8.3 Agr Risk ManagementCITY OF SALINA
REQUEST FOR COMMISSION ACTION DATE TIME
11/16/8 4:00 P.M.
AGENDA SECTION: Administration ORIGINATING DEPARll~IENT: APPROVED FOR
NO. 8 RISK MANAGEMENT AGEND~: ~_
NO. 3
BY: Keith F. Rawlings BY:
Attached is the formal proposal for the City's participation in the Kansas
Intergovernmental Risk Management Agency (KIRMA). You will notice that the
maximum cost of full membership for Salina has been estimated at $429,584 and
may be as little as $397,365. It is scheduled to commence as of January 1,
1988.
Also attached are several sheets of information comparing KIRMA with our
present coverage, or where known, with estimates for 1988 renewals. As can be
seen, joining KIRMA would reduce our premium costs at least $88,878 (18.4%)
with maximum savings estimated at $121,097 (25.1%). You should remember that
these potential "reductions" may not necessarily directly translate into dollar
for dollar savings in the Risk Management budget. What it will do is stabilize
or "level out" our insurance contributions and enable us to do a better job of
budgeting in the future, continue our aggressive risk management approach, and
possibly build some smaller local reserves while KIRMA is building much larger
ones fog us. You should also keep in mind that of our KIRMA assessment, only
about 30% of it (as much as approximately $119,000 to $129,000) is actually
going for premiums, fees and administration. The remaining 70% ($278,000 to
$300,000) goes into reserves in order to satisfy statutory funding
requirements. This includes approximately 10% more than was originally needed,
primarily due to changes in the enabling legislation as a result of heavy
lobbying efforts by the insurance industry.
You may note that other larger or similar sized cities will not be
participating in KIRMA. There are a couple of reasons for this. First of
all, Wichita, Kansas City and Topeka have not been invited to join. It was
felt that they were large enough, and therefore, different enough, to warrant
COMMISSION ACTION
MOTION BY SECOND BY
TO:
CITY OF SALINA
REQU ES T ,:OR COMM I S S I ON ACT I ON DATE T I ME
Z+:00 P.M.
AGENDA SECT)ON: ORIGINATING DEPARTMENT: APPROVED FOR
NO, AGENDA:
FTEM
NO.
BY: BY:
exclusion as they might adversely affect the remaining cities' loss ratios.
They are also large enough that they are self-insured to various degrees.
Lawrence and Leavenworth are also self-insured to some extent and feel that
they are unable at this time to justify joining. Lastly, another pool, the
Kansas Eastern Region Insurance Trust (KERIT) is operational and available to
all of the above mentioned cities, except Wichita, and some of the other
larger Kansas City suburbs. While it is only a workers compensation pool at
this time, they are expanding into property and casualty early in 1988.
Some of the primary advantages to joining KIRMA include:
- Comparable to better coverage than currently provided
- Aggressive risk management, safety and training emphasis
- Control over claims management
- Owned and managed by "local" board of directors
- Fully regulated by the Kansas Insurance Commissioner's Office
- Lower cost
- Stabilization of long-term costs
- Establishment of reserves may result in future reductions in
assessments
Some of the disadvantages include:
Pooling is new and unfamiliar in Kansas
No commissions to local insurance agents
In order for Salina to formally participate, the attached funding commitment
resolution must be adopted and official and alternate representatives to
KIRMA must be named. We would recommend that the Risk Manager and the
Director of Finance, respectively, be the designated representatives.
