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1 Office of the Chancellor 601 Colorado Street Austin, Texas January 14, 2016 MEMORANDUM TO: Board of Regents, The University of Texas System Chairman Paul Foster Vice Chairman Steve Hicks Vice Chairman Jeffery Hildebrand Regent Ernest Aliseda Regent David Beck Regent Alex M. Cranberg Regent Wallace Hall Regent Brenda Pejovich Regent Sara Tucker Regent Justin Drake FROM: William H. McRaven Enclosed for your information is a copy of The University of Texas System s Risk Management Annual Report for fiscal year The report highlights significant risk management activities, and outlines the financial results of the Systemwide property, casualty, workers compensation, unemployment compensation, and professional liability insurance programs. The Office of Risk Management, in coordination with professionals at the U.T. institutions, continues to develop, implement, and manage innovative risk control and risk financing programs to address ongoing occupational, environmental, financial, property, casualty, and international risks for the U.T. System and its institutions. The attached report demonstrates the results of the programs administered by these professionals each and every day. Please let me know if you have any questions or if I can provide additional information. WHM:ki Enclosure Cc: Executive Officers, U.T. System Mr. Phillip B. Dendy Chief Administrative Officers, U.T. System Institutions Chief Business Officers, U.T. System Institutions The University of Texas at Arlington The University of Texas at Austin The University of Texas at Dallas The University of Texas at El Paso The University of Texas of the Permian Basin The University of Texas Rio Grande Valley The University of Texas at San Antonio The University of Texas at Tyler The University of Texas Southwestern Medical Center The University of Texas Medical Branch at Galveston The University of Texas Health Science Center at Houston The University of Texas Health Science Center at San Antonio The University of Texas MD Anderson Cancer Center The University of Texas Health Science Center at Tyler

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3 MEMBERS OF THE UNIVERSITY OF TEXAS SYSTEM BOARD OF REGENTS AND EXECUTIVE OFFICERS OFFICERS As of August 31, 2015 Paul L. Foster, Chairman R. Steven Hicks, Vice Chairman Jeffery D. Hildebrand, Vice Chairman Francie A. Frederick, General Counsel to the Board MEMBERS Terms scheduled to expire February 1, 2017* Alex M. Cranberg Wallace L. Hall, Jr. Brenda Pejovich Terms scheduled to expire February 1, 2019* Ernest Aliseda Paul L. Foster Jeffrey D. Hildebrand Terms scheduled to expire February 1, 2021* David J. Beck R. Steven Hicks Sara Martinez Tucker Terms scheduled to expire May 31, 2016* Justin A. Drake (Student Regent) EXECUTIVE OFFICERS William H. McRaven, Chancellor David E. Daniel, Deputy Chancellor Steven W. Leslie, Ph.D., Executive Vice Chancellor for Academic Affairs Scott C. Kelley, Ed.D., Executive Vice Chancellor for Business Affairs Raymond S. Greenberg, M.D., Ph.D., Executive Vice Chancellor for Health Affairs Amy Shaw Thomas, J.D., Vice Chancellor and Counsel for Health Affairs Patricia D. Hurn, Ph.D., Vice Chancellor for Research and Innovation Daniel H. Sharphorn, J.D., Vice Chancellor and General Counsel Barry McBee, J.D., Vice Chancellor and Chief Governmental Relations Officer William H. Shute, J.D., Vice Chancellor for Federal Relations Randa S. Safady, Ph.D., Vice Chancellor for External Relations Stephanie A. Bond Huie, Ph.D., Vice Chancellor for Strategic Initiatives *Each Regent s term expires when a successor has been appointed, qualified, and taken the oath of office. The Student Regent serves a one-year term. 1

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5 TABLE OF CONTENTS EXECUTIVE SUMMARY COST OF RISK PROGRAM SUMMARIES Auto, Property & Liability Plan Comprehensive Property Protection Plan Fire and All Other Perils Comprehensive Property Protection Plan Wind and Flood Directors and Officers/Employment Practices Liability International Travel Rolling Owner Controlled Insurance Program Unemployment Compensation Insurance Workers Compensation Insurance Resource Allocation Program Professional Medical Liability Plan Business Continuity and Emergency Management Environmental Program...27 A LOOK AHEAD TO FY For questions concerning this report, contact The University of Texas System Office of Risk Management 504 Lavaca Street, Suite 930 Austin, Texas (512)

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7 EXECUTIVE SUMMARY It is the mission of the Office of Risk Management (ORM) to provide high-quality risk management services, resources, and leadership, which create value and support The University of Texas System s (UT System) mission of excellence in education, research, healthcare, and public service. The framework of the UT System risk management program consists of key elements including assessment, control, finance, communication, and monitoring. It is governed by executive leadership and direction from the Risk Management Executive Committee (RMEC). A broad range of risks are managed by professionals at UT System Administration, the institutions and through Systemwide committees including the Risk Management Advisory Committee (RMAC), the Workers Compensation Insurance (WCI) Committee, the Environmental Health and Safety Advisory Committee (EHSAC), and the Emergency Management Committee (EMC). In Fiscal Year (FY) 2015, the total population of UT System including students, faculty, and staff was over 331,000 and total payroll was over $7.4 billion. Collectively, there were about 99 million gross square feet of building space, and Total Insured Values (TIV) (building, contents, and business income) of almost $32 billion. There were over 17,000 trips internationally for business, research, or study abroad, and 2,400 vehicles were in the UT System fleet. These are only a few of the metrics reflecting the diversity and magnitude of the operational exposures facing the UT System institutions. The WCI program continues to be a model in both the higher education and public entity sectors. In FY 2015, total claim expenditures were $3.6 million, representing the lowest annual claim expenditure in over 20 years. This collaborative effort between safety and case management professionals has proven time and again to be effective in controlling the frequency and severity of injuries across UT System. Following an extensive research and underwriting process, The University of Texas System Cyber Liability Insurance Program became effective on September 15, It is a comprehensive plan that coordinates the risk assessment and control activities managed by information security and information technology professionals through a response plan including forensics, communication, crisis management, and legal subject-matter experts, as well as a mechanism to finance the loss. A multidisciplinary committee from the academic and health institutions and UT System Administration is now developing the operational procedures for plan management. The Comprehensive Property Protection Plan (CPPP) was enhanced by increasing the total available limit on the commercial layer for named windstorm from $150 million to $200 million. Systemwide costs for the CPPP remained flat. Loss control activities are an important part of this program. During FY 2015, property conservation surveys were completed on 108 buildings Systemwide with a total insured value of over $6.1 billion. Working with our institutions, ORM facilitated 3 carrier loss prevention visits surveying a total of 30 buildings. The Master Builder s Risk Program provides property insurance coverage for large construction and renovation projects, including coverage for the work that is being completed as part of the project, equipment, damage to existing property, delay in completion, and soft costs. Like the Rolling Owner Controlled Insurance Program (ROCIP), this program creates cost savings for UT System through economies of scale, and provides more robust coverage when compared to contractor provided coverage. Since its inception in FY 2013, The Master Builder s Risk program has provided coverage for $1.4 billion of construction values. 1

