TEXAS MUNICIPAL LEAGUE INTERGOVERNMENTAL RISK POOL

Transcription

1 TEXAS MUNICIPAL LEAGUE INTERGOVERNMENTAL RISK POOL Board of Trustees Meeting The Woodlands Waterway Marriott 1601 Lake Robbins Drive, Montgomery A Room The Woodlands, Texas April 16, 2011 Trustees Present Staff Present Also Present Mary Gauer, Chair Marvin Townsend Pam Beachley, Legislative Consultant Byron Black, Vice Chair Carol Loughlin Chuck Faerber, Rudd & Wisdom, Inc. Kevin Caddell Hank Domeracki Debra Fox, Guy Carpenter Eddie Edwards David Reagan Bob Kamm, Legislative Consultant John Fullen Mike Bratcher Mike McCrohan, Oxford Insurance Brokers Andres Garza Scott Epperson Collin Schoenfeld, Guy Carpenter Don Henderson Les Horne Kevin Smith, Alaska MLJIA Greg Ingham Matt Jordan Tammy White, Board Member, Alaska Larry Melton David Longoria John Monaco Mike Rains Leo Montalvo Allan Romer Pat Norriss Tito Villegas Paul Parker Debbye Mangum Chair Mary Gauer called this regular meeting of the Board of Trustees of the Texas Municipal League Intergovernmental Risk Pool to order at 7:30 a.m. on Saturday, April 16, Welcome guests from Alaska, Board Member Tammy White from the North Slope Borough School District and Kevin Smith, Executive Director, Alaska Municipal League Joint Insurance Association. 1 Mary Gauer welcomed guests from Alaska, Board Member Tammy White from the North Slope Borough School District and Kevin Smith, Executive Director, Alaska Municipal League Joint Insurance Association (AMLJIA). 2. Welcome New Board Member, TML Board Representative John Monaco, Mayor of Mesquite. Mary Gauer welcomed John Monaco, Mayor of Mesquite, as the new TML Board of Directors ex officio representative. 3. Roll Call and Excused Absences (Tab 1) Marvin Townsend reported the absences of Larry Gilley, Robert Herrera, and Bennett Sandlin, and the reasons they asked their absences be excused. 1 All references to Tabs in these minutes are references to the Tabs in the Board of Trustee Agenda packet.

2 MOTION by Larry Melton, seconded by Andres Garza, to excuse the absences of Larry Gilley, Robert Herrera, and Bennett Sandlin. Motion carried with unanimous approval. 4. Consideration of Minutes of January 22, 2011 meeting at Galveston (Tab 2) MOTION by Byron Black, seconded by Kevin Caddell, to approve the minutes of the regular Board meeting on January 22, 2011, as written under Tab 2. Motion carried with unanimous approval. 5. Nominations Committee 5a. Consideration of minutes of October 1, 2010 committee meeting (Tab 3) The October 1, 2010 Nominations Committee meeting minutes were approved at the Nominations Committee meeting on April 15, c. Election of non-member trustee to Place 15 for term remaining to October 1, 2012 to replace Ms. Nora Chavez (Tab 4) Mary Gauer announced that the recommendation of the Nominations Committee was brought to the Board in the form of a motion, which was seconded by Byron Black, to appoint Rickey Childers to the Board of Trustees to fill the vacancy in Place 15 on the Board of Trustees to complete the unexpired term ending on October 1, Motion carried with unanimous approval. 5b. Election of member trustee to Place 4 for a term expiring on October 1, Mr. Rickey Childers is no longer the City Manager in Lancaster (Tab 4) Mary Gauer presented the recommendation of the Nominations Committee that Mr. Peter Vargas, City Manager of Allen, be appointed to fill the vacancy in Place 4 on the Board of Trustees to complete the unexpired term ending on October 1, 2014, and that the Executive Director contact Mr. Vargas to determine his willingness to serve. MOTION by Pat Norriss, seconded by Larry Melton, to appoint Mr. Peter Vargas, City Manager of Allen, to fill the vacancy in Place 4 on the Board of Trustees to complete the unexpired term ending on October 1, 2014, subject to the Executive Director confirming Mr. Vargas willingness to serve. Motion carried with unanimous approval. 6. Finance Committee 6a. Consideration of minutes of January 21, 2011 committee meeting (Tab 5) The January 21, 2011 Finance Committee meeting minutes were approved at the Finance Committee meeting on April 15, b. Review of the February 28, 2011 (5-month) Financial Statements (Tab 6) Hank Domeracki presented the 5-month Financial Statements for the period ending February 28, 2011, under Tab 6. 2

