Remarks of the Chair of the Board of LAWPRO for the 2020 Year in Review
2020 was a year like no other in living memory, but the business of law managed to continue, even if the way we accomplished it felt completely unfamiliar.
Likewise, LAWPRO continued to operate, even though the pandemic impacted us in many ways including closed courts and a real estate market that sprung back to life quickly after a short-lived lull in the spring. As expected, we saw a decline in the number of claims and transaction levies. However, some of what we saw was unexpected such as an increase in the number of lawyers we insure by 2% from the previous year.
Gross written premiums were slightly lower in 2020: $113.9 million, compared to the $114.7 million seen in 2019. Net claims expenses of $100.9 million were above last year’s total of $99.4 million. Even as LAWPRO transitioned to work from home and adapted to new processes, we were able to cut general expenses to 10% under budget and 3% below 2019. LAWPRO had sufficient capital available to cover requirements as demonstrated by the Minimum Capital Test (MCT) of 229% at year end, within our preferred range of 210% to 240%.
As the financial statements in the following pages demonstrate, LAWPRO continues to fulfill the mandate given by Convocation more than two decades ago. To do so we navigate a careful balancing act: keeping revenues (i.e., premiums, levies, and investment returns) high enough to be commercially viable and satisfy regulators that the company is financially healthy, while handling claims and carefully controlling premiums to maintain affordability and properly reflect the cost of risk. In doing so, we effectively operate as a not-for-profit entity, while being regulated as a for profit insurance company.
Even with the changes and challenges brought on by the COVID-19 pandemic, we remain financially healthy as we plan for scenarios similar to what we are now experiencing as part of our corporate governance processes and risk management strategies put in place by our Board. As a measure of our success, I am pleased, that for the 20th consecutive year, insurance rating agency AM Best Co. issued LAWPRO an “A” rating for financial strength and “a” issuer credit rating in November of 2020. This independent rating is provided to companies that have an “excellent” ability to meet ongoing insurance obligations and reflects our long-term financial stability.
LAWPRO is steady and secure and we remain ready to pay claims and help our insureds, even in and after the exceptional circumstances we experienced in 2020.
Andrew J. Spurgeon is Chair of the Board of LAWPRO