8 EXECUTIVE SUMMARY CONTINUED International programs and the global footprint of the UT System continue to expand. In FY 2015, UT System had approximately 17,000 trips to over 150 countries. ORM participated on a risk assessment trip for a study abroad program to Israel with UT Tyler and similar trips are anticipated in the future where these activities can benefit multiple institutions. ORM worked with several institutions, Travel Services, and the Office of Employee Benefits (OEB) to renew and place a bundled medical and security assistance and evacuation program with a blanket student accident and sickness policy. This assures that any traveler on a university sponsored trip has the appropriate resources available to them, if needed. In FY 2015, the UT institutions disposed of $1.4 million pounds of hazardous waste. Systemwide contracts for hazardous waste disposal resulted in $700,000 savings, approximately 46% over comparative contract pricing. Systemwide contracts for environmental services result in efficiency and cost savings for the institutions as well as control over disposal options to enhance environmental due diligence. Training and preparation are critical when dealing with any incident. All institutions, in coordination with ORM, local jurisdictions and responders when appropriate, conducted emergency management drills and training exercises. These included severe weather, fire, Ebola/infectious disease response, active shooter, counter terrorism, lab animal escape, mass casualty, HAZMAT incidents, and many more. The UT System s strategic risk management framework encourages the application of prudent risk mitigation techniques and risk intelligent decision making. The following report demonstrates the activities and financial results of UT System s risk management programs and ORM for FY

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10 COST OF RISK Cost of risk is a method of representing the financial performance of risk management programs. For the purpose of this report, cost of risk includes fixed costs such as commercial and self-insurance premiums, program administration, broker fees, and replenishment to the CPPP. The cost of risk model also includes paid deductibles for the CPPP, self insured programs, Directors and Officers/Employment Practices Liability (D&O/ EPL), and automobile insurance programs. It does not include premiums paid for institution-specific policies or retained losses not reported by the institutions. In FY 2015, the cost of risk for Systemwide risk management programs managed by ORM was approximately $35.3 million. Costs related to all programs combined remained essentially flat over the five-year period from FY 2011 to FY 2015, increasing by only 1%. During this same time period, Systemwide exposure metrics including headcount, payroll, square footage, total insured values, research expenditures, and others have increased significantly. Since FY 2011, TIV has increased by 25% and gross square footage has increased by 11%. Systemwide Named Windstorm limits increased by $117 million, while the cost to the institutions actually decreased slightly, by 1%. The table on the following page illustrates the Systemwide cost of risk and applicable metrics. The graph demonstrates cost by lines of coverage since FY Similar charts, including WCI and UCI cost per employee, and CPPP cost per $100 TIV and cost per square foot demonstrate the actual cost and impact of programs, and are provided to each institution for their individual analysis. 4

11 COST OF RISK SYSTEMWIDE PROGRAMS ADMINISTERED BY THE OFFICE OF RISK MANAGEMENT The University of Texas System All Institutions FISCAL YEAR TOTAL 1 WCI UCI PROPERTY 2,3 CRIME D&O 2 AUTO 2 INTL $35,277,578 $7,572,047 $9,279,864 $16,031,220 $88,718 $311,784 $1,259,212 $734, $35,353,539 $7,051,066 $10,472,287 $15,714,808 $87,721 $398,994 $905,970 $722, $37,290,930 $6,634,109 $11,339,173 $17,211,598 $85,441 $485,347 $901,606 $633, $34,089,192 $6,511,442 $9,961,467 $15,112,078 $94,572 $1,020,535 $820,396 $568, $34,956,137 $6,806,583 $9,556,506 $16,181,407 $94,729 $855,039 $840,767 $621,106 % Change ( 11-15) 1% 11% -3% -1% -6% -64% 50% 18% ALL INSTITUTIONS FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 % INCREASE SINCE FY 11 Headcount 5 106, , , , ,605 8% Total Insured Value 6 (000) $25,573,854 $27,223,926 $28,739,211 $29,817,994 $31,918,548 25% Gross Sq. Ft. 7 89,335,678 93,911,726 96,348,368 98,167,145 98,790,982 11% Operating Budget 8 (000) $12,773,800 $13,092,500 $13,926,526 $14,616,372 $15,634,227 22% Enrollment 8 211, , , , ,112 3% Research Exp. 8 (000) $2,369,600 $2,540,100 $2,487,392 $2,530,714 $2,512,106 6% Payroll 6 (000) $6,173,530 $6,374,339 $6,720,349 $6,972,582 $7,450,716 21% Cost of Risk 9 $34,956,137 $34,147,825 $37,248,628 $35,175,869 $35,277,578 1% COST OF RISK BY LINE OF COVERAGE MANAGED BY ORM 1 Total does not include Professional Medical Liability Insurance (PMLI). 2 Includes premiums and deductibles paid by Institutions for CPPP-AOP, CPPP-W&F, D&O and Auto. 3 Includes CPPP-AOP, CPPP-W&F, Fine Arts, and Equipment. 4 Includes the International package, International Emergency Assistance, Special Crime and DBA policies paid by UT System funds and not allocated to institutions. Institution allocation: $162,376 - FY 2011, $54,375 - FY 2012, $213,285 - FY 2013, $229,708 - FY 2014, $142,159 - FY State Auditor Quarterly FTE Report. 6 Values reported to ORM by Institutions for CPPP and WCI programs. 7 Statistical Handbook, Texas Higher Education Coordinating Board. 8 UT System Productivity Dashboard, Does not include individual policies purchased for institutions, except NFIP and TWIA policies. 5

