MINUTES

OF

THE MIAMI VALLEY RISK MANAGEMENT ASSOCIATION

September 19, 2005

Time and Location

MVRMA Office, 4625 Presidential Way, Kettering, Ohio.  The meeting began at 9:07 am.

 The following individuals were present when the meeting was called to order: Sherry Callahan, Beavercreek; Dave Helling, Bellbrook; Jim Pfeffer, Blue Ash; Mark Schlagheck, Centerville; Janine Cooper, Englewood; Mike Burns, Indian Hill; Nancy Gregory, Kettering; Tom Moeller, Madeira; Bruce Snell, Mason; Dody Bruck, Miamisburg; Wayne Davis, Montgomery; Tom Judy, Sidney; Sue Knight, Troy; Julie Trick, Vandalia; Tom Reilly, West Carrollton; Rick Steddom, Driver Alliant Insurance Services; and Kathy St. Pierre, Craig Blair, Starr Markworth and Michael Hammond, MVRMA.

 Richard Drennen, Tipp City arrived at 9:10 am and Derrick Parham, Springdale arrived at 9:15 am.

Consent Agenda Approval

Motion by Mr. Moeller, seconded by Mr. Pfeffer, to approve the Consent Agenda.  Motion carried.

Risk Management Committee Report

Ms. Markworth announced that training attendance had picked up.  Of the 408 people who have attended training this year, 93% were MVRMA participants.  She also mentioned a Drivers Training class that was held last week.  Seven new driver trainers completed the five-day certification.

Sherry Callahan, as chair of the Risk Management Committee, recommended the committee’s revisions for the SPEC program.  They included:

1.   A minimum of 80% compliance for all members.  Members who do not score at least 80% would be expected to participate in a three-year improvement plan, meeting quarterly with the Loss Control Manager, providing progress reports on deficient areas and committing to a 10% increase on the next SPEC evaluation.  If, during the three-year period, the member achieved 80% compliance, no further action would be required.

2.   Monetary rewards would be presented annually as follows:

90-94.99% compliance - $750

95-100% compliance - $1,000 

Following this recommendation, there was a lengthy discussion.  Everyone agreed SPEC contains excellent safety and loss control guidelines.  However, everyone did not agree on an 80% “expected” compliance or a monetary incentive plan.  Mr. Hammond provided a comparison of SPEC to Loss Ratio prepared by Mr. Judy.  It revealed that members with SPEC compliance greater than 90% were two times more likely to have a loss payout ratio lower than the pool median.  Likewise, with SPEC scores less than 90%, loss payout ratios were two times more likely to be higher than the median.  Board members appeared to favor some combination of the SPEC score (possibly averaged over a period of time) and the Loss to Premium Ratio, which is already averaged over a five-year period, as the means for determining “expected” standards.  They directed staff and the Risk Management Committee to discuss this matter further.  The Board also concluded a monetary reward for SPEC was not necessary. 

Mr. Blair reviewed the Claims “Watchlist.”  It included four new claims, three from 2003 and one from 2005.  It is too early to determine how serious these claims will be. 

Mr. Hammond reviewed the Loss to Premium Ratio Report included in the agenda packet.  It covered the period 2000-2004 and included total incurred for all claims with deductibles netted out.  The Executive Director and Loss Control Manager will visit those member cities, whose ratio is higher than the pool average of 44.8%, to discuss the specifics of their losses.  They will provide an analysis of losses by type and department in order to pinpoint potential loss control deficiencies.

Finance Committee Report

Mr. Hammond discussed the 2006 renewal.  He noted property has been budgeted for a 10% increase, although before Hurricane Katrina, a flat to 5% reduction had been considered.  The recent appraisal update has been included in the exposures for projecting the 2006 property renewal, which will be effective 7/1/06.  By December, we hope to have a not to exceed rate for the final budget.

