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

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

Definitions of Public Entity Pooling “…a cooperative group of governmental entities joining together to finance an exposure, liability, or risk.” “…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 Governmental Accounting Standards Board #10 Terrorism Risk Insurance Act of 2002 “...self-insurance arrangements by municipalities and other entities”

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

Pools of Pools  National Captives or RRG’s  APEEP - AMERIND, Inc.  NLC-MIC - GEM - CRL - Transit RE  States Self-Insurers Risk Retention Group  FORMER – Housing Authority Insurance Group (HAIG) & United Educators (UE)

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.

Type of Pool – 371 of nearly 500 public entity risk and/or benefits pools

Type of Entities Served by Pools Pools

Pool Funds

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

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

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

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

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

 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. Member Advantages

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

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

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

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,

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