Transcript Unlocking the Treasures” On The Scope and Size of Public

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.”
Governmental Accounting Standards Board #10
AGRiP Operations Manual
“…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.”
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
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
180
160
140
171
120
100
80
60
40
20
0
Monoline
Multiline
Fleet
Other
105
91
4
Type of Entities Served by Pools
363 Pools
180
Cities/Towns
160
School Dist.
140
120
100
80
Special Dist.
165
163
Counties
127
Housing Authorities
122
Other
60
40
20
0
78
Transit
73
29 27
Higher
Ed./Townships
Pool Funds
200
180
160
140
120
100
80
60
40
20
0
186
147
Liability
Property
152
WC
Benefits
88
Unemployment
57
16
All Other
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
Member Advantages
 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.
 MN League and Association of Counties and
NIRMA (NB) Police POST accredited training.
Member Advantages
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