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MINUTESOF
THE MIAMI VALLEY RISK MANAGEMENT ASSOCIATION
December 19, 2005
Time and Location
MVRMA Office, 4625 Presidential Way, Kettering, Ohio. The meeting began at 9:10 am.
The following individuals were present when the meeting was called to order: Terry Klein and Myra Jackson, Beavercreek; Dave Helling, Bellbrook; Jim Pfeffer, Blue Ash; Mark Schlagheck, Centerville; Eric Smith, Englewood; Mike Burns and Dave Couch, Indian Hill; Nancy Gregory, Kettering; Kim Lapensee, Madeira; Bruce Snell, Mason; Dody Bruck, Miamisburg; Wayne Davis, Montgomery; Gary Lucas, Piqua; Tom Judy and Ginger Adams, Sidney; Sue Knight, Troy; Julie Trick, Vandalia; Tom Reilly, West Carrollton; Jenny Chavarria, Irma Ivey and Bob Harrison, Wyoming; Rick Steddom, Driver Alliant Insurance Services; and Kathy St. Pierre, Craig Blair, Starr Markworth and Michael Hammond, MVRMA.
Richard Drennen, Tipp City, and Derrick Parham, Springdale, arrived at 9:14 am. Laura Curliss, Wilmington, arrived at 9:20 am.
Consent Agenda Approval
Motion by Mr. Davis, seconded by Ms. Gregory, to approve the Consent Agenda. Motion carried.
Risk Management Committee Report
Ms. Markworth reported 907 people participated in the 2005 training program, which included focus groups and networking. Of the 754 attendees for actual training, 611, or 81%, were MVRMA member employees. Ms. Markworth mentioned next year’s training will include topics related to employment practices.
At the September Board Meeting, the members rejected the revisions to the SPEC program as presented. Staff and the Risk Management Committee subsequently reviewed and amended the revisions. Ms. Lapensee reviewed the updated revisions for the Board. They included:
1. Change the effective date of the revisions from 2006 to 2007
2. Require the improvement plan (which includes quarterly loss control visits from MVRMA) only if the member has a loss to premium ratio exceeding 60% and an average SPEC compliance (for the last three years) that is less than 80%
3. Decrease the improvement plan from three years to two years
Motion by Mr. Pfeffer, seconded by Mr. Reilly, to approve the revisions to the SPEC program as presented. Motion carried.
Mr. Blair reviewed the Claims Watch List, which includes claims currently reserved for $25,000 or more. Among those claims is the Carder vs. Kettering claim which is scheduled to go to trial in January; the Lavender vs. Blue Ash claim on which a decision for summary judgment is expected in the next 3-6 months; the Watson vs. Mason claim which has been dismissed and the Brown vs. Madeira claim for which mediation is scheduled in January. Litigation summaries which provide updated information on all open lawsuits were included in the agenda packet.
As one of the 2005 objectives, site visits were to be conducted for those cities that fell below the required loss to premium ratio of 60% (the industry standard). Mr. Hammond and Ms. Markworth reported they have already met with four of the five cities requiring a visit. A meeting with the fifth city will take place following the Board Meeting. Each city has been provided a detailed analysis to determine frequency and/or severity of losses. The visits have been well received. After each visit, Ms. Markworth has provided a letter summarizing what was discussed, including all loss control recommendations.
Finance Committee Report
Mr. Hammond provided a letter from GEM regarding the 2006 liability proposal. In 2006, GEM will reinsure MVRMA for the full amount excess the $1M SIR. GEM will retain $1M and retrocede the remaining excess reinsurance to American Re. American Re is the premier public entity reinsurer. Although some terms and conditions are still being negotiated, one exclusion in the American Re agreement that is not currently in the GEM member reinsurance agreement concerns “liability arising directly or indirectly out of, or related to, liability of contractors for residential construction.” After some discussion, it was determined this exclusion would have no affect on MVRMA member cities. Mr. Hammond presented two options for reinsurance, one for $6M, at a cost of $504,156, and one for $9M, at a cost of $549,592, which is still $16,628 less than the amount budgeted. Motion by Mr. Pfeffer, seconded by Mr. Judy, to approve the second option for $9M excess $1M. Motion carried.