3 6c. Review of February 28, 2011 (5-month) Investment Report (Tab 7) Hank Domeracki presented the 5-month Investment Report for the period ending February 28, 2011, under Tab 7. 6d. Report regarding Standard & Poor s Rating (Tab 8) Hank Domeracki presented the report under Tab 8 that Standard & Poor s had affirmed the Texas Municipal League Intergovernmental Risk Pool s A rating with a stable outlook. 6e. Consideration of commuting outstanding workers compensation reinsurance claims with CNA (Tab18) Mike Bratcher presented under Tab 18 the $9,250,000 commutation proposal from Continental Casualty Company (CNA) for claims from to for the future obligations under the Pool s excess coverage contracts. MOTION by Andres Garza, seconded by Larry Melton, to recommend the commutation in principle, to authorize the Executive Director to finalize the commutation, and to execute a commutation contract for $9,250,000, adjusted for any recent payments made by Continental Casualty Company. Motion carried with unanimous approval. 6f. Consideration of further amending the April 18, 2006 audit contract with Johnson Lambert & Company, LLP to provide a two-year extension (Tab 9) Hank Domeracki presented the audit contract provisions as set forth under Tab 9, and based on satisfactory performance of the auditing firm, to amend the contract with Johnson Lambert & Co., LLP to provide for extending the contract for two additional years. MOTION by Andres Garza, seconded by Leo Montalvo, to authorize the Executive Director to execute an amendment to the contract with Johnson Lambert & Co., LLP, dated April 18, 2006, to provide for an additional two-year extension and authorize Johnson Lambert & Co., LLP, to conduct financial audits, per the terms of that agreement, for the fiscal years ending 2011 and 2012 with the compensation being set at $125,500 and $126,750, respectively. Motion carried with unanimous approval. 6g. Recommendation to amend contract with Rudd and Wisdom, Inc. for actuarial services and exercise contract extension (Tab 10) Hank Domeracki presented the contract provisions with Rudd and Wisdom, Inc., and, based on satisfactory performance of the actuary, recommended revising the contract to provide for a different basis for calculating the Consumer Price Index Adjustments from the Dallas/Fort Worth area to all U. S. cities, amending the contract to provide for two-year term extension options instead of the current one-year option, and extending the contract for the fiscal years and in the amounts of $44,660 and $45,330, respectively. MOTION by Andres Garza, seconded by Greg Ingham, to amend the contract with Rudd and Wisdom, Inc., as set forth under Tab 10. Motion carried with unanimous approval. 3

