Several years ago, recognizing that few insurers had a dedicated proprietary form for water entities, the insurance company Allied Public Risk created the WaterPlus program. It provides both property and liability insurance to about 3,000 water-related entities around the nation, including water districts, water authorities, sanitation and wastewater facilities, irrigation entities, and special-purpose districts. In this interview, George Pappas, a senior vice president for distribution at Allied Public Risk, tells Irrigation Leader about the advantages of WaterPlus and the many factors an irrigation entity should consider when choosing a policy.
Irrigation Leader: Please tell us about your background.
George Pappas: I’m originally from the Northeast. I was raised in Pennsylvania and attended Hobart College in Geneva, New York, in the beautiful Seneca Lake area. After graduation, a lot of my friends moved on to Boston, and I couldn’t resist going there as well. In Boston, I received my MBA at Suffolk University with a concentration in marketing. I’ve been in the insurance industry for over 20 years, working for various insurance carriers and managing general agencies.
Irrigation Leader: Please tell us about Allied Public Risk.
George Pappas: Allied Public Risk is a specialized underwriting manager consisting of experts with an exclusive concentration on the public sector and its complex insurance needs. We’ve partnered with financially stable national carriers and developed customized insurance programs for municipalities, emergency service organizations, and water-related entities, including irrigation entities.
Irrigation Leader: Please tell our readers about the WaterPlus insurance program.
George Pappas: WaterPlus is a program that we developed and launched in 2012, although we’ve had other programs in the water space going back to the 1990s. WaterPlus is a program specifically designed for water-related entities. It focuses on water districts, water authorities, sanitation and wastewater facilities, irrigation entities, and special-purpose districts. The program provides both property and liability insurance (including worker’s compensation in California only) for about 3,000 water-related entities around the nation. About one-fifth of that portfolio consists of irrigation districts, both small and large.
Irrigation Leader: What is the history behind the creation of WaterPlus?
George Pappas: We discovered that a lot of generalist insurance companies didn’t really have proprietary forms for water entities. As a result, their policies were not responsive to the issues of those businesses, and there were a lot of exclusions, resulting in numerous denied claims. There was a real need for and interest in a program specifically designed for the exposures water entities face today. We developed the program largely out West. We’ve been marching east for about 20 years, but a large portion of our portfolio is still in the West, where water is still king.
Irrigation Leader: What are the advantages for irrigation districts of being part of this group?
George Pappas: WaterPlus is a guaranteed-cost program, meaning that the insured pays a fixed premium for an annual policy term. It’s not a pooled program in which you may share your losses with other members, you can be assessed for a premium increase due to losses at any time, and the other members of your program are not water-related entities. The problem with heterogenous pools is that you get a lot of distinctive municipal exposures, such as those related to law enforcement, and can be assessed for the bad behavior of other members of the pool. Sometimes there is also a lack of oversight from the various departments of insurance when it comes to pools. This is an issue when solvency is a concern. Problems can also arise when a pool lacks funds to pay for claims.
WaterPlus’s limits are not shared, the insureds are homogeneous, and the program is admitted by various departments of insurance with proper oversight. WaterPlus is underwritten by Allied World, which has an A (excellent) rating from A.M. Best. The good news about our program is that there are separate limits for each individual policy for each insured. You’re not going to be sharing limits or losses with other group members. If an insured has losses, the premium may increase accordingly for that specific insured, but it will not affect the other insureds in our book of business. Nor do we bump up your premium or rate in the middle of a policy due to claim activity.
Irrigation Leader: Is a guaranteed cost program more predictable than a pooled program?
George Pappas: I would say so. Pooled programs simply do not have the national diversification to absorb losses from localized claims. In other words, insurance carriers making a profit in the Northeast may be able to offset claim losses in the South or West. Right now, I see regional state pools pushing some significant rate increases. The problem is compounded when pools require a notification to exit the pool. It’s a contractual relationship, and you have to follow the withdrawal provisions within the contract. I’ve seen pools that require you to give a notification of your intention to exit ranging from 90 days to a year before the effective date.
Irrigation Leader: Are the terms generally a year long, or are they longer?
George Pappas: About 99.9 percent of our risks are on a traditional annual policy. There are some exceptions. For example, if a client wants to align its policy with the fiscal year of its budget, we can offer a short-term policy to line up the schedule and then place it on an annual policy.
Irrigation Leader: Does WaterPlus offer a checklist of measures that irrigation districts can take to achieve a lower rate?
George Pappas: Yes. The coverage checklist is pretty simple, because our WaterPlus program includes a lot of automatic, built-in coverages from day one. The insureds do not have to worry about exposures that are not contemplated within our program. We also help our clients limit their exposure and implement mitigation efforts to help reduce losses, which will correlate to reduced insurance costs. We always reward our insureds for following best operational practices. For irrigation districts, that could be as simple as lining their canals with concrete or having a budget mark to put concrete lining in vulnerable areas of a canal, install alarm systems for potential overflow issues, pursue rodent control or vegetation control measures, or do regular canal inspections.
Irrigation Leader: Do you provide recommendations about policies or about training that the board of directors of an irrigation district should receive?
George Pappas: We can make recommendations about policies—for instance, making sure that termination or anti‑sexual-harassment policies are implemented. Usually, the insured’s general counsel would develop the policies. We would also recommend putting into place a fleet safety program for an entity’s vehicles. Such a program would address maintenance and upkeep but would also include motor vehicle reports for new hires or current employees.
Irrigation Leader: Do you have a recommended personnel training program?
George Pappas: We do. When we evaluate a potential client, we always look at its employment policies and procedures. We make sure that these irrigation districts or canal companies are doing what they need to do to make sure that employees are aware of all written manuals, that employment programs are implemented, and that termination protocols are clearly followed. We make sure that best practices, especially when it comes to employment practices issues, are implemented for every risk.
Irrigation Leader: So the insurance company looks to see if managers have employment contracts, for instance?
George Pappas: Of course. We also look at contractors’ contracts. If an irrigation entity hires a contractor, it should make sure that the contractor is properly insured and that the irrigation entity is listed as an additional insured on the policy. We also make sure contracts with contractors protect our clients through a hold-harmless clause or other indemnification language. That provides ironclad protection for the irrigation entity if a contractor is responsible for a mistake or negligent act.
Irrigation Leader: What is your message to irrigation districts that are not currently using WaterPlus?
George Pappas: I think the insurance industry as a whole will change in 2021 based on the massive fires out West and the plethora of hurricanes in the South that occurred in 2020. We’re going into a somewhat volatile cycle in which the days of finding the bottom price will start to fade. We’re seeing constriction in the marketplace, with increased property rates, lower excess capacity, and increased reinsurance costs for insurers. The fact that insurance companies are not currently making profits on the investment side, combined with the current low interest rates and the COVID‑19 pandemic, means that there is now more emphasis on making an underwriting profit. The focus on underwriting profit means that irrigation risks may see significant price increases in the marketplace.
Overall, everyone is going to be pushing higher premiums in 2021. Irrigation entities need to start budgeting for higher insurance costs. I also encourage them to contact their insurance brokers to determine the size of the increase. It’s going to be a surprise for a lot of water-related entities, including irrigation entities, which for the past 15–20 years have been used to a soft market in which they could essentially push for the price they wanted.