12 DESCRIPTION OF COVERAGE AUTO, PROPERTY & LIABILITY PLAN DATE OF INCEPTION September 2013 PREMIUM ALLOCATION The Automobile, Property & Liability Plan provides automobile liability and physical damage coverage for owned, leased, hired, and nonowned (liability only) vehicles, along with general liability coverage for certain scheduled exposures. All coverages are subject to a selfinsured retention with an aggregate stop loss deductible. Policies are composite rated with each institution paying its portion of the premium based on the total vehicle count reported, subject to audit. Auto, Property & Liability Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 1,977, $ 1,226, Prepaid Expense 8, , Total Assets 1,986, ,279, Liabilities Deferred Income - 14, Account Payable 1 317, Loan Payable 2 1,000, ,000, IBNR 269, , Total Liabilities 1,587, ,143, Net Position $ 398, $ 135, Statement of Revenues, Expenses and Changes in Net Position For the Year Ended 8/31/2015 8/31/2014 Revenue Premium Income 1 1,274, , Interest Income - - Total Revenue $ 1,274, $ 753, Expenses Claim Expenses 418, , Premium Expenses 449, , Actuary Expenses 2, , Total Expenses 870, , Change in IBNR 140, , Net Expenses 1,010, , Excess Revenue Over Expenses 263, , Other Transfers and Adjustments - - Change in Net Position 263, , Beginning Net Position 135, Ending Net Position $ 398, $ 135, Premium income is shown net of $317, overpayment from UT Austin which is also included in Accounts Payable. 2 Loan from CPPP-Fire & AOP fund to Auto fund. 6

13 AUTO, PROPERTY & LIABILITY PLAN FIVE YEAR CLAIM HISTORY FOR ALL POLICIES Total Incurred Claims are a snapshot of active, pending and closed claims as of 9/1/2015. Numbers are subject to change as claims are finalized. HIGHLIGHTS FROM FY 2015 ORM s high-retention auto program continues to provide Systemwide auto liability and physical damage coverage for owned, hired, and nonowned autos at a low rate per vehicle when compared to traditional auto programs. Starting in FY 2013, premium increases were necessary to capitalize the self-insured retention fund associated with the new structure of the auto program. More stable premiums are expected as the program matures. A Third Party Administrator (TPA) continues to provide claims handling services, payment services and other related services associated with the Auto, Property and Liability Program. ORM designed and launched a Risk Management Information System (RMIS) module to streamline the scheduling and certification process of UT owned automobiles. This module has facilitated the data gathering and insurance reporting processes. AUTO LIABILITY PREMIUM (rate x vehicles) CAUSE OF LOSS BY INCIDENT LOSS CONTROL FY 2009 FY 2015 To assist UT System institutions in maintaining compliance with UTS157- Automobile Insurance Coverage for Officers and Employees and General Requirements for the use of Vehicles, ORM continues to provide at no additional cost to the institutions, traffic safety and large passenger van training for UT System authorized drivers through ORM s online driver education program. Cart Operator Safety Training was added as an additional driver training option in FY In FY 2015, 685 individual drivers completed 4,740 courses through the online program. In FY 2014, 438 individual drivers completed 2,468 courses through the online program. Since 2009, 1,944 individual drivers have completed required driver training through the ORM online program. 7

14 COMPREHENSIVE PROPERTY PROTECTION PLAN FIRE AND ALL OTHER PERILS DESCRIPTION OF COVERAGE DATE OF INCEPTION FY 1995 PREMIUM ALLOCATION METHODOLOGY The Comprehensive Property Protection Plan (CPPP) Fire and All Other Perils Program (Fire and AOP) is a commercial insurance program with a high retention and 7% quota share ($75m layer x of $25m) that insures the institutions against property claims, resulting from fire and other perils. A funded reserve is in place to cover the policy deductible and quota share. Underlying Systemwide Inland Marine/Equipment, Fine Arts, and Crime policies are purchased as the first layer of coverage. 80% - Institution s Total Insured Values 20% - Institution s Premium Allocation Model (PAM) score CPPP Fire and AOP Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 18,412, $ 17,865, Prepaid Expenses 2,001, ,436, Loan Receivable 1 1,000, ,000, Accounts Receivable - - Total Assets 21,413, ,302, Liabilities Deferred Income 2 1,735, ,950, IBNR 1,365, , Total Liabilities 3,100, ,281, Net Position $ 18,313, $ 19,020, Statement of Revenues, Expenses and Changes in Net Position For the Year Ended 8/31/2015 8/31/2014 Revenue Premium Income 2 $ 4,551, $ 3,979, Interest Income 464, , Total Revenue 5,015, ,254, Expenses Claim Expenses 597, Premium Expenses 3,681, ,627, Actuary Expenses - - Administrative Expenses 410, , Total Expenses 4,688, ,010, Change in IBNR 1,034, , Net Expenses 5,722, ,091, Excess Revenue Over Expenses (706,841.17) 162, Other Transfers and Adjustments - - Change in Net Position (706,841.17) 162, Beginning Net Position 19,020, ,857, Ending Net Position $ 18,313, $ 19,020, Loan from CPPP-Fire & AOP fund to Auto fund. 2 $1,735, FY 2015 premium deferred to FY