Attachments
COMMISSION ACTION
MOTION BY SECOND BY
TO:
League
Mumc paht es
November 4, 1987
To the City of Salina
Attention: Keith Rawlings,
P.O. Box 736
Salina, Kansas 67402
Risk Manager
The Steering Committee of the proposed Kansas Intergovernmental
Risk Management Agency (KIRMA) is pleased to present Salina with
this proposal to become a contributing member of KIRMA. A similar
letter is being sent to each of the 31 cities which have, to date,
passed an ordinance to enter into the interlocal cooperation
agreement to establish KIRMA, including the following:
Arkansas city Kinsley
Atchison Liberal
Beloit Lyons
Bonner Springs Marysville
Chanute
Coffeyville
Columbus
Derby
Dodge City
E1 Dorado
Emporia
Garden City
Goodland
Hays
Hesston
Mulvane
Neodesha
Newton
Ottawa
Pittsburg
Russell
Sabetha
Salina
Seneca
Ulysses
Valley Center
Wamego
While KIRMA and its consultants continue negotiations with the
Kansas Insurance Department to establish KIRMA under the new Kansas
Group-funded Municipal Pool Act, we are confident that the program
can take effect on January 1, 1988. As noted below, a meeting of
the official representative from each KIRMA contributing member will
be held on December 9 to officially organize KIRMA to come into
legal existence on January 1.
The Steering Committee, which again last Thursday reviewed the
program and the most recent fiscal and actuarial data, remains
convinced that KIRMA will provide participating cities with a safe,
cost-effective and stable source for municipal risk management
needs. This includes broad "insurance-type" risk protection
coverages, professional claims management, quality loss prevention
consulting and risk management services.
Enclosed is a summary outline of the risk protection coverages
which will be provided to contributing members. While there are
some special exceptions, such as liability for municipal gas systems
or airports, the KIRMA risk coverage will be broad and
comprehensive, designed to meet the needs of Kansas cities.
Because of some additional requirements imposed by the new
state Municipal Group-funded Pool Act, the funding for losses by
KIRMA will be even more conservative than we originally planned. As
a result, the costs will be somewhat higher, including the required
payment of a premium tax. We now estimate that the cost of full
KIRMA membership for the City of Salina for the year 1988 will not
exceed $429,584, and may drop to a total of $397,365. Our
consultant, the Arthur J. Gallagher & Co., one of the largest
insurance consulting firms in the U.S. with considerable experience
in municipal pools, is convinced that we are using a conservative
approach which will leave surplus funds available at the end of the
year for either reduced future contributions or for increasing the
amount of the risk pool to stabilize future costs.
You will, of course, want to compare the cost and benefits of
KIRMA with your existing program. For most cities, the costs for
1988 will be significantly below actual premiums paid for coverage
in 1986 or 1987. In this cost comparison, you will want to compare
common coverages. For example, some cities are not now carrying
full liability insurance, particularly liability protection for
public officials, police professional lines and federal civil
rights. Prospective costs for 1988 for private carrier coverages,
including the new worker's compensation rates, should also be
reviewed. As noted above, you will want to verify any savings from
your own records, and project any savings with coverages comparable
to KIRMA's.
The Steering Committee also strongly suggests you evaluate the
risk management services t? be ~rovided by KIRMA as a joint public
agency of its member municipalities--one of the primary reasons why
KIRMA is beinq formed. On the other hand, your city should realize
that this objective imposes some local obligations: KIRMA cities
will be required to maintain a high quality program of loss
reduction and prevention.
If your City does decide to join KIRMA as
member, we need two thinqs: (1) evidence of
commitment, and i2) a designation of your official
as requested below:
a contributing
your financial
representative,
Financial Commitment. Under the interlocal agreement entered
into by your City, KIRMA becomes operational only upon a
determination by the Board of Trustees that a sufficient number of
member municipalities have made contributions or written commitments
sufficient to fully fund the proposed services and benefits. We now
need this financial commitment (not a check) to proceed further.
Enclosed is a resolution form which may be used for this purpose.
We need to receive, by not later than December 7, either (1) a
certified copy of such a resolution, or (2) a copy or the minutes of
a Governing Body meeting which includes a similar motion, or (3)
some kind of written commitment that your City will financially
contribute to KIRMA, on its legal formation, for 1988.