4 6h. Consideration of net income three year forecast assuming worst case assumptions, projection of current conditions, and best case assumptions (Tab 11) This information was reviewed by the Board at its meeting on April 15, Andres Garza stated it was reviewed by the Finance Committee and no action was necessary. 6i. Consideration of equity return alternatives for (Tab 17) (Underwriting and Claims Committee to report) This item was presented by the Underwriting and Claims Committee under agenda item 7e. 6j. Information Technology Report on status of hardware and software updates to the computer system (Tab 12) David Longoria presented the Information Technology Report under Tab 12 on the status of hardware and software updates to the computer system. 7. Underwriting and Claims Committee 7a. Consideration of minutes of January 21, 2011 committee meeting (Tab 13) The January 21, 2011 Underwriting and Claims Committee meeting minutes were approved at the Underwriting and Claims Committee meeting on April 15, b. Property Reinsurance Recommendations for May 1, 2011 to May 1, 2012 (Tab 14) Carol Loughlin presented the recommendations for property reinsurance for May 1, 2011 to May 1, 2012 under Tab 14. Since the reinsurance coverage had not been completely placed as of this Board meeting, it was recommended that Guy Carpenter be authorized to place coverage effective May 1, 2011, within an annual deposit premium between the $11.1 to $11.5 million range based on total insured values of $26.2 billion, not including auto physical damage, with the following renewal terms: $146 million excess of $4 million for losses except those caused by named storms $140 million excess of $10 million for losses related to named storms Two Risk Warranty in the layers above the first $25 million All reinsurers participating are to hold a current A.M. Best rating of at least A- (Excellent) Reinsurance premiums include compensation to Guy Carpenter Company and London broker, Oxford Insurance Brokers. Staff be authorized to negotiate with NLC Mutual Insurance Company to continue its quota-share participation consistent with the premiums and terms outlined above. The Pool currently has a 15% quota share in the $50 million excess of $50 million layer and may need to increase its quota-share percentage to 20% in that layer. 4

5 MOTION by Don Henderson, seconded by Kevin Caddell, to authorize the renewal terms for property reinsurance beginning May 1, 2011, authorizing Guy Carpenter to place coverage within an annual deposit premium range of $11.1 to $11.5 million with renewal terms as stated above, and authorizing the staff to negotiate with NLC Mutual Insurance Company to continue its quota-share participation consistent with premiums and terms outlined under Tab 14. Motion carried with unanimous approval. 7c. Consideration of Property Rates for (Tab 15) Carol Loughlin presented the recommendations for property rates under Tab 15. It had been projected that reinsurance costs would increase for ; however, current renewal indications are at the low end of the range. In terms of expenses, the Property Fund is now as large as the Liability Fund and it is recommended allocations be increased from 17% to 22% for contract service fees and general and administrative expenses to the Property Fund. It was recommended that the Pool absorb any increased reinsurance costs and the higher expense allocation and that property rates remain at the current levels. MOTION by Don Henderson, seconded by Pat Norriss, to adopt the property rate recommendations as set forth under Tab 15 with no increase in rates for Motion carried with unanimous approval. 7d. Workers Compensation and Liability Rate Recommendations for (Tab 16) Carol Loughlin presented the workers compensation rate recommendations for under Tab 16. Carol introduced Chuck Faerber from Rudd and Wisdom, Inc., the Pool s actuary. It was recommended that workers compensation and liability rates be set for using short-term interest rate projection of 4% and a longer-term interest rate projection of 5%. It was recommended that workers compensation rates for paid police officers be reduced by 8% and paid firefighters by 3%. This will provide an overall reduction of approximately 3% and, when combined with the change in experience modifiers, an overall reduction of 4%, which is consistent with the actuary s rate indications. It was recommended that the new rates apply to all proposals and rerates with an effective date of May 1, 2011 or later. MOTION by Don Henderson, seconded by Paul Parker, to adopt workers compensation rates as set forth under Tab 16. Motion carried with unanimous approval. Carol Loughlin presented the liability rate recommendations for under Tab 16. The actuary s indications for liability rates are as follows: General Liability reduced by 13%; Automobile Liability increased by 1.5%; Law Enforcement increased by 0.2%; and Public Officials Liability reduced by 1.7%. It was also recommended that aviation rates be reduced by 10% and all new rates be applied to all proposals and rerates with an effective date of May 1, 2011 or later. MOTION by Don Henderson, seconded by Byron Black, to adopt liability and aviation rates for as set forth under Tab 16. Motion carried with unanimous approval. 5