The liability premium for GEM ($1 million x $1 million) provides for a 7% reduction.  To determine this premium, GEM considers various criteria that provide a possible 15% credit.  MVRMA initially received a 12% credit.  We lost 2% because of GEM’s process for reviewing our financial performance.  GEM did not take into consideration MVRMA’s ability to assess its members.  Additionally, GEM’s review of MVRMA’s financial performance over the short term was negatively impacted by its payout of dividends.  By agreeing to review MVRMA’s financial performance over a ten-year period, MVRMA qualified for the additional 2% credit, which will decrease this year’s premium by approximately $5,000. 

Excess liability coverage has been budgeted at $250,000, a 23% increase, for coverage of $5 million x $2 million.  An additional $75,000 is included for the purchase of additional limits, if available.  Mr. Steddom informed the Board that Driver and GEM have been reviewing new concepts for placing the excess and hope to have at least one proposal at the GEM Board meeting the first week in October. 

Crime coverage has been budgeted for a 5% increase.  Driver will be contacting MVRMA’s current carrier to negotiate the renewal.

Mr. Hammond provided copies of Godbold & Malpere’s loss funding study.  He noted that loss funding is an important aspect of the 2006 budget because it accounts for approximately 58% of the amount to be contributed.  Based on past claims expense and exposures, this study recommended loss funding of $2,335,000 for LY18 (2006), which provides a 60% confidence level.  Motion by Mr. Parham, seconded by Ms. Gregory, to accept the loss funding study.  Motion carried. 

Ms. St. Pierre reviewed the 2006 Preliminary Budget.  Since Mr. Hammond had already reviewed the 2006 insurance renewal, Ms. St. Pierre began her explanation with Professional Services 200-xxx.  Increases in this section include reimbursements for two cities that had completed law enforcement reaccreditation in 2005 and the increased broker expense.  Line item 200-202 Loss Control Services will be decreased by $10,000 in the final budget because of the Board’s decision not to pay monetary rewards for SPEC.  Employment Services 300-xxx includes a 3% increase for salary & wages.  Ms. St. Pierre noted all salary ranges had been adjusted to reflect a 2.1% CPI increase.  Pool Operations 400-xxx actually decreased slightly from the amount budgeted for 2005.  Line item 400-404 includes half of MVRMA’s contribution ($1,250) to the 2007 AGRIP Administrators’ Retreat in Cleveland.  The remaining $1,250 will be included in the 2007 budget.  Line item 400-411 Miscellaneous/Contingency under “2005 Projected” includes $18,000 to pay the consultant for the business growth plan.  Claims/Loss Adjustment Expenses 500-xxx includes the loss funding discussed previously as well as the shock loss fund contribution.  Shock loss fund contributions were calculated according to the amended Shock Loss Fund Policy.  Any member whose SLF balance is equivalent to its upcoming annual loss fund contribution was not required to make an additional deposit.  Any member, whose balance fell below its targeted amount, was required to contribute the amount needed to reach the targeted amount or 15% of the current annual loss fund contribution, whichever was less.  Ms. St. Pierre asked everyone to review the factors used to compute the 2006 PCF and contact her with questions or corrections.  The preliminary budget includes an operating fund rebate of $70,000 for 2005.  This amount is expected to increase in the final budget.  The “Amount to be Billed” for each member was listed on the final page of the handout.  Barring any unforeseen circumstances, this amount would be the maximum to be paid in 2006.  Motion by Mr. Moeller, seconded by Mr. Burns, to approve the 2006 Preliminary Budget and PCF.  Motion carried.

Motion by Mr. Parham, seconded by Mr. Moeller, to accept the Financial Audit and CAFR for the year ended December 31, 2004, that were previously distributed.  Motion carried. 

Marsh’s settlement offer of $2,665.13 for contingent commissions was discussed at a previous Board Meeting.  The Ohio Attorney General had asked MVRMA to delay accepting the offer until that office had an opportunity to review Marsh’s records.  Subsequently, the OAG reported that they could find no reason to advise against accepting the settlement offer due to the small size of the premium involved compared to the cost and risk of litigation.  Motion by Ms. Gregory, seconded by Ms. Knight, to approve the Marsh settlement, which is expected to be paid in installments over four years beginning in November, 2005.  Motion carried. 