Mr. Hammond provided a handout for the 2006 crime proposal. It compared the expiring policy with the proposed policy, both of which are from National Union Fire Insurance Co. of Pittsburgh, PA (AIG). Coverages, limits and deductibles remain essentially the same. However, an additional endorsement has been added which deletes the exclusion for bonded employees, thus providing them with full crime coverage in addition to the bonded amount. Mr. Hammond noted this coverage includes faithful performance and therefore acts like a surety bond. He reported some members will be required to provide a letter to AIG detailing controls where countersignatures are not required on checks and/or where bank accounts are reconciled by the same person authorized to make deposits or withdrawals. Mr. Hammond was directed to send a sample letter or other instructions to all cities required to provide this documentation. The premium for this coverage is $11,822. Motion by Mr. Burns, seconded by Ms. Trick, to approve the 2006 crime coverage with AIG as presented. Motion carried.
Mr. Hammond noted all but the $100,000 bonds renewing 1/1/06 will be renewed with Travelers/St. Paul, MVRMA’s current bond carrier. Because of the lengthy application required by Travelers for $100,000 bonds, Driver will renew them with CNA. No other renewing bonds will require applications. Any bonds coming due throughout the year will be renewed with CNA and will require a completed application. However, Driver is able to issue these bonds directly, thus eliminating the long turn-around time we have experienced in the past.
Ms. St. Pierre reviewed the changes in the 2006 Final Budget as compared to the Preliminary Budget. They included:
Excess Insurance
100-107 Crime/Surety Bonds increased by $500.
100-113 Primary Excess Casualty decreased $5,598 because of the additional rating credits.
100-117 Commercial Property/Boiler & Machinery increased $1,471 because of various adjustments in property values.
Professional Services
200-202 Loss Control Services decreased $10,000 because the monetary awards for SPEC were rejected by the Board at the September Board meeting.
200-205 Financial Auditing Services decreased $7,400 with the acceptance of the proposal from Clark Schafer Hackett Co., even with the additional expense for Carol Riggle who will assist with the GAAP conversion and general ledger.
Pool Operations
400-416 Gas & Electric increased $500 to allow for the anticipated utility increase.
PCF Calculation
Various changes were made in property values, NOE and Average Annual Losses since the Preliminary Budget was prepared.
LY17 Operating Fund Rebate
The rebate increased from $70,000 in the Preliminary Budget to $111,749.
Amount to be Billed
Mr. Hammond compared the amount billed in 2005 with the amount to be billed in 2006. In 2006, operating contributions decreased $65,799; loss fund contributions, which are funded at a 60% confidence level, increased $208,000; and shock loss fund contributions increased $174,672. For 2006, members whose SLF balance was less than their loss fund contribution were again required to contribute the amount needed to reach the target amount or 15% of their loss fund contribution, whichever was less. Overall, the amount to be billed increased $255,123 or 6.9%.
Mr. Hammond noted he would not review the changes in the Objectives/Work Plan since they were notated in the agenda packet. No questions or concerns were noted.
Motion by Mr. Judy, seconded by Ms. Gregory, to approve the 2006 Final Budget and Objectives/Work Plan as presented. Motion carried.
Under Ohio law, MVRMA was able to obtain an exemption for taxes and fees that would normally have been paid by an excess insurance company. Because of this exemption, ACE issued an endorsement to decrease MVRMA’s 2005 excess liability premium $11,750. Mr. Hammond reported, and DAIS confirmed, a reimbursement is expected before the end of the year.
Mr. Hammond noted the State Auditor’s office awarded the contract for financial auditing services to Clark Schaefer Hackett Co. The proposed cost of $22,800 is considerably less than what was paid to Deloitte & Touche in 2005. In all, MVRMA will pay $119,500 to CSH over five years while Deloitte & Touche would have cost $216,350 for the same period. Motion by Mr. Pfeffer, seconded by Mr. Judy, to approve the selection of Clark Schaefer Hackett Co. to provide the auditing services for the next five years and to authorize the Executive Director to execute the agreement. Motion carried.
Mr. Reilly noted under the new auditing arrangements, the IPA would not be able to convert MVRMA’s cash basis financial information to the accrual basis. To assist with this conversion and the compiling of basic financial statements, MVRMA requested a proposal from Ms. Carol Riggle, an accountant formerly with the State Auditor’s office. Her proposal included a fee of $3,300. Motion by Ms. Gregory, seconded by Mr. Drennen, to approve the agreement with Carol Riggle to provide the GAAP conversion and trial balance for the 2005 Financial Audit and to authorize the Executive Director to execute the agreement. Motion carried.
Mr. Reilly noted the current investment target for Bond Tech is $5M. Since MVRMA’s funds have continued to increase, and MVRMA has been satisfied with Bond Tech’s investment strategy, the Finance Committee recommended increasing the investment target to $8M. Motion by Mr. Judy, seconded by Ms. Gregory to increase the investment target as recommended. Motion carried.