KIRMA Representatives--official Meetina. We need the name,
title and address of your City's official KIRMA representative and
alternate--see the attached form.
Under the interlocal agreement, these official representatives
will meet on December 9 to adopt the KIRMA Bylaws, elect the Board
of Directors, and take such other action as may be necessary for the
legal implementation of KIRMA. In your selection of your official
representative, keep in mind that the KIRMA representatives in
attendance will elect some of their members (probably seven) as
members of the Board of Directors, which will require attendance at
board meetings in the future. The meeting will be at the Jayhawk
Towers in Topeka on Wednesday, December 9, beginning at 10:00 am.
With your support, KIRMA will become one of over 200 public
entity pools in the country. The Steering Committee is confident
that KIRMA is a sound investment of public funds and will provide
significant benefits to its member municipalities, in the same
manner as has occurred for thousands of other cities across the U.S.
If you have any questions, don't hesitate to contact Bernie Hayen at
the League office. Scott Wightman of the Gallagher Co. (314-569-
1343) is also available for questions.
We need your firm commitment bv December 7. If it will require
a few weeks to obtain this formal commitment, please send us your
official representatives so that we can invite them to the meeting,
with the written financial commitment to follow.
Sincere~yj ~
E.A. Mosner -
League Executive Director
For the KIRMA Steering Committee
EAM:grs
Encls.
DESIGNATION OF.
OFFICIAL K I R M A CITY
REPRESENTATIVE
To the Executive Director
Kansas Intergovernmental
of Directors:
of the League of Kansas Municipalities and the~
Risk Management Agency (KRIMA) and its Board
Pursuant to the interlocal cooperation agreement entered into by the
City and other Kansas municipalities, to establish the Kansas
Intergovernmental Risk Management Agency. known as K IRMA, the
following, who are officers or employees of the City, are hereby
designated as the City'.s official representative for KIRMA:
I~el~semta/Jve (name. title, address, telephone number):
Alternate Representative (name, title, address, telephone number)
Submitted by:
(name, title)
Date:
KANSAS
K IRMA
SUMMARY OF PROPOSED RISK COVERAGES
INTERGOVERNMENTAL RISK MANAGEMENT AGENCY
PART I--LIABILITY COVERAGES
A. Comprehensive General Liability
"Claims-made basis"*
$500,000 of coverage for the Kansas Tort Claims Act
$1.000,000 for liabilities imposed by Federal Code, including civil rights
Limits apply per occurence, with no annual aggregate
Broad wording
Includes all employees, volunteers and ancillary boards and commissions
No deductible
Excludes pollution, gas utilities, asbestosis, airport liability and
hospital malpractice, but includes ambulance malpractice
B. Automobile Liability
"Claims-made basis"*
$500.000 of coverage for the Kansas Tort Claims Act
$1,000,000 for liabilities imposed by Federal Code, including civil rights
Limits apply per occurence, with no annual aggregate
Uninsured and underinsured motorists
Hired and non-owned
No deductible
No scheduling required
Automatic coverages for changes
C. Police Professional Liability
"Claims-made basis"*
$500.000 of coverage for the Kansas Tort Claims Act
$1.000,000 for liabilities imposed by Federal Code, including civil rights
Limits apply per occurence, with no annual aggregate
Broad wording
Includes ali employees, volunteers and ancillary boards and commissions
No deductible
Public Officials Liability
"Claims-made basis"*
$500.000 of coverage for the Kansas Tort Claims Act
$1,000,000 for liabilities imposed by Federal Code, including civil rights
Limits apply per occurence, with no annual aggregate
Broad wording
No deductible
Includes all employees, volunteers and ancillary boards and commissions
-OVER-
PART II--PROPI=RTY COVERAGF__.~
A. Buildinq and Contents
100% replacement cost
No coinsurance
$1000 deductible per occurence
"All-risk" form
Boiler and machinery not included
B. Contractor-Type Equipment
100% replacement cost
No coinsurance
$1000 deductible per occurence
"All-risk" form
C. Automobile Physical Damac~e
No scheduling required
Automatic coverage for changes
$1000 deductible per occurence
Comprehensive and collision
D. Crime
$100.000 limit
Money and securities
Employee fidelity
No deductible
PART III--~I~ORKERS COIIPI::NSATION
A. Statutory Benefits
$500,000 employers liability
Not subject to annual audit
* "Claimms-~ Basis. In order to have a claim covered under a
"Claims-Made" policy, the occurence has to happen and the claim has
to be presented to the city during the period of KIRMA membership.
