Navigating the Challenges and Opportunities of the Oklahoma Schools Insurance Market

Navigating the Challenges and Opportunities of the Oklahoma Schools Insurance Market

As the Oklahoma Schools Insurance Group prepares for the 2023-2024 Plan Year renewal, it’s crucial to evaluate the present condition of the school insurance market. The past few years has brought significant challenges and changes for the education sector, from inflation, social inflation, supply chain constraints, natural disasters, and lack of capacity within the insurance market. Amidst these challenges, OSIG has been working to provide comprehensive insurance coverage and risk management solutions to schools across Oklahoma.

In this insight report, we will explore trends, challenges, and opportunities that are shaping the insurance landscape for schools in Oklahoma and provide insights into how the OSIG program is innovating and adapting to better serve its members and meet the evolving property and casualty insurance needs.

Market Update & Rate Forecast

Based on our program insights from the same time last year, the market was anticipating stabilization. After experiencing three years of a hardening market with higher deductibles, valuation adjustments, reduced capacity, and consecutive rate increases, the collective property market was hopeful for stabilization in the second half of 2023 or early 2024.

However, global insured losses have been surpassing historical averages, posing challenges for insurers. The global reinsurance market has experienced a significant decrease in available capacity and an increase in demand, leading to a reduction of more than $40 billion in dedicated reinsurance capacity over the past year.

A decrease in capacity refers to a reduction in the amount of capital available for insurers to transfer risk to reinsurers. Essentially, when an insurer sells a reinsurance policy to a reinsurer, they are transferring some of the financial risk associated with the policy to the reinsurer in exchange for a premium payment. However, if there is a decrease in available reinsurance capacity, it means that there are fewer reinsurers willing or able to take on new policies or provide additional coverage to existing policyholders. When there is a decrease in capacity, it can lead to higher prices for reinsurance coverage, as insurers are forced to compete for a small pool of available capital. This results in higher premiums as this increased cost is passed on to their customers.

So, despite earlier expectations, the market continues to face uncertainties. Insurance claims
following large catastrophes can be heavily affected by these issues, as was the case in 2022, where their impact was particularly noteworthy. In fact, 75% of the worldwide insured losses incurred in 2022 took place in the United States, leading to a surge in total natural disaster insured losses in the U.S. between 2020 and 2022, totaling over $275 billion, which represents the highest three-year total ever for U.S. insurers.

According to AM Best, the net underwriting losses of the US property and casualty (P&C) market for the first nine months of 2022 amounted to $24.3B, nearly four times the total underwriting loss reported during the same period in 2021.

The industries combined ratio is a measure of underwriting profitability in which a number below
100 represents a profit and one above 100 represents a loss. In 2022 the industry’s combined ratio was 102.5 up 2.8 points from 2021. The graphic below represents the US P&C industry combined ratio and net underwriting gain since 2013.3 As the net underwriting gain decreases insurers need to charge more rate in order to remain profitable.

In the following pages, you will see the program’s performance, including some of our largest claims. Despite the current hard market, our rate increase this year is lower than similar CAT-exposed risks, such as convective storms in Oklahoma, similar risk have seen 50%+ rate increases.

The standard market terminology has been “double double half” trend, where premiums and deductibles double while insurance limits are cut in half.

If schools were not members of OSIG and insured in the standard market they would experience, non-renewals due to loss ratio, double or triple the property rate, percentage deductibles of 2% to 5%, less limits and more exclusions on coverage.

A risk pool has buying power due to economies of scale, larger bargaining power, and more efficient administration. It can negotiate better rates and terms with insurers, leading to lower premiums and better coverage for each school.

2019 was a historic year for the program as property losses surpassed $126M, marking the
highest recorded losses within a single year in the history of OSIG.

In 2021, OSIG achieved a record high membership of 535 members with total insured values surpassing $22B, but its history of property losses has been noteworthy, with over $274M incurred since YE 2015.