Mr. Hammond noted a check for $903.41, the first of four payments for MVRMA’s share of the Marsh settlement, was received and posted to the 2005 operating account.
Nominating Committee Report
Ms. Gregory, on behalf of the Nominating Committee, nominated the following slate of officers for 2006:
President: Sue Knight, Troy
Vice President: Tom Reilly, West Carrollton
Treasurer: Mark Schlagheck, Centerville
Secretary: Julie Trick, Vandalia
Motion by Mr. Judy, seconded by Ms. Curliss, to elect the proposed slate of officers for 2006. Motion carried.
Driver Alliant Insurance Services Report
Mr. Steddom stated it is hard at this time to predict the amount of increase for the upcoming property renewal. Due to the recent hurricane activity, Driver expects property coverage to increase anywhere from 5-25%. Mr. Steddom will know more in February/March once many of the reinsurance treaties have renewed. He is hopeful PEPIP will have added leverage at its 7/1/06 renewal since it experienced no wind losses.
Mr. Steddom stated the liability marketplace is still hard and slightly hardening. It is as yet unknown if property losses will spill over into the liability market. He noted insurance/reinsurance is a commodity which is driven by capital and surplus. As losses, such as those from Hurricane Katrina, begin to drain the capital and surplus, the rates go up. But, insurance as a commodity has changed during the last 25 years due in large part to the Bermuda markets. They have enabled new capital to enter the insurance/reinsurance marketplace without all the regulations, thus making investments in new carriers and even existing companies desirable. Since capital is now so easily assimilated, hard markets generally last for shorter periods than in the 80s.
Executive Director’s Report
Mr. Hammond noted an update from Terry Godbold regarding the business growth plan was included in the agenda packet. He stated CORMA, the Columbus pool being considered for membership, has been very responsive to Mr. Godbold’s requests for additional information. A preliminary report is expected in mid-January.
Mr. Hammond reported he attended the AGRIP Executive Leadership Institute at Lake Tahoe held in conjunction with the California Association of Joint Powers Authorities (CAJPA) September 21-23. There were over 1000 attendees with 40 different breakout sessions. He also attended the GEM Board Meeting and Claims Summit in Seattle with Mr. Blair October 3-5.
Ms. Knight reported she attended the Fall AGRIP Governance Conference in San Antonio November 14-16 with Mark Schlagheck, Laura Curliss and Starr Markworth. Everyone agreed it was worthwhile. Ms. Knight noted about a fourth of the attendees were Board members, and the conference included a track especially for them. There were three excellent general sessions, and a session about providing appraisals electronically which she found especially interesting.
Mr. Hammond referred to the agenda packet where the dates and locations for the 2006 conferences were included. He directed anyone interested in attending to contact Ms. St. Pierre.
Suggested Board Meeting dates for 2006 were included in the agenda packet. Mr. Parham recommended delaying the September Board Meeting by one week. Motion by Mr. Davis, seconded by Ms. Trick to approve the following Board Meeting dates:
Monday, March 20
Monday, June 19
Monday, September 25
Monday, December 18.
Motion carried.
Mr. Hammond informed the Board MVRMA’s first records disposal took place December 1.
Mr. Hammond referred to a letter received from the State Auditor’s Office. As hoped, it stated the Ohio compliance supplement does not apply to risk pools. As a risk pool, MVRMA must comply with ORC 2744.081 which only requires specific actuarial compliance.
Mr. Hammond informed the Board MVRMA recently received two checks. The first check totaling $6,122.92 is a rebate from Driver to NPX members for commissions during the period 1998-2000. The second check totaling $24,856.44 is the unused portion of the 2002 Aggregate Funded Layer. Both checks will be deposited proportionally to members of those years in the General Reserve Fund. Each member city will be notified of the amount of its deposit.
Mr. Hammond explained NPX will be dissolving its organization in California and will be reestablishing itself in Washington DC as the National Association of Government Entity Pooling. Funds currently held by NPX will be transferred to the new association.
President’s Report
Ms. Knight asked if everyone had an opportunity to sign up for a committee on the sheet that was being passed around during the meeting. Mr. Hammond added that MVRMA’s goal is to have every Trustee participate on a committee in 2006.
Having concluded its business for the day, the Board adjourned at 11:00 am. A holiday luncheon followed the meeting at the Kohler Center Banquet Room for Trustees, Alternates, City Managers and Staff.