If a city would withdraw from KIRMA, an option to be able to present
future claims that occurred while you were a member (Extended Discovery
Period Endorsement) will be provided to that city for an additional cost.
** Info~. For detailed questions about this coverage or its pricing,
please call Bernie Hayen at the League of Kansas Municipalities ((913)
354-9565) or Scott Wightman at Gallagher ((314) 569-1343).
KIRMA
THE KANSAS INTERGOVERNMENTAL RISK MANAGEMENT AGENCY
--A Protected Loss Coverage Pool and Risk Management Service for Kansas Municipalities--
Why KIILMA? Following is a brief explanation, and some advantages and objections, developed by a Steering
Commit"cee selected by representatives of over 30 Kansas cities interested in developing KIRMA -- the Kansas Inter-
governmental Risk Management Agency. KIRMA will not become a public agency unless legally formed by a suffi-
cient number of municipalities to permit KIRM'A to efficiently, effectively and safely secure its public purposes.
KIRMA is being formed under the Kansas Municipal Group-funded Pool Act, a comprehensive law enacted by
the 1987 legislature. It is subject to certification and regulation by the Commissioner of Insurance -- and is even
required to pay state taxes, notwithstanding its non-profit, governmental purpose.
A Brief Explanation
In brief, the Kansas Intergovernmental Risk Management Agency (KIP~MA) will be an official, state-regulated
public agency, established to pro, fide risk management services and loss coverages for cities and other municipalities
in Kansa& It will be created, owned and managed by those municipalities which enter into an interlocal coopera-
tion agreement forming the agency, as authorized by Kansas statutes. While KLPuMA is sometimes referred to as
a municipal insurance pool, and will provide comprehensive coverages for municipal losses, the focus of KIILMA
is on risk management. Ouly those municipalities committed to maintaining an active local risk management pro-
gram are invited to join KLR~MA. It ;viii be a protected program -- all potential losses not funded by the KIBMA
joint risk management pool will be covered by loss protection agreements with private insurance companies. All
income and assets of KIRMA v-ill be public funds, dedicated to the exclusive benefit of its member municipalities.
Some Advantages
· Makes possible an active and effective local safety and
risk reduction program
· Provides comprehemive loss coverage, specifically
designed for Kansas municipalities, as determined by
its members
· Encourages the active involvement of those member
municipalities which create, own and operate KIRMA
· Provides for future and continued availability of needed
loss coverages
· Can result in savings of public funds compared to the
costs of similar loss coverage now available
· Helps stabilize long-term c~sts, based on the experiences
of its Kansas members, not on national trends or in-
surance underwriter experience in other states
· Provides members with control over administrative
costs
of Joining KIB~MA
· Secures computerized fiscal and claims information on
a monthly basis
· Permits an aggrt~ive claims defense strategy, with
greater control over "courtesy" payments
· Permits the use of claims personnel trained in the
processing of claims against governmental units
· Provides for the use of aetorne.vs specializing in the
defense of governmental liability and civil rights claims
· Permits the members to participate in the resolution
of certain disputes that may arise, including claim set-
tlements
· Permits continued use of governmental tort immunity
to the extent provided by law
· Helps keep Kansas public funds in Kansas -- most
municipal insurance policies are with out-of-state eOm-
panics
Some Objections
· An intergovernmental risk management program like ·
KLRMA is new and unfamiliar in Kansas, though ex-
tensively used in other states -- about o00 public pools ·
now exist in the U.S.
