wyman DEEP DIVE INTO DATA COLLECTED Unit data is at the center of our insurance availability analysis. Report Breakdown Year Month Zip Code Policy Type 2022 10 80202 Homeowners Premium Data by Calendar Month ($) Direct Premium Written During the Calendar Month Direct Premium Earned During the Calendar Month Direct Premium Inforce As of Month-End Unit Data (#) Direct Units Written During the Calendar Month Direct Units Earned During the Calendar Month Direct Units Inforce As of Month-End Loss Data by Accident Month ($) -Reported as of 10/31/2022 Direct Losses Incurred on Claims with Dates of Loss in Accident Month Direct DCC Incurred on Claims with Dates of Loss in Accident Month Direct Reported Claim Counts with Dates of Loss in Accident Month Breakdown •Monthly Data: Since the availability situation was anticipated to be evolving quickly at the onset of this analysis (Fall 2022). •Zip Code: Allows us to identify availability/affordability problems at a granular level & compare with high-risk areas from the wildfire model. •Policy Type: Allows us to split “Homeowners Multi-Peril” policies between the 3 core types: Homeowners (e.g., HO-3), Renters (e.g., HO-4) & Condos (e.g., HO-6). The focus of this study is specifically Homeowners policies (HO-3). Losses •Accident Months: Collected this way in order to track catastrophic occurrences more accurately. •Catastrophic Nature: Since the Colorado situation is anticipated to be tied to wildfire risk, and catastrophic exposures do not lend themselves nicely to analysis of historical losses over a short period, the analysis of this data has not been prioritized for this study. Premiums •NAIC Reconciliation: Annual Totals are expected to be equal to CO Totals for “Homeowners Multi-Peril” in the state. •Written/Inforce: Allows us to track evolution of average premiums charged on a timely basis. •Earned: Collected in anticipation of a profitability analysis. Units •Exposure Counts: Tracks the amount of policies underlying premium & loss figures (insured buildings for HO-3, insured building units for HO-4 & HO-6). •Core Availability Metric: Allows us to track whether less buildings are finding insurance in the state, as well as how the average price they are paying is evolving. 48© Oliver Wyman HANDLING OF GEOGRAPHICAL DATA •We used the “zipcodes” open-source Python package to perform our manipulations of the ZIP code-level data collected from carriers. •Some of the useful information we relied on includes the type of code (“Standard” or “PO Box”), their central location (lat./long.), as well as associated their cities and counties. •Link:https://pypi.org/project/zipcodes/ •We used ArcGIS’ dataset of US ZIP codes areas (as-of Dec 2021) –owned by ESRI –to present our figures onto maps (using the geographical coordinates relevant to each ZIP code). •The map we relied on is “Open Street” map, which is free and publicly available. •This dataset also contained some demographic information such as the population density by zip code (as-of June 2021), which we used as well. •Link: https://www.arcgis.com/home/item.html?id=8d2012a2016e4 84dafaac0451f9aea24 •Using the “zipcodes” open-source package, we retrieved the most county associated to each unique zip code. •We then combined this to the ArcGIS dataset to compute the geographical surface of each county by combining the surface of each underlying ZIP code. •This representation is imperfect, as in practice any given ZIP code can spread across more than one county. Nonetheless, we believe this simplified representation may prove useful to the reader. Data Manipulation Visual Representation From ZIP code data to County data Disclaimers and limitations 07 50© Oliver Wyman •Missing Carriers: Oliver Wyman had initially surveyed 97.3% of Colorado’s “Homeowners Multi-Peril” market shares to produce this study. Some of the surveyed carriers –either because they did not respond or because material data integrity concerns were identified –had to be excluded from the data analysis. This brought us down to 95.3% market shares available for our analysis, which we feel is sufficient to depict an adequate portrait of the industry in this state. However, we recognize that in the event where significant movement would be happening within the remaining 4.7% (e.g., significant growth in 2022), this could have an impact on our findings. •Discrepancies with NAIC Statements: All carriers were instructed to report premium volumes that reconcile with their NAIC annual statements for “Homeowners Multi-Peril” in Colorado. We performed a reconciliation, and where the discrepancies were completely unrealistic (in multiples of the NAIC-reported volume), we contacted the carriers for revision. Smaller discrepancies –which could range from -22% to +22% depending on the carriers & years –have been observed as well. Depending on the nature & magnitude of volume missing or in excess, findings could be materially impacted by this