6 7e. Consideration of Equity Return alternatives for (Tab 17) Kevin Caddell presented the Underwriting and Claims Committee recommendation for an equity return for The Underwriting and Claims Committee discussed having an equity return in the form of a contribution credit rather than an issued check. The committee also recommended that an equity return not be given in the Property Fund due to the uncertainty of reinsurance costs for 2013 and the upcoming hurricane season. It was recommended that an equity return for property coverage members be discussed after the hurricane season. MOTION by Kevin Caddell, seconded by Pat Norriss, that the equity return this year be a contribution credit in the Workers Compensation and Liability Funds. Motion carried with unanimous approval. Kevin Caddell reported that the Underwriting Committee had recommended an equity return in the amount of $8 million. Greg Ingham suggested the $8 million come from the Workers Compensation Fund and the Liability Fund. Any discussion on an equity return from the Property Fund should wait until after hurricane season has ended. Greg Ingham stated the Pool needed to start educating its Members to understand that rate reductions decrease the amount of equity returns. Carol Loughlin mentioned that the $8 million could be allocated proportionately between the Workers Compensation Fund and the Liability Fund based on the Best Estimate Projections for returned members equity shown under Tab 11. Greg Ingham stated he would put that in the form of a motion. MOTION by Greg Ingham, seconded by Larry Melton, to provide an $8 million equity return from the Workers Compensation Fund and Liability Fund in the form of a contribution credit to Members, the $8 million being allocated between such Funds proportionately based on the Best Estimate Projections for returned Members equity shown under Tab 11, and the criteria for distribution of the equity return to Members to be the same used for the equity distribution, giving appropriate recognition to loss ratios and longevity participation of the Member. Motion carried with unanimous approval. 7f. Consideration of commuting outstanding Workers Compensation Reinsurance claims with CNA (Tab 18) Presented by the Finance Committee under agenda item 6e. 7g. Consideration of continuation of property coverage for the City of San Benito (Tab 19) Marvin Townsend presented the recommendation on continuing property coverage for the City of San Benito under Tab 19. 7h. Significant Cases and Legal Developments impacting the Pool (Tab 20) David Reagan presented the report on Significant Cases and Legal Developments impacting the Pool under Tab 20. 7i. Report regarding Hurricane Ike claim of the City of Pasadena (Tab 21) Mike Rains presented the report under Tab 21 on the Hurricane Ike claim from the City of Pasadena. 6

7 7j. Update on losses caused by Hurricane Ike (Tab 22) Mike Rains presented the report under Tab 22 on the update of Hurricane Ike loss payments since the last Board meeting on January 22, k. Liability and Property Report on claims that have reserves exceeding $150,000 and consideration of settlement authority in excess of $500,000 (Tab 23) Mike Rains presented the Liability and Property Claims Report under Tab 23. 7l. Consideration of amendment to the Liability claims settlement authority (Tab 24) David Reagan presented the recommendation of an amendment to the Liability claims settlement authority to include the payment of judgments in excess of $500,000. It was recommended that the Board modify the settlement authority as set forth under Tab 24. MOTION by Don Henderson, seconded by Paul Parker, to amend the Liability claims settlement authority as set forth under Tab 24. Motion carried with unanimous approval. 7m.Workers Compensation Claims Report, including (1) claims that have reserves exceeding $150,000, (2) fatality claims, (3) presumption claims, (4) catastrophic losses, (5) update on the Workers Compensation Alliance and (6) report regarding proposed commutation of Workers Compensation Excess Coverage Contracts with Transamerica (Tab 25) Mike Bratcher presented the Workers Compensation Claims Report under Tab 25. 7n. Final Board Report regarding disputed hospital bills, (Tab 26) Mike Bratcher presented the final report regarding disputed hospital bills from under Tab 26. 7o. Underwriting Report on underwriting results and loss ratios, including the Quarterly Report by Victor O. Schinnerer & Company, Inc. regarding revenues received and contract activities (Tab 27) Matt Jordan presented the Underwriting Report on underwriting results and loss ratios under Tab 18 and noted the quarterly report by Victor O. Schinnerer & Company, Inc. regarding revenues received and contact activities as set forth under Tab 27. 7p. Loss Prevention Report on member surveys, training, and property valuations conducted (Tab 28) Les Horne presented the Loss Prevention Report on member surveys, training, and property valuations conducted set forth under Tab 28. 7q. Field Services Report on Pool membership growth (Tab 29) Scott Epperson presented the Field Services Report on Pool membership growth under Tab 29. 7

