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Pooling – The Greatest Success In I ntergovernmental R elations

Pooling – The Greatest Success In I ntergovernmental R elations. Harold Pumford Chief Executive Officer Association of Governmental Risk Pools March 5, 2012 Phoenix, AZ. 2012 AGRiP Spring Conference. Public Entity Risk and Benefits Pooling.

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Pooling – The Greatest Success In I ntergovernmental R elations

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  1. Pooling – The Greatest Success In Intergovernmental Relations Harold Pumford Chief Executive Officer Association of Governmental Risk Pools March 5, 2012 Phoenix, AZ 2012 AGRiP Spring Conference

  2. Public Entity Risk and Benefits Pooling • The greatest experiment in intergovernmental relations that far exceeds all expectations of the Nixon New Federalism. And perhaps the greatest success story in government from that time. • In The Beginning • 1974 WC for Texas public entities • Erosion of sovereign immunity • Insurance market cycles – Pumford FILO Theorem

  3. Definitions of Public Entity Pooling “…a cooperative group of governmental entities joining together to finance an exposure, liability, or risk.” Governmental Accounting Standards Board #10 “…a risk financing mechanism whereby a group of public entities contribute to a shared fund that in turn pays claims for and provide service to the participating entity.” AGRiP Operations Manual Terrorism Risk Insurance Act of 2002 “ ...self-insurance arrangements by municipalities and other entities”

  4. Similar/Dissimilar Risk Financing Alternatives • Safety group/sponsored insurance programs • Master policies with certificates of insurance • Mutual insurance companies • Reciprocals • Group captive and association captive insurance companies • State “assigned risk” pools • Risk retention groups

  5. Public Entity Pooling is BIG Business 1.Number of public entities in pooling It is believed to be in excess of 75,000 or roughly 85% of all public entities. 2. Annual member pool contributions P&C $5 billion to $7 billion Benefits $8 billion to $10 billion 3. Yet to be appraised: Total Assets managed by public entity pools.

  6. Type of Pool – 371 of nearly 500 public entity risk and/or benefits pools 171 105 91 4

  7. Type of Entities Served by Pools 363 Pools 165 163 127 122 78 73 29 27

  8. Pool Funds 186 152 147 88 57 16

  9. Tillinghast’s Ten Key Factors of Pool Success 1. Sense of urgency 2. Homogeneity of membership 3. Risk sharing 4. Organizational support (commitment) 5. Prudent funding

  10. Tillinghast’s Ten Key Factors of Pool Success 6. Long-term commitment 7.Quality underwriting 8. Cost effectiveness 9. Equitable distribution or additional assessments 10. Risk control/claims management services

  11. Member Advantages The greatest measure of differentiation with the traditional industry is the commitment to and continued focus on managing and funding risk exposures. This has lead to phenomenal cooperative efforts to enhance the efficiency and value of government services. EXAMPLES

  12. Schools Insurance Authority – Sacramento, CA – fitness for duty testing of 5 jobs categories. Reduced WC over 5 years by 80%. Member Advantages

  13. School bus evacuations in Louisiana after Hurricane Katrina. Member Advantages • MN League and Association of Counties and NIRMA (NB) Police POST accredited training.

  14. Member Advantages • PELICAN grant in PA and a similar program initiated with a state loan in FL for Medical Malpractice for County Nursing Homes. • MACo Legal advice for EPL and land use decisions.

  15. How Pools further cooperate together to enhance the efficiency and value of the ways in which they serve as custodians of public funds: • Member Advantages

  16. GA – Local Government Risk Management Services jointly owned by the municipal and county poolsTX – Public Employee Benefits Association for municipalities, counties and schools; as well as self-insured entities. • Member Advantages

  17. Member Advantages OR – city/county and special districts pools at one time shared a building for claims offices. OR – the special districts association and school board association merge their P&C pools into a new pool for school P&C coverage.

  18. Member Advantages MT – MACo and MMIA Risk Management Training at the State Law Enforcement Academy

  19. Pooling – A Cooperative Risk Management Program by Members Public entity risk and benefits pooling is not about insurance, it is about public entities joining together to provide greater value to their constituents.The decision is not whether to buy insurance from the pool,

  20. The success of public entity pooling is due largely to success as risk management programs, rather than simply as a risk-financing program (insurance).Public entities cooperating for their mutual advantage.Providing the smallest member with resources usually available only to the largest entities

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