issue. •Reliance on Guy Carpenter’s wildfire score: In order to assess the wildfire exposure in the state, we have relied on the wildfire score developed by our sister company Guy Carpenter. We recognize that different vendors may come to different assessments of the wildfire risk in the state. Also, due to the granularity of the surveyed data, we represented wildfire exposure at the zip code level. This is an important simplification, as in practice the wildfire risk may vary greatly within a zip code. Insurers may even rely on geo-coding to properly assess the risk of each policy. •Data Validations: While we have made several reasonability checks of the data received and created a process that allows for reconciliation of some of the figures with NAIC statements, this analysis still largely relies on the assumption that insurers answered the survey accurately and in good faith. •Data Confidentiality: In order to produce this study, Oliver Wyman surveyed granular data from insurance carriers, and also collected detailed information regarding the companies’ pricing & underwriting methodologies. As our goal was to depict industrywide trends, all the exhibits &findings presented throughout this report are always aggregated in some way. We did not highlight information from individual carriers anywhere in this report. DISCLAIMERS REGARDING DATA LIMITATIONS 51© Oliver Wyman QUALIFICATIONS, ASSUMPTIONS, AND LIMITING CONDITIONS: OLIVER WYMAN Oliver Wyman Actuarial Consulting, Inc. (Oliver Wyman) prepared this report for the State of Colorado’s Division of Insurance (the Agency), to support the Agency in fulfilling the requirements of SB22-206, C.R.S. §10-1-143, which requires the commissioner of the Agency to conduct a study and prepare a report concerning methods to address the stability, availability, and affordability of homeowner’s insurance for Coloradans with a focus on stabilizing the current market. This report includes important considerations, assumptions, and limitations and, as a result, is intended to be read and used only as a whole, and may not be separated into, or distributed in, parts. This report is being provided strictly for information purposes and, in the case of regulators and officers of the Agency, is intended to be used by them solely for the purposes set forth in SB-22-206 and to fulfil their related legislative, regulatory, administrative, and official functions. This report may not be reproduced, quoted, or distributed for any other purpose or to any other third party without the prior written permission of Oliver Wyman. All decisions in connection with the implementation or use of the results, advice or recommendations contained in this report are the sole responsibility of the Agency. Oliver Wyman shall not have any liability to any third party in respect of this report or any actions taken or decisions made as a consequence of the results, advice or recommendations set forth herein. The opinions expressed herein are valid only for the purpose stated herein and as of the date hereof. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable but has not been verified. No warranty is given as to the accuracy of such information. Public information and industry and statistical data are from sources Oliver Wyman deems to be reliable; however, Oliver Wyman makes no representation as to the accuracy or completeness of such information and has accepted the information without further verification. No responsibility is taken for changes in market conditions or laws or regulations and no obligation is assumed to revise this report to reflect changes, events or conditions, which occur subsequent to the date hereof. 52© Oliver Wyman QUALIFICATIONS, ASSUMPTIONS, AND LIMITING CONDITIONS: GUY CARPENTER The data and analysis provided by Guy Carpenter herein or in connection herewith are provided “as is,” without warranty of any kind whether express or implied. The analysis is based upon data provided by the Agency or obtained from external sources, the accuracy of which has not been independently verified by Guy Carpenter. Neither Guy Carpenter, its affiliates, nor their officers, directors, agents, modelers, or subcontractors (collectively, “Providers”) guarantee or warrant the correctness, completeness, currentness, merchantability, or fitness for a particular purpose of such data and analysis. The data and analysis are provided strictly for information purposes, may not be separated into, or distributed in, parts, and may not be reproduced, quoted, or distributed for any other purpose or to any other third party without the prior written permission of Guy Carpenter. In no event will any Provider be liable for loss of profits or any other indirect, special, incidental and/or consequential damage of any kind howsoever incurred or designated, arising from any use of the data and analysis provided herein or in connection herewith. There are many limitations on actuarial