15 COMPREHENSIVE PROPERTY PROTECTION PLAN FIRE AND ALL OTHER PERILS PROGRAM Total Insured Values: $31,918,548,373 Annual Commercial Premium: $3,488,479 HIGHLIGHTS FROM FY 2015 ORM conducted 29 direct, face-to-face underwriter meetings in order to add new carriers to the program this year and maintain competitive pricing. Overall premium cost for the Fire and AOP program decreased by approximately $400,000 for the April 2015 renewal. Total Insured Values under the program increased from $29.8 billion to $31.9 billion for the April 2015 renewal. ORM moved UT System s quota share participation from 10% of the primary $25 million layer excess of policy deductibles to a 7% quota share participation of the $75 million layer excess of $25 million. CLAIM ACTIVITY There were a total of 11 claims reported under the CPPP Fire and AOP, Equipment and Fine Arts policies. The total settlement payments for all losses was $485, Of the nine reported CPPP Fire and AOP claims in FY 2015, four losses have total reserves estimated at $1,665,000, and are expected to exceed the $250,000 institution deductible. LOSS CONTROL The Property Conservation Program surveyed 108 buildings, during 15 institution visits, with a Total Insured Value of $6,225,535,304. In addition to the 15 institution visits, carrier loss prevention engineers surveyed 30 buildings representing the largest concentration of values on the three campuses. 550 buildings over $10 million in value are now included in the Premium Allocation Model with a combined total value more than $25 billion. 97 new property recommendations were made in FY 2015 with a total of 877 recommendations made over the life of the program. 67 property recommendations were closed or completed in FY 2015 with a total of 521 closed over the life of the program. A total of 43 construction projects at 7 institutions have utilized the Systemwide contract for construction photo documentation. 9

16 COMPREHENSIVE PROPERTY PROTECTION PLAN WIND AND FLOOD DESCRIPTION OF COVERAGE DATE OF INCEPTION FY 2003 PREMIUM ALLOCATION METHODOLOGY The Comprehensive Property Protection Plan Named Windstorm and Resulting Flood Program (Wind and Flood) includes commercial insurance with high retention and a 7% quota share (75m layer x of $25m) with interim financing that insures the institutions against direct physical loss and damage resulting from named-windstorm and/or storm surge flood. Interim financing is in place and supported by capacity to issue debt up to $50 million. Underlying National Flood Insurance Program (NFIP) and Texas Windstorm Insurance Association (TWIA) policies are purchased as the first layer of coverage. 10% - Institutions Total Insured Values reported 70% - Institutions with property in Tier 1 and 2 based on loss estimates 20% - Institutions with property in Tier 1 and 2 and 100 Year Flood Zone CPPP Wind and Flood Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 20,646, $ 18,797, Prepaid Expenses 10,158, ,283, Total Assets 30,805, ,081, Liabilities Deferred Income 1 8,521, ,049, Accrued Expenses 7, , IBNR - - Total Liabilities 8,528, ,055, Net Position $ 22,276, $ 19,025, Statement of Revenues, Expenses and Changes in Net Position For the Year Ended 8/31/2015 8/31/2014 Revenue Premium Income 1 $ 16,261, $ 14,553, Interest Income 458, , Total Revenue 16,719, ,816, Expenses Claim Expenses - - Premium Expenses 13,058, ,636, Administrative Expenses 410, , Total Expenses 13,468, ,020, Change in IBNR - - Net Expenses 13,468, ,020, Excess Revenue Over Expenses 3,250, (204,360.83) Other Transfers and Adjustments - - Change in Net Position 3,250, (204,360.83) Beginning Net Position 19,025, ,230, Ending Net Position $ 22,276, $ 19,025, $8,521, FY 2015 premium deferred to FY

17 COMPREHENSIVE PROPERTY PROTECTION PLAN WIND AND FLOOD PROGRAM OVERVIEW Total Insured Values: $31,918,548,373 Annual Commercial Premium: $9,533,808 Capitalization: $1,500,000 HIGHLIGHTS FROM FY 2015 ORM increased Named Windstorm limits by $50 million from $150 million to $200 million. In light of favorable insurance market conditions ORM extended the UTMB deductible buydown policy for an additional year. This resulted in a reduced premium rate. Significant savings were also achieved for the UTMDACC excess wind program due to the higher attachment point and market competition for the placement. *Deductibles vary by location - $100 million per occurrence for UTMB, $50 million per occurrence for UTHSC-Houston and UTMDACC, all other Tier 1 locations, minimum of $5 million with $50 million maximum depending on values. *UTMB purchases a $50 million Named Windstorm deductible buydown policy to reduce the $100 million deductible applicable to its main campus under the UT System policy to $50 million. *UTMDACC purchases an additional $100 million in Named Windstorm coverage that is in excess of the UT System CPPP Policy. LOSS CONTROL Completed exposure analyses and surveys for elevation certificates for buildings located in high hazard flood zones. Placed three new policies to date based on new analysis. Working with institutions on new flood policies based on exposure and critical nature of operations. Continued working with the Center for Space Research at UT Austin to develop storm loss scenarios for UTMB. Completed graphic web interface for modeling tool and working to incorporate new facilities information based on latest mitigation work and space utilization data from UTMB Updated graphic documentation showing location of UT buildings relative to high hazard flood zones, delineating buildings with NFIP and TWIA coverage. Facilitated builder s risk carrier visits to survey UTMB construction projects. Continued to monitor and assist institutions on property recommendations related to wind and flood loss mitigation. TOTAL UNDERLYING WIND & FLOOD LIMITS 11

