AGENDA DATE: 6/1/2016
TITLE:
Title
Establishment of Risk Management Fund for Claim Payments.
BODY
SUBJECT/PROPOSAL/REQUEST: Approval of establishment of Risk Management Fund for payment of property insurance claims
ITEM TYPE: Consent Action Item
STAFF CONTACT(S): Letteri, Walker, Kamptner, Burrell, Kriebel
PRESENTER (S): N/A
LEGAL REVIEW: Yes
REVIEWED BY: Thomas C. Foley
BACKGROUND: The County pays an annual insurance premium to VACORP for its property and casualty (P&C) insurance coverage. The County has historically paid significantly more in annual premiums than it receives in claims reimbursements. Finance staff have evaluated the County’s current P&C insurance plan and the potential of significant savings in insurance premiums by increasing the per claim deductible amount from $1,000 to $25,000 as a first step in moving toward a self-insurance plan. Please see the attached Report for more information regarding staff’s analysis and recommendation.
STRATEGIC PLAN: Economic Prosperity: Foster an environment that stimulates diversified job creation, capital investments, and tax revenues that support community goals
DISCUSSION: Staff has concluded that a more efficient use of insurance premium dollars would be for the County to retain a greater portion of its insurance risk. In order to do so, a separate Risk Management (RM) fund needs to be established from which property claims are paid. This step will move the County towards P&C self-insurance over a multi-year period. Any year-end balance in the RM fund would be re-appropriated to the fund for use in the next fiscal year. As the RM fund balance increases over time, funds not used to pay claims can be used to support other risk management initiatives.
BUDGET IMPACT: There is no budgetary impact associated with establishing a RM fund. The RM fund would be used to pay up to $25,000 per claim for property claims. Property claims above the $25,000 deductible amount would be fully insured after the County’s payment of the deductible. As set forth in the attached Report, the County has historically had low claim frequency and severity, and staff anticipates a savings after all claims are paid due to the significant reduction in the premium amount.
RECOMMENDATION:
Recommendation
Staff recommends that the Board approve the establishment of a Risk Management Fund to be used to pay up to $25,000 per property claim.
If the Board approves the establishment of the fund, staff will present an appropriation request to the Board for approval as part of the July 6, 2016 Appropriations agenda item. The appropriation request will be for $32,751, which is the amount the County will save in its FY17 insurance premium by increasing the per claim deductible from $1,000 to $25,000 effective July 1, 2016.
ATTACHMENTS:
A - June 2016 Risk Management Fund Report