Executive Board Meeting Minutes June 28, 2016

Transcription

1 PRESENT Executive Board Members: Loy Dale, SWRMIC Patty Page, North Kitsap SD Dr. Tim Bruce, La Conner SD Dr. Carl Bruner, Mt. Vernon SD Dr. Ron Spanjer, Blaine SD Diana Reaume, Quillayute Valley SD Dr. Mark Anderson, Spokane Public Schools Shannon McMinimee, Tacoma Public Schools Dr. Michelle Reid, South Kitsap SD Carol Browder, NWESD 189 (Ex-Officio) Others: Chuck Hole, Board Treasurer James Marta, James Marta & Co. Dr. Monte Bridges Karen Graham, AJGallagher Tyna Ek, Attorney Richard Staudt, Seattle Public Schools Staff: Deborah Callahan Bob Fulmer Charles Upchurch Tommy Le Dawn Mayes ABSENT: Kirsten Parker, Dieringer SD John Welch, PSESD 121 (Ex-Officio) Michelle Dearlove, ESD 123 (Ex-Officio) Gavin Hottman, ESD 112 (Ex-Officio) Jerry McDermott, NEWESD 101 (Ex-Officio) Tom Fleming, ESD 105 (Ex-Officio) Monica Hunsaker, OESD 114 (Ex-Officio) 1 P age

2 I. Call to Order Board Chair L. Dale called the meeting of the Executive Board to order at 10:55 a.m. II. Consideration of Consent Agenda L. Dale requested changing the Agenda by switching the order of items to begin with Item 8, followed by Item 7, and then with a presentation by an outside vendor. C. Bruner made the motion which was seconded by S. McMinimee to accept the Agenda as modified. Motion carried. III. Consent Agenda P. Page made the motion which was seconded by T. Bruce to approve the Consent Agenda. Motion carried. L. Dale stated for the record that R. Staudt is here and will be given three minutes if he chooses to comment under Member/Public Comments. We will bypass items 5, 6, and 7 and go to Item 8 presented by D. Callahan on the RAS, then J. Marta will follow with Item 7 on the Q3 financials. IV. Presentation Risk Assessment Survey D. Callahan stated that every April or June, the Board considers the RAS; staff proposes the content and the Board considers funding. 2 P age Three things point to an RAS change: financial consideration, member feedback and pool trends. Traditionally, the RAS was 3% and it was out of surplus, and we used the investment income which was 3%. In , the Board increased the RAS to 5.75%, instead of using dividends. With a steadily increasing number of members, it equates to a $2M reduction in surplus annually, and has been sustainable over a number of years, but will be difficult to sustain with the change in claims liabilities. We held four risk roundtables and talked with the members. They had issues with the recent RAS and they didn t see it derived out of trends. We listened, had post meeting surveys, and met with four members to talk in depth about this issue. Comments about the RAS included thinking the current RAS was too large an issue to tackle in an RAS and would take 3 years to make a difference, labor intensive and rigid. They loved the idea to meet and give suggestions and want local table-tops to talk about the RAS, wanted us to consider using the funds for risk management needs instead of going back into the general budget. They wanted options, autonomy and the ability to self-direct, and look at timelines for training and implementation. How can we be anticipatory of the budget before we put the RAS out there? Pool trends show an increasing number of E&O claims, particularly sexual abuse in both a frequency and severity basis.

3 The RAS draws $2M from surplus every year. The members want a different RAS next year, and the result is to reconfigure the RAS for A 2-pronged RAS approach would be where we offer a 3% RAS, compliance based, which is more manageable to members, based on loss trends, annually funded from surplus with a credit off premium, but a lower percentage. Also, add a 3% self-directed project which totals 6%, instead of The 3% self-directed project identifies the dollar amount the member has available to spend and offers a menu of choices as to what they want to tie it to, such as the areas that they are seeing losses. It would be paid upon completion of the project rather than at end of year. What does a 3% RAS life cycle means this year? Sept 2018 will be first time members will see the 3% rate at the same time is the self-directed project that can be rolled out so it has less negative impact to members. P. Page remembers multiple discussions around should we have the 5.75%, and since 2005 we have looked at that, but we re getting new financials. We need to have the updated financials in order to assess. L. Dale is wondering if we are able to make this decision today or wait until January? D. Callahan said let s hold the vote until J. Marta can present on the current financial structure. V. Executive Session Claims Executive session began at 12:45 PM to discuss pending litigation and was estimated to last approximately 50 minutes. Executive Session ended at 2:05 PM. VI. Presentation Reinsurance Renewal K. Graham with AJ Gallagher presented on the 2016 Renewal Report. Overall, we have a slight increase in exposure. The carriers mostly look at FTE criteria as the main one they back their quotes into. K. Graham recommends we look at higher limits. The quotes from UE are very competitive. They reduced the rate by almost 5%. AIG is also very competitive in 10x of 10. They overall have a reduction in premium of 4%. We also have quotes of 10x of 20 and have an indication of 10x of 30. We went to Hallmark, 10Mx of 20, charging $26k/$1M. We looked at National Casualty for 10x of 30 for $22k/$1M, and will firm that up after July 1. For property, we have $500M in limit and we considered testing the market for what $750M and $1B in limits would cost. It makes sense to wait until we get a Probably Maximum Loss (PML) report later in the year to make a better business decision on bumping property limits. 3 P age

