UTSA Financing Risk Management John DeLaHunt, MBA, ARM UTSA Risk & Life Safety Manager April 22, Business Affairs: Your Partner for Successful Solutions

Often—FREQUENCY—Rare Minor ——— SEVERITY ——— Major Risk Mapping Paper Cuts Bird Attacks Warfare Auto Fatality MANAGE AVOID TOLERATETRANSFER Business Affairs: Your Partner for Successful Solutions 2

Integrated Risk Management: A Three Legged Stool 1.Loss Prevention 2.Loss Control 3.Risk Finance - and - 4.Business Continuity Business Affairs: Your Partner for Successful Solutions 3

CostCapacity NakedLow Self-InsuranceLowModerate Risk PoolingModerate CommercialHigh Risk Finance Strategies Business Affairs: Your Partner for Successful Solutions 4

Policies in Place for People Workers Compensation (WCI) * Unemployment Compensation (UCI) * Directors & Officers (D&O) * Commercial Crime * 2008 Premiums$326, Premiums (estimated)$374,456 * Offered through UT System to all UT institutions (“System Coverage”) 5 Business Affairs: Your Partner for Successful Solutions

Policies in Place for Property Real Property (CPPP)* Vehicles (liability, physical damage, etc)* Scheduled equipment* Fine Arts* Mobile equipment * Offered through UT System to all UT institutions (“System Coverage”) 2008 Premiums$235, Premiums (estimated)$242,682 6 Business Affairs: Your Partner for Successful Solutions

Policies in Place for Events Supplemental Excess General Liability –Festivals (Texas Folklife, Asian) Tenant User Liability Insurance Program –Joint Sponsored events Sports Camp Insurance CoA Design/Build Accident Policy 2008 Premiums$35, Premiums (estimated)$35,540 7 Business Affairs: Your Partner for Successful Solutions

UTSA Insurance Premiums (estimated) People (WCI, UCI, D&O, Crime) $326,632$374,456 Property (CPPP, Auto, Mobile Equipment, Equipment) $235,366$339,532 Liability (Festivals, TULIP, Camps, D/B) $35,540 Total$558,848$713,987 8 Business Affairs: Your Partner for Successful Solutions

UTSA Cost of Risk 9 Business Affairs: Your Partner for Successful Solutions

CPPP Fire/AOP Structure LossFinancing up $1B No Coverage $1B $5M Commercial Insurance $5M $250k 50% institution w/loss (5 yr amortization) 50% all other institutions (5 yr amortization) $250k $0 Deductible – institution w/loss 10 Business Affairs: Your Partner for Successful Solutions

CPPP Wind & Flood Structure LossFinancing Up $150M No Coverage $150M $50M Commercial Insurance $50M $250k 40% Debt Svc Institution w/loss (20-30 yr amort.) 60% Debt Service All other institutions (deferred capitalization on property fund, yrs) $250k $0 Deductible (institution w/loss) 11 Business Affairs: Your Partner for Successful Solutions

UTSA Fire/AOP Cash Flows $0 Year 0 -$250 Year 2Year 1Year 4Year 3Year 5 Following Catastrophic Property Loss (thousands of dollars) -$475 -$25 UTSA suffers the loss Any sister institution suffers the loss -$25 -$ Business Affairs: Your Partner for Successful Solutions

Unfunded Deductibles CPPP - Fire/AOP and W&F Exposure –Property loss >$250k Deductible if UTSA suffers the loss –$250k per occurrence, both programs Fire/AOP Replenishment over 5 years –$475k per year if UTSA suffers the loss –~$25k per year if another campus suffers the loss W&F Debt Service over years –$20M if UTSA suffers the loss –~$1.5M if another campus suffers the loss 13 Business Affairs: Your Partner for Successful Solutions

Unfunded Deductibles Employment Practices Exposures –Wrongful Termination –Harassment/Retribution –Denial of Tenure –Civil rights actions –Other federal causes Deductibles –$100,000 individual per occurrence –$300,000 institution per occurrence 14 Business Affairs: Your Partner for Successful Solutions

Unfunded Retention Tort Liability Exposures –Premises defect –Tangible personal property –Motor-driven equipment Limit of Liability – fully retained –$250,000 individual, per occurrence –$500,000 limit to individuals, per occurrence –$100,000 property damage –$600,000 total 15 Business Affairs: Your Partner for Successful Solutions

Unfunded Exposures Summary ProblemInsuranceExposure Property Loss to UTSA - Fire/AOP CPPP $250k Deductible $475k Fund Replenishment for 5 yrs Property Loss to UTSA - Wind and Flood CPPP $250k Deductible yrs debt service on $20M Property Loss in system - Fire/AOP CPPP ~$25k Fund Replenishment for 5 yrs Property Loss in system - Wind and Flood CPPP yrs debt service on ~$1.5M Deferred Capitalization Employment PracticesD&O $100k individual $300k institution Tort Liability $250k Per person $500k Per occurrence $100k Property Damage 16 Business Affairs: Your Partner for Successful Solutions

UTSA Scheduled Equipment Coverage 17 Business Affairs: Your Partner for Successful Solutions

Ideas Build catastrophic property loss reserve –Immediately fund $725K to avoid disruptions for one budget cycle –Fully fund $2.625M to avoid all disruption due to property loss Premium and reserve sharing analysis 18 Business Affairs: Your Partner for Successful Solutions

Ideas Build liability reserve –Tort liability: $600k cap –D&O deductible: $100k/$300k –Immediately: $600k (assumes 1 loss per year) Premium and reserve sharing analysis 19 Business Affairs: Your Partner for Successful Solutions

Ideas Build hybrid equipment protection program –Insure high-value, unique, exposed assets –Insure fee-funded assets –Immediately: ↑ insurance coverage –Immediately: $50k loss retention pool –Target: $100k premium cost –Target: $300k loss retention pool Premium and retention sharing 20 Business Affairs: Your Partner for Successful Solutions

Ideas Combine retention pools –Short term target: $725K –Long term target: $3M Add retention pool to insurance budgets Centralize management of risk retention (losses) and risk transfer (insurance) 21 Business Affairs: Your Partner for Successful Solutions

UTSA Financing Risk Management John DeLaHunt, MBA, ARM UTSA Risk & Life Safety Manager April 22, Business Affairs: Your Partner for Successful Solutions