18 DIRECTORS AND OFFICERS/EMPLOYMENT PRACTICES LIABILITY DESCRIPTION OF COVERAGE Directors and Officers/Employment Practices Liability (D&O/EPL) is a selfinsurance plan that provides coverage to board members, employees, faculty, and other covered individuals, as well as each of the UT System institutions for claims arising from actual or alleged wrongful acts performed by the Plan beneficiaries. The Plan also provides coverage for EPL claims, such as wrongful termination, failure to promote, and wrongful discipline. The Office of General Counsel administers the plan and ORM is responsible for plan accounting. DATE OF INCEPTION September 1, 1991 Coverage A and B September 1, 1996 Coverage C PREMIUM ALLOCATION METHODOLOGY 80% - Employee Headcount (6 years) 20% - Loss History (6 years); capped at $250,000 per claim Directors and Officers Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 11,859, $ 13,542, Prepaid Expenses 7, , Total Assets 11,867, ,550, Liabilities Deferred Income - 13, IBNR 1,085, ,514, Total Liabilities 1,085, ,528, Net Position $ 10,781, $ 11,021, Statement of Revenues, Expenses and Changes in Net Position For the Year Ending 8/31/2015 8/31/2014 Revenue Premium Income $ 325, $ 340, Interest Income 345, , Total Revenue 671, , Expenses Claim Expenses 1,997, Excess Insurance Policy Expense 188, , Actuary Expenses 6, , Administrative Expenses 148, , Total Expenses 2,340, , Change in IBNR (1,429,493.00) (434,461.00) Net Expenses 911, (148,974.58) Excess Revenue Over Expenses (240,094.12) 688, Other Transfers and Adjustments - - Change in Net Position (240,094.12) 688, Beginning Net Position 11,021, ,333, Ending Net Position $ 10,781, $ 11,021,

19 DIRECTORS AND OFFICERS/EMPLOYMENT PRACTICES LIABILITY PROGRAM OVERVIEW Plan Deductibles* Coverage A Non-Indemnified Individuals - None Coverage B Indemnified Individual/ Organization - $100,000 per person/$300,000 per loss Coverage C Organization - $300,000 per loss Excess D&O/EPL Policy The excess policy is a following form program and is in excess of the $5 million UT System Self-Insurance Plan retention. The policy was renewed as part of a two year rate and terms and conditions guarantee. CLAIM ACTIVITY 124 claims were reported under the D&O/EPL Plan in FY claims, with report dates from FY 2001 through FY 2015, were closed during FY 2015 PREMIUM HISTORY 13

20 INTERNATIONAL TRAVEL To address the variety of exposures presented by international travel and operations, ORM maintains the following insurance programs: Foreign Package Policy Coverage includes the following: Foreign Workers Compensation provides coverage for injury or occupational illness occurring to an employee, which occurs while the employee is outside of the United States. Coverage includes Workers Compensation, Employers Liability, and Supplemental Repatriation Expenses. Benefits are as directed by the state/province of hire. Foreign General Liability provides coverage if UT System or its institutions become legally obligated to pay damages because of bodily injury or property damage occurring outside of the United States. Foreign Auto Liability; Physical Damage; Hired and Non-Owned Auto Liability provides coverage for the use of owned private passenger or hired/charter vehicles while being operated outside of the United States (coverage applies in excess of any other applicable insurance). Defense Base Act The Defense Base Act (DBA) policy provides compulsory workers compensation coverage and disability benefits for civilian employees working outside of the United States on contracts between UT System and the U.S. Government. Benefits are as directed by the Federal Defense Base Act. International Emergency Assistance UT System s Emergency Assistance provider supports international travelers and expatriates with worldwide emergency assistance and evacuation services 24 hours a day while abroad. International Travel Blanket Student Accident Sickness Policy The policy provides medical expense coverage to students internationally on a UT System Institution study abroad program or related educational activity. INTERNATIONAL TRAVEL BY INSTITUTION* INSTITUTION TOTAL STUDENT TRAVELERS TOTAL EMPLOYEE TRAVELERS CAR RENTALS BUS RENTALS UT Arlington UT Austin 3,817 4, UT Brownsville UT Dallas UT El Paso UT Pan American UT Permian Basin UT San Antonio UT Tyler UT Southwestern Medical Center UT Medical Branch Galveston UT Health Science Center Houston UT Health Science Center San Antonio UT MD Anderson Cancer Center 0 1, UT Health Science Center Tyler UT System Administration TOTAL 6,081 11, *Data used for FY 2015 policies is based on FY 2014 travel. 14

21 INTERNATIONAL TRAVEL HIGHLIGHTS FROM FY 2015 ORM hired an International Risk & Insurance Analyst to serve as a Systemwide expert resource on matters relating to international health, safety, security, emergency planning, crisis management, and risk mitigation. The selected candidate came from the UT Austin campus, where she served as the International Risk Analyst for the past five years. UT Tyler partnered with ORM to conduct a successful safety and security assessment of Israel to aid the UT Tyler International Oversight Committee (IOC) with decision-making related to study abroad programming in Israel. The visit resulted in an official risk assessment report issued from ORM. In order to ensure all students traveling abroad on university sponsored programs are covered, ORM worked with the Office of Employee Benefits to procure a new blanket travel accident and sickness insurance. The policy provides medical expense coverage to students traveling on a university sponsored program and includes emergency medical and security evacuations. INTERNATIONAL TRAVEL TRIPS BY REGION* TOP 10 MOST VISITED COUNTRIES Canada 1,268 United Kingdom 1,199 China 1,155 France 988 Mexico 968 Spain 958 Italy 945 Germany 933 South Korea 501 Japan 464 6,081 Student Trips 11,118 Employee Trips 151 Countries *Data used for FY 2015 policies is based on FY 2014 travel. INTERNATIONAL EMERGENCY ASSISTANCE During FY 2015, the provider responded to 508 requests for medical or security advice or assistance in 76 countries. Out of the total number of cases, 75% were requests for advice/ referrals, 23% necessitated out-patient treatment, and 1% required inpatient/evacuation services. FOREIGN PACKAGE POLICY & DBA CLAIM ACTIVITY The FY 2015 Foreign Package Policy had one claim submitted for an incident that occurred in the Bahamas with a total incurred loss of $1,100. There were no claims reported in FY 2015 for the DBA Policy. LOSS CONTROL IOCs were created at the institutions in FY 2010 to review requests for travel to any country where significant safety or health concerns are present. In FY 2015, the institutions received 1,456 requests for exceptions and granted 999 exceptions to faculty/staff and 436 exceptions to students, when travelers met IOC requirements for risk assessments and management plan. The total number of traveler exceptions that were denied was 21. Exceptions were denied to Egypt, Iran, Iraq, Israel, Kenya, Lebanon, Mexico, Nigeria and Pakistan. 15