4 We wanted to achieve $100M in standard flood and wanted to achieve $100M in high hazard flood and quake. Also wanted to look at 3% deductible would look like on earthquake coverage and see if the pricing made sense. Trying to get up to $100M limit in flood zone and earthquake, the carriers won t quote before 30 days of renewal. For Stand Alone Terrorism and NCBR: - Canopius surprised AJG because they included active assailant coverage. This came out of the Gallagher team after Sandy Hook. - Their NCBR deductible SIR of $50k is immediate vs. the Hiscox time delay of 72 hour waiting period. We are negotiating with the carriers and expect we can get the Pool better coverage. Active Assailant Coverage includes business income and extra expense coverage if you have a terrorism event. D. Callahan agrees with K. Graham s recommendations: 1. Recommend renewing with Lexington for property coverage at $500M and leave limits for now. 2. Renew with UE at 9x at 1 3. Renew Chartus at 10x of 10 as offered 4. Renew Cyber as offered at $680k, and not wait until the next Board meeting to approve. 5. Renew Stand Alone Terrorism with NCBR but go with new carrier with active assailant coverage 6. Purchase higher liability limits to $30M with Hallmark and higher limits to $40M with National Casualty. Total cost is $11M, or $311,308 higher than last year which includes some reductions in costs and some additional coverages. D. Reaume made a motion to approve the recommended Reinsurance Renewal with latitude to make changes and adjustments per final cost, seconded by S. McMinimee. Motion carried. VII. VIII. Member/Public Comments R. Staudt with Seattle Public Schools addressed the Board with two about the RAS. Does the Pool want to continue incentivizing member districts to do more than the minimum to reduce their loss exposure? Secondly, how do we go about funding that? Presentation Q3 Financial Statement J. Marta presented on the Q3 financials. 4 P age Everything in the Financial Statement is a full accrual. - Member contributions - Expenses are a little higher than contributions

5 - Security grant funds if not spent will go back into general budget. C. Bruner made a motion, seconded by R. Spanjer to approve the Q3 Financials. Motion carried. RAS - Revisited L. Dale asked if a motion was needed to approve the RAS in September at what percentage. D. Callahan recommends 3%. P. Page moves that we approve continuation of the RAS with the financial incentive to be determined after the year end financials are presented in November. S. McMinimee seconded. Motion carried. IX. Executive Director Report A. Board Vacancies 5 P age D. Callahan asked how the Board would like to amend the Bylaws regarding a Board member moving from one district to another similar sized district. D. Callahan said there is a provision in the Bylaws that says the Board cannot have a representative from the same district serving two different positions, only one position per district. S. McMinimee said the person is elected, not the position. She would be in favor of, in the event that a board member representing one size district moves to a different district of the same size during their term, the Board member may elect to keep their position on the board so long as it does not result in two members of the same size district serving on the Board. S. McMinimee made a motion to amend the Bylaws to state that in the event a Board member representing one size district moves to a district of the same size, based on the FTE described in Section III, Article III Categorization of Members during their term, that Board member may elect to keep their position on the Board if this does not result in two members of the same district being on the Board, seconded by C. Bruner. D. Callahan asked if the paragraph immediately above that also be included because that s not current language and it does not give the Executive Director the direction of what to do. S. McMinimee withdraws the motion as made and amends to include both paragraphs, along with the sentence, so long as this does not represent two members of the same district serving on the Board, seconded by C. Bruner. M. Reid abstained from the vote. Motion carried. B. Coverage Agreement There are three suggested changes to the Coverage Agreement: two are increases in coverage, and one is a clarification of coverage.