8 8. General Counsel s Report 8a. Legislative Update on activities relating to the Texas Legislature since the previous Board meeting (Tab 30) Pam Beachley and Bob Kamm, legislative consultants for the Pool, reported on significant workers compensation bills and other legislation affecting the Pool for the legislative session which began on January 11, Comments by ex officio Members from and to TML and Employee Benefits Boards Mr. Eddie Edwards, ex officio member from the TML Intergovernmental Employee Benefits Pool (TMLIEBP) Board of Trustees, stated that the TMLIEBP Board would meet the following week. Based on information he had received, the TMLIEBP is in very good financial shape and the Pharmacy Benefit Management Program had returned more savings than anticipated. Mr. John Monaco, ex officio member from the TML Board of Directors, stated that the current concerns are with the legislative session. Mary Gauer inquired about the legislation regarding changing the dates for municipal elections that would allow, but not require, cities to hold elections in November. David Reagan stated that the legislation would allow cities the option to change elections to November. Mary Gauer said she understood that the legislation was requiring municipal elections to be changed to November. David Reagan indicated that there might be another bill requiring all elections be held in November, but that he was unable to locate it in the short notice before the Board meeting. 10. Executive Committee Report 10a. Status of lawsuits in which the Pool is a party (Tab 31) David Reagan presented the report under Tab 31 on Lawsuits in which the Pool is a Party. 10b. Personnel Report identifying employment changes (Tab A) Allan Romer presented the Quarterly Personnel Report under Tab A. 10c. Consideration of appointment of Executive Director Designate (Moved to the end of the agenda.) 11. Meeting Schedule and Board Continuing Education (Tab B) Marvin Townsend reported that the Executive Committee had suggested the Omni Hotel in downtown Fort Worth for the October 19-20, 2012 Board meeting since the Hilton Bella Harbour in Rockwall had advised that the hotel did not want to commit to a group the size of the Pool. The committee suggested the 25 th and 26 th for the January 2013 Board meeting and that it be held at the South Padre Island Sheraton. The suggested date for the Board meeting in April 2013 is the 12 th and 13 th at the J W Marriott Hill Country Resort in San Antonio. 8

9 MOTION by Andres Garza, seconded by Leo Montalvo, to change the location of the October 19-20, 2012 Board meeting to the Omni Hotel in downtown Fort Worth, to set the date of January 25-26, 2013 for the South Padre Island Sheraton, and the April 12-13, 2013 Board meeting be held at the J W Marriott Hill Country Resort in San Antonio. Motion carried with unanimous approval. Mr. Townsend also noted the upcoming NLC RISC Trustee Conference on May in Newport, Rhode Island. 10c. Consideration of appointment of Executive Director Designate Chair Mary Gauer announced that the Board would convene in an Executive Session at 10:45 a.m. under Texas Government Code, Sections to The Board reconvened into open session at 10:58 a.m. MOTION by Andres Garza, seconded by Paul Parker, to name Carol Loughlin, current Deputy Director, as the Executive Director designate. Motion carried with unanimous approval. 12. Adjournment a.m. MOTION by Andres Garza, seconded by Greg Ingham, to adjourn the Board at 11:01 Submitted by: David W. Reagan, Board Secretary Approved by the Board of Trustees on,