Mr. Hammond provided an update on the State Auditor’s RFP for MVRMA’s 2005 financial audit.  Staff has completed the auditor’s questionnaire and a pre-proposal meeting has been scheduled for Oct. 12.  At that meeting, potential auditing firms will meet with MVRMA staff to determine if they will be submitting a proposal.  In the past, Deloitte has prepared MVRMA’s trial balance in conjunction with the financial audit.  Going forward, MVRMA will be required to provide a trial balance.  Ms. St. Pierre has contacted Ms. Carol Riggle about providing the GAAP conversion.  Ms. Riggle was recommended by Mr. Drennen because of her work with Tri-Cities and other government entities in the area.

Mr. Hammond informed the Board that Special Events Insurance is now available through Driver Alliant.  It provides primary coverage, so in case of a loss, it would respond first.  It is reasonably priced and provides coverage of $1 million with a zero deductible.  The Mason Heritage Festival recently secured this coverage for a cost of $1,250.  According to Mr. Snell, past coverage for this event had been as high as $20,000.  Mr. Steddom noted this coverage should be competitive with what a local broker could offer.  The premium is based on attendance and category of risk.  It has three primary uses:

1)      Where the member is making city premises available to others

2)      For recreational events where the city brings in instructors (The instructor can be included in the coverage.)

3)      Big events that might be co-sponsored by another group

Membership & Marketing Committee Report

Ms. Knight mentioned that RFP’s for the business growth plan study were submitted to nine consultants.  On September 1, the M&M Committee interviewed representatives from three firms, Godbold & Malpere, Insurance Buyers Council and Independent Consulting & Risk Management Services.  After the interviews, the field was narrowed to two, ICRMS and Godbold & Malpere.  After further consideration and a review of references, the committee recommended Godbold & Malpere, MVRMA’s actuary.  The fee for this project is $18,000.  Motion by Mr. Moeller, seconded by Mr. Reilly, to approve the selection of Goldbold & Malpere to complete the business growth study for MVRMA.  Motion carried.

Driver Alliant Insurance Services Report

Mr. Steddom reported the damage from Hurricane Katrina could total $200 billion, including what will be covered by the government.  $20 – 60 billion is expected in insured payouts.  The world wide insurance capacity is about $300 – 400 billion in capital and surplus, so this catastrophe could have a substantial impact on the insurance market.  If losses reach the high end of expectations, both liability and property will start to harden.  Mr. Steddom noted that A.M. Best had just placed 20 companies on a “watch” list because of hurricane exposures.  They include Endurance, Munich Re, American Re and Imagine Re.  These companies have not been downgraded yet, but will be closely watched as the billions of dollars in claims are settled.  Fortunately, PEPIP does not insure any properties along the Gulf Coast, but because some of its reinsurers do, PEPIP may need to replace them due to loss of capacity. 

Executive Director’s Report

Mr. Hammond announced he will be attending the AGRIP Executive Leadership Institute September 21-23 at Lake Tahoe.  This conference is being held in conjunction with CAJPA, and more than 1,000 participants will be attending.  In October, he will be attending the GEM Board Meeting in Seattle, and Mr. Blair will be joining him for the Claims Summit.  Several Board members will be attending the fall AGRIP conference in San Antonio and will be accompanied by Ms. Markworth.   

Marsh will be providing a list of MVRMA members who have separately purchased Flood Zone A coverage.  That coverage will expire December 15.  MVRMA’s current property policy with PEPIP includes $5 million/occurrence and annual aggregate for Flood Zone A.  Driver will provide a comparison for those cities that wish to continue purchasing additional Flood Zone A coverage.  The cities desiring this coverage must  provide a broker of record letter so that Driver can request rates from current carriers.   

President’s Report

Mr. Judy directed the Nominating Committee, chaired by Ms. Gregory, to develop a 2006 slate of officers, which will be presented at the December Board Meeting.  Ms. Gregory asked anyone who would like to serve on the Board to contact her.

Having concluded its business for the day, the Board adjourned at 11:00 am.