22 ROLLING OWNER CONTROLLED INSURANCE PROGRAM DESCRIPTION OF COVERAGE VALUE ENROLLED ALL PHASES PROJECT FUND CONTRIBUTION RATE The Rolling Owner Controlled Insurance Program (ROCIP) provides Workers Compensation, General Liability, and Excess Liability insurance coverage for all enrolled contractors working on designated UT System construction projects. Benefits include lower insurance premiums due to bulk purchasing, consistency of insurance provided on each project, $9,406,555,969 as of August 31, 2015 Actuarially determined rate per $100 construction value Rolling Owner Controlled Insurance program Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 53,435, $ 61,369, Prepaid Expenses 1 4,655, ,408, Accounts Receivable - - Total Assets 58,090, ,778, Liabilities Accounts Payable 501, , Deferred Income 108, IBNR 5,446, ,996, Total Liabilities 6,056, ,512, Net Position $ 52,034, $ 57,266, Statement of Revenues, Expenses and Changes in Net Position For the Year Ended 8/31/2015 8/31/2014 Revenue Premium Income $ 8,281, $ 19,752, Builder s Risk Income 775, ,259, Interest Income 1,376, , Total Revenue 10,433, ,676, Expenses ROCIP Claim Expenses 3,696, ,028, Builders Risk Expenses 1,778, ,151, ROCIP Premium Expenses 6,319, ,753, Actuary Expenses 11, , Administrative Expenses 410, , Total Expenses 12,216, ,323, Change in IBNR 449, (529,272.00) Net Expenses 12,665, ,793, Excess Revenue Over Expenses (2,232,060.63) 10,882, Other Transfers and Adjustments (3,000,000.00) - Change in Net Position (5,232,060.63) 10,882, Beginning Net Position 57,266, ,383, Ending Net Position $ 52,034, $ 57,266, Increase in prepaid expenses due to start up of Phase VI excess liability premium paid through 8/1/

23 ROLLING OWNER CONTROLLED INSURANCE PROGRAM PROGRAM OVERVIEW PHASE DATES CONSTRUCTION VALUE COST AVOIDED BY PROJECT ESTIMATED SAVINGS TO THE ROCIP FUND* SAVINGS REBATE TO INSTITUTIONS ROCIP IV $2,115,233,830 $11,143,909 $15,045,919 $15,000,000 ROCIP V $4,219,652,668 $18,144,506 $35,476,780* To be determined** ROCIP VI $1,453,082,105 $7,701,335 To be determined To be determined * Estimated Savings: Phase still in active construction ** Rebate to be evaluated for ROCIP V in Fall of 2017 HIGHLIGHTS FROM FY 2015 ROCIP VI ROCIP VI began in August 2013 and includes 38 projects with values in excess of $1.42 billion as of the end of FY It is anticipated that over $3 billion of construction will be included in the program prior to its expiration in ROCIP VI has 12 construction projects/phases enrolled in Austin. UT System Administration s replacement office building began construction in downtown Austin with completion expected in the fall of Projects at UT Austin include an Engineering Education Research Center, Medical Center Complex, and a significant new facility for the School of Business. The Austin construction projects equate to over 55% of the overall current Phase VI construction value. ROCIP V ROCIP V began in 2008 and has covered 128 projects with total construction values of roughly $4.2 billion. Eight projects are still active as of the end of FY Since inception of the program, over 50% of the construction value has been driven by Hurricane Ike recovery, renovation and growth at UT Medical Branch at Galveston as well as continued growth at UT Austin, UT MD Anderson Cancer Center, and UT Southwestern Medical Center. In 2011, UTSWMC began construction on the largest single project ($453 million) in the program, and it was completed and opened in December, Jennie Sealy, another replacement hospital under ROCIP V, is located on the UTMB campus and completion is expected in early ROCIP IV ROCIP IV began in FY 2004 and ended in May, The favorable claims experience in the program allowed for a $12 million savings rebate in August, An additional rebate of $3 million was distributed in FY LOSS CONTROL ROCIP 681 inspections performed by ROCIP team on V & VI projects; 17,269 inspections performed by all project team members on V & VI projects. Targeted training to contractors and construction inspectors in areas such as Root Cause Analysis Development and Safety Leadership. Quarterly series of one hour safety awareness training sessions focused on higher risk activities on our projects for contractors, project management teams, and campus personnel.