In 2023, OSIG is facing further challenges with claims of $15M and losses exceeding $30M due to recent tornadoes, with total insured values exceeding $25B. The program’s six year history of property losses has resulted in a loss ratio of 262%, which contrasts with the reinsurers’ target loss ratio of 65%, highlighting the need for mitigation measures.

The program is facing significant development on claims from prior years. In fact from 02/2022 to 02/2023 the program experienced $46M in claim development. Even though these losses happened in prior years the development continues to flow through the current year balance sheet.

OSIG’s Approach to Mitigating Property Losses

We continue to face challenges presented by the changing landscape of property, general liability, cyber liability, and reinsurance requirements including the various factors of inflation, a rise in litigated claims, and broader definitions of coverage by the legal system, and the use of
Public Adjustors in the claims process.

Additionally, as the market has continued to firm, OSIG has experienced the pressure for reduced capacity and additional sub-limits on coverages, reflecting the changing landscape of
the insurance market.

The following measures have been necessary to adapt to the evolving market conditions.

Margin Clause

A margin clause in property insurance is like a safety net that helps insurers protect themselves
from unexpected or increased costs associated with claims. It’s added to the insurance policy to provide a buffer against rising claim expenses due to factors as mentioned above.

In addition to providing a buffer against unexpected claim costs, a margin clause in property insurance also places a responsibility on the insured to ensure that their property is adequately insured to its full value.

365 Day Notice

Due to a reinsurance requirement, the program implemented a 365-day notice requirement for windstorm and hail losses. Late reported claims can pose challenges in verifying the cause and
extent of damage, and can result in higher claim payouts. By requiring members to provide notice of windstorm and hail losses within a specific timeframe, the program aims to streamline the claims process, mitigate delays, and minimize the risk of unexpected claims that may impact
the program’s balance sheet.

Several factors contribute to the occurrence of late-reported claims. One key factor is contractors contacting school districts to request roof inspections, during which they may identify old damages that were not previously reported. This can result in delayed claims being filed as the damages may have occurred in previous years but are only discovered during the current inspection.

Another factor is the change in leadership within school districts. When a new Superintendent
joins a school district, they may conduct thorough inspections of school buildings and identify damages that were previously assessed for actual cash value by their predecessor. The new Superintendent may then request coverage for the full replacement cost of the building, leading to late-reported claims.

In addition, it’s also important to consider the cost of the claim at the time of loss versus the inflated cost later. As time goes by, the cost of materials and labor increases, which can make it more expensive to repair or replace damaged property. This can lead to higher claim payouts and increased costs for the program.

The impact of these late-reported claims on the insurance program is significant. As these claims affect the current year’s balance sheet, they can result in increased rates for the program, affecting its financial performance. Additionally, the delayed nature of these claims can make it challenging for the insurance program to accurately forecast and budget for claims expenses.

Cosmetic Exclusion

Due to an additional reinsurance requirement, OSIG has taken steps to mitigate risk, including implementing a cosmetic damage exclusion for metal roof coverings. This exclusion helps address claims where the roof is still functioning as intended and does not necessarily require replacement, reducing the number of unnecessary claims.

Appraisal Valuations

In 2020, our appraisal project for school structures with minimum values of $250,000 or higher was initiated. This project has resulted in appraising an average of 100 school districts per year, a major requirement from our reinsurance partners and a growing standard in the market.
This helps ensure property values are correct since there is now a margin clause of 125%. If a
building were to be significantly undervalued and have a loss, the school would not be able to
build back the same kind and quality of structure. By appraising the buildings this helps determine the correct insured to value.

Prior to the appraisal project, evaluating the value of schools in Oklahoma was relatively straightforward, as their valuations had remained unchanged for the past 10 years. Our OSIG program had previously offered blanket limits, which eliminated the need for producers or school members to emphasize the value of each building. However, with the program’s recent changes and the requirement to schedule each building, proper valuation has become crucial.

Coverage Options for Buildings

We are still offering coverage options for structures such as replacement cost (RC) this is replacement cost as of the time of loss or damage with 125% margin clause, actual cash value (ACV) this is replacement cost less depreciation, debris removal only (DRO), and stated value. Depending on the age and use of the building, the insured could have potential savings by changing the coverage valuation.