· The KIRMA members must accept more risk manage-
ment responsibility, and work harder to prevent losses
to KIRMA
Local insurance agents will not get a commission on
policy sales
Conflicts may occur over the adequacy of a member's
safety and loss reduction program
More Information
The League of Kansas Municipalities is serving as the secretariat for those cities interested in forming KIRMA.
For further information, contact the League at 112 West Seventh Street, Topeka, Kansas 66603.
Insurance Type
General Liability
Police Professional
Liability
Public Official's
Liability
EMS Veh. & Prof.
Liability
Mobile Equipment
Vehicles
Radios, Sirens & Radar
Portable Fire Equipment
Buildings & Contents
BiCenter Contents &
Liability
Museum & Contents
Boilers
Computer
Workers Compensation
Total
Salina Insurance Coverage
Without KIRMA
C 0 S T
1985 I986 1987
26,567 132,274 87,685
16,037 35,I03 43,857
I5,266 9,475 15,311
8,068 16,622 I9,6gl
3,856 3,245 3,589 *
35,381 72,738 57,849
4,470 5,510 2,006
3,150 3,150 3,150 *
48,513 58,000 64,056
21,907 24,000 24,994
2,115 2,766 2,409
655 830 881
547 646 785
128,863 145,502 i63,102
315,395 509,868 482,626
% Change Estimated
1985-1987 1988 Cost
230% 100,800
173% 50,~00
0% 17,600
I44% 18,474
64% 66,500
55% 2,300
0% --
32% 73,600
I4% 28,700
14% 2,800
35% 1,000
44% 900
27% 199,121
53% 562,195
Est. Change
1987-1988
+ I5%
+
I5%
6%
15%
15%
15%
15%
15%
15%
15%
22%
I6%
* Did not renew and costs are not
included in the !987 total.
COVERAGE COMPARISONS
Traditional Insurance (I9B7) vs KIRMA
ComB. Gen. Liability
Automobile Liability
Police Professional
Liability
Public Officials
Liability
EMS Liability
Building & Contents
(General)
Building & Contents
(Museum)
Building & Contents
(BiCenter)
Contractor - Type
Equipment
Present Coverage Present
Description Cost
Statutory Benefits $163,102
S500,000 liability
Annual Audit
Claims-made basis $ 87,685
$500,000 Kansas flab.
-0- Federal liability
No deductible
$500,000 Annual aogregate
$500,000 Each occ~rence (KS)
$500,000 Each occurence (Fed.)
Occurence basis
$500,000 Kansas liability
-0- Federal liability
Claims-made basis $ 43,857
$500,000 Kansas liability
-0- Federal liability
SB,O00 Deductible
$1,000.000 Annual aggregate
Incl. all employees,
volunteers & boards
Claims-made basis $ 15,311
$500,0B0 Kansas liability
-O- Federal liability
$5,000 Retention
!500,000 Annual aggregate
Incl. all employees,
volunteers & boards
Claims-made basis $ 4,610
$500,000 Kansas liability
-0- Federal liability
$100 Deductible
$500,000 Annual aggregate
Incl. all employees &
volunteers
100% Replacement cost S 64,056
$500 "Disappearing"
deductible
All risk form
100% Replacement cost $ 2,409
$100 Deductible
All risk form
100% Replacement cost S 24,994
$1,000 Deductible
All risk form
Loss of earnings
protection
EMS-IO0% Repl. cost $ 3,282
$500 Deductible
Electronic EQuipment $ 2,006
No deductible
Auto Physical Damage Scheduling ~ 69,648
Boiler & Machinery
Public Employees
Blanket Bond
Depositor's Forgery
Bond
Total
$25, $50, $500 &
$1,000 Deductible
Comprehensive, collision
spec. perils
525,000 limit on money $ 71B
and securities
$5,000 limit on C.M. & $ I00
and Finance Director
$50,000 limit on Treasurer $ 180
$I0,000 limit on C.C. iS) $ 555
$3S0,000 Total coverage $ 881
at 8 locations
$250 Deductible
100% Replacement cost
S500 Deductible
$10,000 Performance Bond $ 768
$25,000 Performance Bond $ I00
Add coverage not included in KIRMA
$485,057
KIRMA Coverage
Description
Statutory Benefits
$500,000 liability
No Annual Audit
Claims-made basis
$500,000 Kansas liab.
