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Managing your risk by Michael Kelly

NCACC Risk Management Director Michael Kelly writes a regular column on risk management for CountyLines. With more than 41 years of risk management/ insurance experience, he holds the CPCU - Chartered Property & Casualty Underwriter, ARM-P - Associate in Risk Management for Public Entities, CRM - Certified Risk Manager, ARe - Associate in Reinsurance and CIC - Certified Insurance Counselor Professional Designations. He can be reached at michael.kelly@ncacc.org or (919) 719-1124.  For archives of this column click here.

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Mar 26

Risk Management regional meetings update

Posted on March 26, 2013 at 10:32 AM by Chris Baucom

During the last two weeks of February, the NCACC risk management staff hosted five regional meetings located geographically throughout the state. The purpose for these annual gatherings is to provide members and prospective members of the NCACC risk pools a general working outline of current membership statistics, the pool’s financial update, available risk/loss control services, and anticipated changes in coverage document design. There is a discussion of our underwriting/rating procedure, as well as a projection of renewal costs as driven by our reinsurance expenses and pool actuary loss projections. As this definitely affects all of our members, this month’s article will serve as a summary review of our major points for those who could not make any of our sessions.

Locations: They were held this year in Martin, Robeson, Wake, Catawba and Macon counties during the last two weeks of February.

Attendance: There were a total of 111 attendees, representing 42 counties, 17 county entities and members of the Pools Board of Trustees, County Managers, Assistant County Managers, Clerks to the Board, Emergency Management Directors, Finance Officers, Human Resources Directors, Safety/Risk Managers and Entity Directors. This wider spectrum of management responsibilities made for some excellent discussions during the course of the presentations.

Finances: Both the Liability & Property and Workers’ Compensation Pools are in solid financial shape. The Workers’ Compensation Pool has unallocated invested reserves of more than $6 million, and the Liability & Property Pool has more than $39 million. Unallocated reserves in this instance means money in excess of the projected need to settle/close all open claims, not including an extra $10 million already pre-allocated for a pool named storm reinsurance deductible. Both pools are the strongest they have been financially for the previous 10 years. 

Special Projects/Announcements: We are completing a revamping of our Liability & Property rating/underwriting process similar to what we did last year for the Workers’ Compensation Pool. The last 20 percent of County/Entity reconstruction appraisals have been completed, and values will be reflected in next year’s coverage limits. Our process for handling the loss data feed to generate the claim detail in IVOS has changed and should be an improvement in consistency. A new coverage extension – cyber extra expense, aimed at mitigating a data breech loss situation - will be included in this year’s coverage document with further expansion expected.

Third Party Administrator Report: During the past coverage year, Sedgwick CMS handled more than 1,250 and 1,600 claims for the Workers’ Compensation and Liability & Property Pools, respectively. Through their operational process the Pools achieved a savings of more than $4 million through bill review, physician/pharmacy network utilization and their auto damage appraisal program. The primary loss type impacting workers' compensation is stemming from motor vehicle accidents. Automobile losses also lead in the most frequent type of liability claims, with property losses leading in severity, arising from Hurricane Irene.

Risk Control: Since bringing risk/loss control in-house, member’s interest in taking internal steps to reduce their frequency and severity of losses has increased through education and understanding of the cause/effect for a member’s ultimate cost of risk. Their increased understanding is not just related to insurance costs, but for potential losses that are not leveraged or financed through coverage, as well. A training matrix, outlining available risk control services and protocols for participating, was distributed and discussed including available additional outside training resources through such agencies as the North Carolina Department of Labor (OSH Division), N.C. Industrial Commission, N.C. Safety & Health Council as well as North Carolina Public Risk Management Association.

Insurance Market Environment: There was a summary discussion of present insurance carrier/broker appetite for risk, industry underwriting results for the prior 12 months, along with a legislative expectation (H30, H10, H50) update in regards to impact for risk management during this renewal season. According to the various risk and insurance publications as well as contact with Broker/Company individuals operating in North Carolina, the commercial client renewal outlook in the private sector generally is generating an overall average rate increase of 9-11 percent, with a continued restrictive appetite for local government-based risks. There is an expectation for offered deductibles/retentions to be increased with little or no discount in renewal pricing. 

Pool Renewal Plan Expectations: The renewal process timeline for both pools was discussed with underwriting/rating meetings to be held March 5-6 followed by the Board of Trustees meeting March 20. At that time, the Trustees will formally approve next year’s rates. Applications are available online now at the NCACC RM website: http://www.ncacc.org/index.aspx?nid=230 . Current property/inland marine/auto schedules will be emailed to our members during the first part of March along with a digital renewal application from Underwriting. Renewal numbers are expected to begin being released during the week of April 10 on a first-in, first-out basis, (subject to complete updated underwriting/exposure information provided) as is our protocol each year.

The Pool’s continued primary goal is to remain as close to a no-change (zero-sum game) status as possible where rating is concerned, passing on any pure reinsurance costs (increase or decrease) tempered by each member’s own claim/loss experience and safety score accumulation. Projected reinsurance costs have yet to be formally received, but we are anticipating a small increase in property-only reinsurance costs for the eastern coastal counties. Long story short, we expect to continue being untouchable in both cost and coverage design for next year. Should you have member specific questions please do not hesitate to call us.