Deductible Options

Along with coverage options, we can also provide deductible options for members. Increasing the member deductible can help reduce premium cost.

Current Renewal Expectations

It’s a common misconception that OSIG simply collects premiums without marketing the accounts. However, the reality is that we actively market the OSIG pool each year, working with over 84 different reinsurance partners in both domestic and international markets. We believe in actively promoting our risk pool to ensure its success and sustainability.

We are committed to managing our risk pool in the best interests of our members, and our rate decisions are based on a thorough assessment of various factors, including market conditions, claims experience, and risk management strategies, with the ultimate goal of providing long-term stability and value to our members.

Program Highlights

The Oklahoma Schools Insurance Group is a non- profit and member-owned public entity program whose management is completely controlled by a Board of your peers. The mission of OSIG is to provide quality, cost effective risk management products and services to member schools.

An important but often overlooked aspect of the OSIG program is that it is member-owned. This
means that the participating members have a direct stake in the success of the risk pool and actively participate in its management.


Since property insurance is the premium driver within the program it’s important to not dismiss the importance of the additional coverages included, such as crime, automobile, general
liability, school board legal liability, cyber liability, pollution liability, excess liability, flood, earthquake, boiler & machinery, employee benefits liability, auto physical damage, auto
liability, builders risk, and now an enhanced deadly weapons response program.

The deadly weapon response program was added effective 8/1/2022 at no additional cost. A school should have deadly weapon insurance to proactively mitigate risks associated with the
unfortunate possibility of a deadly weapon incident occurring on their premises. This type of insurance provides coverage for damages, legal liabilities, and associated costs that may arise from such incidents.

The Road Ahead

As we continue to adapt to the market needs to protect our members and protect the programs
balance sheet here are a list of the new added values that will be included with the membership.

HSB Water/Temp Monitoring Devices

The program is investing IoT (Internet of Things) devices for water and temperature monitoring for the members use. We believe these devices can contribute to significant returns on losses avoided, thus helping retain and grow the programs reserves and ultimately reduce premiums. The pilot program will be distributed to select members this July 2023. There is no additional cost with this service.

Vector Solutions

The program is also implementing Vector Solutions at no additional cost. The #1 learning management platform for public schools. It will include 13 trainings from the Safety & Compliance library, along with (22 micro learning modules) Child Sexual Abuse Prevention in School, and (6 titles from driver training) School Bus Safety Company Risk Package.

This training platform will not only help the program reduce losses, it will also provide the schools a centralized system for employees to complete their annual continuing education credits. Of the trainings offered 10 course titles will count towards CE credits. This will be available to all members July 2023. There is no additional cost with this service.

STOPit Solutions

We are continuing to provide STOPit SOLUTIONS, a bullying prevention app. This service is provided at no additional cost.

Beasley Cyber Portal

Members also have access to the Beasley cyber portal at no additional cost. Includes phishing and malware training, ransomware prevention, mobile and W-
Fi security, identity theft, password security. A SCORM compliant training module and much
more. Each Superintendent will have a login after 7/1/23 we can also add additional IT staff as administrators.


It’s crucial to bear in mind the significance of OSIG and the unwavering dedication to schools. Property losses in Oklahoma are often inevitable, and the insurance market has faced significant challenges over the past decade. Since its inception, OSIG has disbursed over $450 million in total claims paid.

OSIG remains true to its original mission of providing quality and cost-effective risk management products and services to member schools.

Although the current insurance market is challenging and we aim to avoid pricing increases, we must charge what it costs. OSIG seeks to address property loss challenges while maintaining a sustainable risk management approach in the insurance industry through risk mitigation, coverage adjustments, and reduced commissions/administration fees. With our new structure we are hopeful rates will stabilize and we can provide reduced pricing and distributions to our members. As we prepare for this renewal it’s important to remember the benefits of being a member of OSIG vs purchasing an insurance policy in the standard market.