6 1) Builder Risk During a Small Works Risk Roundtable in December, we learned that the $250k threshold on Builder s Risk coverage was creating confusion and problems and did not match the Small Works threshold of $300k. The recommendation is to increase the $250k Builder s Risk coverage to $300k to match the Small Works threshold. Feedback from members has been very positive. 2) Limited Lead Endorsement The recommendation is to add a limited lead defense endorsement in anticipation of claims for bodily injury arising out of the ingestion of lead which offers up to $100k defense per occurrence with an aggregate of $1M per member per coverage year, effective September 1, S. McMinimee asked if it isn t retroactive coverage, and industry standard now is no one should be installing fixtures that contain lead, is this coverage going to be meaningful if old fixtures had lead and we can t cover them? D. Callahan said she will look at retroactivity and the possibility of a claims-made coverage instead of occurrence-based. She will also look at reconciling per claim/per occurrence language. 3) Drones C. Contracts It s recommended to update the definition of, and exclusions for, unmanned aerial systems to cover drones that are in compliance with FAA. We would not cover drones that are not in compliance with FAA. S. McMinimee made the motion, seconded by D. Reaume, to approve the proposed changes to the Coverage Agreement. Motion carried. There are three (3) contracts to review: Bickmore Actuarial Services, James Marta & Company (CFO), and PSESD HR/Communications contracts. S. McMinimee moved to approve each contract, seconded by R. Spanjer. Motion carried. 6 P age

7 D. Investment Policy As a result of filing for accreditation with AGRIP, the committee recommended one change: that the Investment Policy include a clause that requires an Annual Review. S. McMinimee made a motion to modify the Investment Policy to add a sentence related to an Annual Review by the Executive Board. Seconded by R Spanjer. Motion carried. E. Annual Meeting (Board ideas for Member participation) At the April meeting, was a discussion on Board initiatives. One of the initiatives was to make the Annual Member Meeting more attractive. The Board discussed some ideas to make it more meaningful for members. F. Member Report Cards B. Fulmer circulated a sample copy of the member report card, stating that the report card will satisfy three things: 1) provide the members an overview by line of coverage of how the Pool is doing, 2) provide the members a comparison of how they are performing compared to the members in their sized category, and 3) allow members to track their performance or losses in each category of loss. Risk Services staff will focus individual data-driven programs based on the member s loss history and where the trending is. The Report Card looks at ultimate loss trends of the Pool. We saw a dramatic increase in E&O losses in sexual misconduct over the last 3 years which is why we believe the focus of the new RAS needs to geared where the pool is seeing the greatest loss. The increased use of investigation coverage and special education coverage should be viewed in terms of early intervention and prevention, and helped drive down our EPL losses. A question was raised as to why C. Bruner and P. Page s districts were not listed on the report card example under medium-sized districts. D. Callahan replied that both Board member district FTE s increased in size. D. Callahan said if a Board member s FTE increased to a different size district, during election years we need to move the FTE requirement up for the Board member to keep their seat on the Board. S. McMinimee suggested discussing at a later time. D. Callahan said perhaps at the November meeting. T. Bruce applauded B. Fulmer on the good work. 7 P age

8 G. Executive Board Calendar D. Callahan suggested one change to the Board Calendar: moving the April meeting from the first week of April (which is difficult for the actuary to get the work done), to the last week of April. Also, having this meeting in June instead of July is difficult for K. Graham to bring the reinsurance quotes. L. Dale suggested a June Board meeting but have a conference call and/or webinar in July or August for the express purpose to discuss excess coverages, which gives K. Graham more time. D. Callahan suggested moving next year s June meeting to Wednesday so it doesn t conflict with the WASA conference. She suggested we keep the Annual meeting in November, and send a post-meeting survey to confirm with members. D. Callahan suggested surveying the Board about returning the June meeting back to July. It was agreed to move the Executive Director s Annual Evaluation to April. X. Board Initiatives None. XI. Meeting Adjournment At approximately 4.06 p.m. the meeting was adjourned. The foregoing is a true and correct copy of the minutes of the meeting of the Board of Directors as approved by the Executive Board. Deborah Callahan, Executive Director 8 P age