24 UNEMPLOYMENT COMPENSATION INSURANCE DESCRIPTION OF COVERAGE DATE OF INCEPTION 1971 PREMIUM ALLOCATION METHODOLOGY Unemployment Compensation Insurance (UCI) is a self-insurance plan that assists workers who become unemployed through no fault of their own. It provides temporary financial assistance to qualified individuals while they search for other work. 60% - Loss History (3 years) 20% - Claim Frequency (3 years) 20% - FTEs Unemployment Compensation Insurance Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 11,096, $ 7,076, Accounts Receivable 191, , Total Assets 11,287, ,284, Liabilities Accrued Expenses - - Claims Accrued 1,271, ,610, Total Liabilities 1,271, ,610, Net Position $ 10,015, $ 5,673, Statement of Revenues, Expenses and Changes in Net Position For the Year Ended 8/31/2015 8/31/2014 Revenue Premium Income $ 9,502, $ 10,460, Interest income 241, , Total Revenue 9,743, ,537, Expenses Claim Expenses 5,087, ,441, Claim Management Expenses 204, , Actuary Expenses 5, , Administrative Expenses 234, , Total Expenses 5,532, ,935, Change in Prior Year Accrual (338,680.66) 199, Net Expenses 5,194, ,135, Excess Revenue Over Expenses 4,549, ,402, Other Transfers and Adjustments (207,784.49) - Change in Net Position 4,341, ,402, Beginning Net Position 5,673, ,271, Ending Net Position $ 10,015, $ 5,673,

25 UNEMPLOYMENT COMPENSATION INSURANCE PROGRAM OVERVIEW UT System reimburses the State Unemployment Trust Fund for any claims paid by the Texas Workforce Commission (TWC) to former employees of UT System in lieu of paying UCI taxes to the TWC. ORM oversees the UCI self-insured plan and human resource professionals at each institution manage claims that are filed with TWC. HIGHLIGHTS FROM FY ,453 unemployment claims were reported during FY 2015, an 11% decrease from 2,763 claims in FY Claim expenditures totaled $5.1 million during FY 2015, a 21% decrease from $6.4 million in FY Claim expenditures were the lowest since FY 2008, which preceded Hurricane Ike layoffs at UTMB in FY 2009 and layoffs caused by state budget cuts in FY Claims protested win rate was 88% in FY 2015, an increase of 9% from the baseline win rate of 79% in FY Since UT System protested 1,049 unemployment claims during FY 2015 the improved win rate accounted for 94 fewer paid claims, saving an estimated $470,000 in avoided unemployment expenditures. The UCI fund balance increased $4 million during FY 2015 to $11 million and meets the actuarially determined capitalization target of $10 million. UT System s FY 2015 premium rates of $0.85 per $100 payroll were 39% lower than the cost of the average Texas employer of $1.40 per $100 payroll. ORM contract provided 98,867 employee verifications at no cost to UT institutions. Reemployment services contract assisted 220 transitioning UT System employees in FY 2015 with reemployment services compared to 230 employees in FY On average, the length of unemployment claims was 8 weeks shorter for employees using the reemployment services with 57% not filing an unemployment claim. UCI EXPENDITURES & COST PER EMPLOYEE The average UT System UCI cost was $76 per employee in FY 2015, a decrease from $92 in FY This cost compares favorably to the average UCI cost paid by experience rated Texas employers of $126 per employee during FY * Based on Texas Workforce Commission average for experience rated Texas employers. 19

26 WORKERS COMPENSATION INSURANCE DESCRIPTION OF COVERAGE Workers Compensation Insurance (WCI) is a self-administered/selfinsurance plan that provides reasonable and necessary medical coverage and income benefit payments to UT System employees who sustain injuries or occupational diseases while in the course and scope of employment. An all-states policy is purchased for employees who work outside the state of Texas. In addition, commercial workers compensation coverage is provided for employees who work under federal contracts and in foreign countries. DATE OF INCEPTION Statutory authority embodied in Chapter 503 of the Texas Labor Code on PREMIUM ALLOCATION METHODOLOGY 50% - Loss History (3 years); capped at $100,000 per claim 30% - Payroll (3 years) 20% - Claim Frequency (3 years) Workers Compensation Insurance Statement of Net Position As of 8/31/2015 8/31/2014 Assets Operating Cash $ 28,547, $ 29,941, Prepaid Expenses 356, , August Premiums Receivable 609, , Total Assets 29,513, ,011, Liabilities Accounts Payable 1 79, , IBNR 7,711, ,216, Total Liabilities 7,790, ,760, Net Position $ 21,722, $ 22,251, Statement of Revenues, Expenses and Changes in Net Position For the Year Ended 8/31/2015 8/31/2014 Revenue Premium Income 1 $ 7,479, $ 7, Interest income 724, , Total Revenue 8,203, ,636, Less RAP Funds Transfer (3,000,000.00) (3,000,000.00) Net Revenue 5,203, ,636, Expenses Claim Expenses 3,600, ,055, Claim Management Expenses 1,118, ,254, Out of State Insurance 55, , Actuary Expenses 14, , Administrative Expenses 1,157, ,120,697,00 Total Expenses 5,945, ,798, Change in IBNR (505,000.00) 270, Net Expenses 5,440, ,068, Excess Revenue Over Expenses (237,342.31) (3,431,817.24) Other Transfers and Adjustments (291,509.31) 11, Change in Net Position (528,851.62) (3,420,547.39) Beginning Net Position 22,251, ,671, Ending Net Position $ 21,722, $ 22,251, FY 2014 premium is shown net of $411,235 overpayment from UTMB which is also included in Accounts Payable. 20

27 PROGRAM OVERVIEW WORKERS COMPENSATION INSURANCE Program administration includes management of cost containment contracts, actuarial assessment of premium, fund administration, reporting and training as required or appropriate, and payment of claims and expenses. All claims are investigated and managed, including hearing representation, by staff of a TPA located in Houston and Dallas and co-located in the UT System Administration office in Austin. UT System supervisors maintain oversight of the claims handling to ensure compliance. UT System is part of a Certified Workers Compensation Healthcare Network. Employees with workrelated injuries or illnesses are required to be treated by providers in the network including many physicians and clinics operated by the UT health institutions. HIGHLIGHTS FROM 2015 The WCI program experienced the lowest fiscal year expenditure in over 20 years of the program and a decrease of 11% from FY The certified workers compensation network began 4/1/2013. Comparing one year pre-network (4/1/12-3/31/13) to post network (4/1/14-3/31/15), the total number of all bills (network and non-network) processed decreased from 12,843 to 11,520 and the average medical cost per claim decreased from $2,598 to $1,055 as compared to the pre-network average. TOTAL EXPENDITURES CLAIMS HEADCOUNT 21