or modeling analyses, including uncertainty in the estimates and reliance on data. We will provide additional information regarding these limitations upon request. As with any analysis, the results presented herein are subject to significant variability. While these estimates represent our best professional judgment, it is probable that the actual results will differ from those projected. The degree of such variability could be substantial and could be in either direction from our estimates. A business of Marsh McLennan Commercial/Residential Insurance Overview Town Board Study Session 10/08/2024 Agenda Objective Background Residential Results Commercial Results Real Estate Agent Perspective Next Steps 1 2 ATTACHMENT 3 - PRESENTED AT MEETING 2024-10-08 Objective Provide a broad overview of commercial and residential insurance issues in the Estes Valley. Background – A Statewide Issue Statewide concerns about availability and affordability of property insurance Senate Bill 22-206 required insurance commissioner to study stability, availability, and affordability of homeowner’s insurance studied by the state Report delivered in March of 2023 3 4 Background – State Findings Profitability of Colorado market for insurers is an issue 4th largest 5-year direct loss and Defense and Cost- Containment Expenses (DCC) ratio among US jurisdictions 51.7% increase in average homeowner’s premiums between Jan 2019 and October 2022 Smaller carriers are shrinking exposures in Colorado, limiting availability and options Background – FAIR Plan Following the study, the Legislature passed House Bill 23- 1288 Created an unincorporated public entity to provideproperty insurance coverage when such coverage is notavailable from admitted insurance companies Expected to be fully stood up by January 2025 Insurance of last resort (damage awards capped at $750,000) 5 6 Background – What’s Next Insurance costs expected to continue to rise Affordability expected to be front and center during the next legislative session Condo HOAs facing distinct challenges HB24-1108 requires a study for condo HOAs and hotels and lodging facilities Due by January 1, 2026 Estes Valley Survey Simple, non-scientific survey to gather experience of Estes Valley residents 299 respondents 255 residential 40 commercial 4 real estate agents 7 8 Residential Residential Results – Coverage Amount 9 10 Residential Results - Cost Average: $4,146 Median: $2,800 ~50% report cost has increased more than 25% in the past four years 0 10 20 30 40 50 60 Cost Increase (last 4 years) $0 - $,1000 $1,001 - $2,000 $2,001 - $4,000 $4,000+ Residential Results - Availability 50% of residential respondents (72/143) report difficulty in acquiring or renewing homeowner’s insurance in last four years 40 respondents report being dropped by homeowner’s insurance carrier Among those reporting difficulty acquiring or renewing, wildfire risk was the reason most commonly cited by the insurer 11 12 Residential Results – Mitigation Strategies Commercial 13 14 Commercial Results – Coverage Amount Commercial Results - Cost Average: $57,865 Median: $42,500 ~82% report cost has increased more than 25% in the past four years 0 2 4 6 8 10 12 14 Cost Increase (last 4 years) $0 - $5,000 $5,001 - $10,000 $10,001 - $15,000 $15,001 - $20,000 $20,001+ 15 16 Commercial Results - Availability 93% of commercial respondents (26/28) report difficulty in acquiring or renewing property insurance in last four years 19 respondents report being dropped by property insurance carrier Among those reporting difficulty acquiring or renewing, wildfire risk was the reason most commonly cited by the insurer (15/26) Residential Results – Mitigation Strategies 17 18 Real Estate Agent Condominium HOAs 19 20 Condo HOAs No specific survey section, responses in both residential and commercial Among the most impacted housing units in the Estes Valley Many impacted by changes in large insurance carrier policy writing (unable to get insurance or can only get partial) More information expected through state study (HB24-1108) Next Steps Does the Board require any additional information about this topic? Does the Board want staff to explore any additional advocacy beyond monitoring upcoming legislation through the CML Policy Committee? Other next steps? 21 22 October 22, 2024 • Rodeo Update • Water 102 – System Conditioning • Massage Therapist Licensing • Arborist Licensing November 12, 2024 • Utility Rates for Service Areas Outside of Town • Annexation Overview • Hosted Short-Term Rentals November 26, 2024 • Multimodal Transportation and Transit Development Plans December 10, 2024 • VEP Dark Skies Initiative • Liquor License Process Items Approved – Unscheduled: • Parking Enforcement Ordinance Updates • Curb and Gutter Philosophy • Stanley Park Master Plan Implementation Items for Town Board Consideration: • Purchasing: Project Delivery Tools Future Town Board Study Session Agenda Items October 8, 2024