Loss-Capping Policy

Originally Adopted by MVRMA Board: December 16, 1991
Amended by MVRMA Board: September 27, 1993, September 24, 2001

PURPOSE

This policy has been established in order to clarify the Miami Valley Risk Management Association's intent to limit the amount of loss experience counted against a member municipality when allocating the costs of the Association among its members.  This policy was developed in recognition of the fact that each member municipality's loss experience may vary significantly from year to year.  Just one major loss could disproportionately increase the funding requirement imposed upon a member over a four-year period. This policy has been adopted to "soften the blow" of a catastrophic loss, particularly upon smaller members of the Association, without otherwise compromising the principles inherent in the MVRMA Pool Contribution Formula.

1.    Beginning with the 2002 budget year, for the purpose of determining average annual losses over a four-year period, MVRMA shall "cap" at $35,000 the largest claim, which exceeds that threshold for each member (and each prospective member).  Each additional loss in excess of the $35,000 limit shall be capped at $100,000 per claim.

For the purposes of this policy "Loss Experience" is defined as the combination of payments and reserves (including Loss Adjustment Expenses and attorney's fees) for each claim. Capped experience shall be shown for each member City on an annual summary of loss experience provided to all MVRMA members as part of each year's budgeting process.

2.    Additionally, property losses, which are the result of "Acts of God" or natural disasters and for which the insurance services organization (ISO) has issued a catastrophic serial number, shall be excluded for the purpose of determining average annual losses over a four-year period.

For the purposes of this policy, "property losses" are defined as direct physical losses or damage to building, personal property or autos, that are determined to be covered losses through MVRMA's property insurance or auto physical damage coverage.