28 WORKERS COMPENSATION INSURANCE CLAIM TOTALS & BENEFITS EXPENDITURES INSTITUTION INDEMNITY EXPENDITURES * MEDICAL EXPENDITURES ** TOTAL EXPENDITURES *** NEW CLAIMS MED LT UT Arlington $51, $237, $289, UT Austin $119, $462, $582, UT Brownsville $0.00 $18, $18, UT Dallas $21, $94, $115, UT El Paso $58, $268, $327, UT Pan American $58, $90, $148, UT Permian Basin $0.00 $9, $9, UT San Antonio $82, $131, $214, UT Tyler $0.00 $12, $12, UT Southwestern Medical Center $123, $338, $461, UT Medical Branch Galveston $247, $478, $726, UT Health Science Center Houston $72, $173, $245, UT Health Science Center San Antonio $75, $123, $199, UT MD Anderson Cancer Center $102, $71, $174, UT Health Science Center Tyler $32, $42, $74, UT System Administration $0.00 $ $ TOTAL $1,045, $2,554, $3,600, * Includes income benefits, death benefits, and attorney fees. (9/1/2014 9/6/2015) ** Includes medical audit and cost management fees. *** Total expenditures figures include $142, in subrogation recoveries. BENEFIT PAYMENTS PER EMPLOYEE* *Data based on total expenditures 22

29 WORKERS COMPENSATION INSURANCE ALLOCATED RISK PREMIUM RATES Funding for the WCI program comes from the collection of premiums from each institution based on a variable rating process. The average rate for FY 2016 is $0.11 per $100 of payroll. ALLOCATED RISK PREMIUM RATES BY INSTITUTION UT System s rate compares favorably to the FY 2016 average rate assessed by the State Office of Risk Management (SORM) of $0.59* per $100 of payroll. The average SORM rate for higher education institutions was $0.26 **. INSTITUTION FY 2014 FY 2015 FY 2016 UT Arlington UT Austin UT Brownsville UT Dallas UT El Paso UT Pan American UT Permian Basin UT Rio Grande Valley UT San Antonio UT Tyler UT Southwestern Medical Center UT Medical Branch Galveston UT Health Science Center Houston UT Health Science Center San Antonio UT MD Anderson Cancer Center UT Health Science Center Tyler UT System Administration AVERAGE PREMIUM PAID PER $100 PAYROLL Source: SORM Fiscal Year Assessments (2007 through 2016) 23

30 RESOURCE ALLOCATION PROGRAM Implemented in FY 1998, the Resource Allocation Program (RAP) provides institutions with funding that allows them to implement risk management initiatives that, while complementing existing efforts, are outside the scope of their current budgets. Since inception, over $51.6 million has been distributed through RAP. The exceptional loss experience in the workers compensation program is clear evidence of its positive impact to the institutions and other program areas. Funding from WCI is allocated to each institution as recommended by the actuary. Funds are allocated primarily based on the institution s three-year loss ratio. Ten percent of the total allocation is used for Systemwide projects and initiatives, which benefits all institutions. Institution RAP DISTRIBUTION Allocation FY 2015 FY 2016 UT Arlington $125,986 $92,168 UT Austin $477,562 $410,299 UT Brownsville $48,893 - UT Dallas $88,370 $89,458 UT El Paso $63,284 $59,789 UT Pan American $44,178 - UT Permian Basin $23,698 $24,843 UT Rio Grande Valley - $73,667 UT San Antonio $67,981 $67,560 UT Tyler $25,026 $24,923 UT Southwestern Medical Center $327,481 $387,703 UT Medical Branch - Galveston $290,972 $247,388 UT Health Science Center - Houston $262,623 $306,452 UT Health Science Center - San Antonio $131,055 $127,056 UT MD Anderson Cancer Center $652,698 $716,714 UT Health Science Center - Tyler $30,810 $35,465 UT System Administration $39,383 $36,515 Systemwide $300,000 $300,000 TOTAL $3,000,000 $3,000,000 EXAMPLES OF SYSTEMWIDE INITIATIVES Systemwide Training Cause mapping, NFPA 1, 30, 45, and 101 Life Safety Code, Environmental Health and Safety (EHS) Academy, International Air Transport Association Dangerous Goods Shipping, and Texas Workers Compensation Compliance Conference Higher Education Risk Management Conference Conference for WCI, EHS, risk management, and insurance professionals National Fire Protection Association Systemwide online access to fire and life safety codes and handbooks Emergency Contact for Shipping Hazardous Materials Provides the required 24/7 access to emergency response information for all hazardous material shipments at the institutions International Emergency Assistance Provides 24-hour medical and security assistance for all employees traveling internationally on university business Audits for Treatment, Storage, and Disposal Facilities Provides funding for third-party due diligence audits of hazardous waste facilities used by the institutions EXAMPLES OF INSTITUTION INITIATIVES Safety and Personal Protective Equipment Police body armor and other personal protective equipment to help reduce workplace injuries Employee Wellness Fund programs that focus on occupational health and physical health of employees and provide health screenings for certain employees as needed Health Care Bariatric Equipment, Strains and Sprains Prevention Purchase and installation of tools and equipment designed to reduce the possibility of injury to staff when moving patients Laboratory Safety Implementation of inventory tracking systems to monitor amount of chemicals present in certain laboratories Nanoparticle Safety Purchase of specialized equipment for industrial hygiene monitoring and assessment of nanoparticle toxicology based on potential for exposure Post-Offer Employment Testing Occupational testing for employees identified in high-risk positions and work areas 24