Preserving Educational Budgets by Reducing Insurance Costs: Creating Your Own Insurance Company Presented by: Jim Blumreich, Chief Financial Officer Northeast Wisconsin Technical College Steve Stoeger-Moore, Executive Vice President Districts Mutual Insurance

Presentation Outline History Process Keys to Success Benefits

Education Exposures Property & contents Athletics Student health Employees Auto Shop and labs D&O Fiduciary liability Sexual harassment Hiring/firing Transportation Residence halls Collectibles Foreign travel Employee dishonesty/crime Business travel accident

History Group program preceded DMI ◦ Created by 6, eventually grew to 15 colleges Developed “trust” of working together ◦ Spread the risk ◦ Cooperative environment developed ◦ Laid the groundwork Large enough exposure base to bargain as a group ◦ No individualized loss control ◦ Pay the premium, we’ll pay the claims ◦ Group buying, no special services ◦ Coverage gaps

History Trust paid out $26M, $5M in losses ◦2◦2 2% loss ratio ◦P◦P remium increases were double digits ◦B◦B udget impact Intent to control risk management ◦O◦O ften neglected – especially at small institutions Champions

Timeline 1984 Group program started of 16 colleges in group program 2003 September - Consultant & actuary study December – Board resolutions to join DMI 2004 January - Certificate of authority approval process July – DMI began operations

Keys to Success Consultant Recommended structure Potential cost savings Create municipal mutual under WI statutes Actuary Study supported financial success Potential cost savings Support CFOs Presidents Boards OCI

Risk Funding Options Captive Rent-a-Captive Stock Company Group Program Pool Mutual Company

Coverage Issued Coverages not noted are covered by WTCS Trust program Workers Compensation ( Rating done by WI Compensation Rating Bureau) Property Casualty Equipment Breakdown Campus Violent Acts

Program Retention Levels Program Retention Levels $225,000 Company Retention $25,000 Member Deductible $350,000,000 Excess Including TRIA and Inland Marine Property $5,000 Member Deductible General Liability $345,000 Company Retention $4,650,000 Reinsurance $5,000 Member Deductible $100,000 Member Deductible $25,000 Member Deductible Auto Liability ELLBoiler & Machinery Work Comp $345,000 Company Retention $100,000,000 Boiler Reinsurance $4,650,000 Reinsurance $350,000 Company Retention $4,650,000 Reinsurance $250,000 Company Retention Statutory Reinsurance Work Comp $250,000 Company Retention Aircraft Work Comp $3,000,000 Reinsurance Statutory Reinsurance Work Comp $650,000 X/S $350,000 Reinsurance

Organization Consultant Legal Counsel Actuary Board of Directors Executive Vice President Accountant Auditor Broker Bank Ancillary Coverages Foreign Liability Fidelity Bond Crime Business Travel Accident Administrative Support Claims Risk & Loss Control Consultant Property, Casualty & Workers Compensation Program Coverages: Equipment Breakdown - Educators Legal - Property & Machinery / Inland Marine - General Liability - Commercial Auto - Workers Compensation - Campus Violent Acts

Funding Years 1-3 Premiums Artificially-rated policies (except w/c) Paid same as year prior to DMI Capital = residual of premium minus expenditures Year 4 Premiums Rates held steady Exposure-based (except w/c) Capital = $1.5M Years 5 & 6 Premiums Rates held steady Exposure-based (except w/c)

Benefits Tangible Did not borrow to create DMI $7.6M surplus Close coverage gaps Consistent policy limits Best practices Focus on loss control Preserve budget Services DMI website ( Intangible Services Loss control, risk management education, hot topics Reduced local staff time Networking Attitude Control Risk management awareness Company owner – skin in the game

Worker Compensation

Where Do We Go From Here Loss control efforts Investments- leverage our surplus Increased retention levels = decreased reinsurance premiums Rating Return capital Pay dividends Pay member premiums Other products

Awards & Recognition 2004 CCBO 2005 GFOA Best Practices Community College Futures Assembly Bellwether finalist 2006 Published in PRIMA 2007 URMIA Innovative Risk Management Solutions finalist 2008 Exec VP won Risk Innovator in Higher Education award

Summary Reduce insurance costs by creating your own insurance company Resources ◦ Champion ◦ Feasibility funding

Presentation handout available on ACCT website. Thank You Jim BlumreichSteve Stoeger-Moore Northeast Wisconsin Technical College Chief Financial Officer Districts Mutual Insurance Executive Vice President Questions?