$I,000,000 Federal liab.
No deductible
No annual aggregate
$500,000 Each occurence {KS)
$1,000,000 Each occurence (Fed.)
Claims-made basis
$500,000 Kansas liability
$1,000,000 Federal liability
Claims-made basis
$500,000 Kansas liability
$1,000,000 Federal liability
No deductible
NO annual aggregate
Incl. all employees,
volunteers & boards
Claims-made basis
$500,000 Kansas ltebility
$1,000,000 Federal liability
NO deductible
No annual aggregate
Incl. all employees,
volunteers & boards
Claims-made basis
$500,D00 Kansas liability
$1,000,000 Federal liability
No deductible
NO annual aggregate
Incl. all employees &
volunteers
100% Replacement cost
SI,000 Deductible
All risk form
I00% Replacement cost
$1,000 Deductible
All risk form
100% Replacement cost
$1,000 Deductible
All risk form
No loss of earnings
protection
I00% Replacement cost
$I,000 Deductible
All risk form
NO scheduling rebutted
Automatic coverage for
changes
$1,000 Deductible
collision
$I00,000 limit on money
and securities
$I00,000 limit on C.M.
and Finance Director
Not included
Not included
Not included
100% Replacement cost
SHOO0 Deductible
Not included
Not included
GRAND TOTAL
Cost
$429,584
2~494
$432,078
TO:
FROM:
SUBJECT:
DATE:
Bill Harris, City Manager
Robert K. Biles, City Clerk and Director of Finance
KIRMA
November 12, 1987
Having served as the Pittsburg representative on the KIRMA
project, I would, of course, be most willing to put on paper the perspectives I
received while actively involved in the project.
the amount of
such as:
Though Pittsburg was one of the cities to benefit the least in
dollars saved, we were looking more closely at other advantages
1. Insurance availability
2. Completeness of coverages
3. Strong risk management
4. Aggressive claims management
5. Stability of "premiums"
Pittsburg had experienced difficulty in obtaining quotes for
insurance, especially in the areas of liability. Police liability coverage was not
renewed in October 1986 and all attempts to find another insurer failed causing
the department to "go bare". The number of bidders on other liability policies
usually did not surpass two. We felt this put us in a situation where we
might be choosing between a significant increase in premium or trying to go it
alone. We also found other coverages offered being trimmed. Maximum
coverages were reduced, deductibles increased and exclusions added though
premiums remained historically high.
Thus the concept of KIRMA providing complete coverages
specifically designed for cities attracted us. Approaching the insurance
market as a "buying group", was seen as a way to acquire coverages we
desired on a long-term basis at a reasonable and stable cost.
KIRMA was also designed to be actively involved in providing
risk management expertise to those cities involved. Though I wore the hat of
Risk Manager, Pittsburg did not have any formal programs in place to reduce
the city's risks. My intent was to invite KIRMA's risk manager to Pittsburg to
help kick off the formation of our program.
The other attraction to us was the promise of aggressive claims
management. It was felt the insurance companies were too willing to settle
cases for small amounts instead of actively defending and "proving" the city's
innocence. In particular, two claims (the only two since 1980) against the
police department were settled for $2,500 and $10,000. The first was for an
alleged civil rights violation; the second was for a person who hung himself in
jail. In each case we felt the city had extremely strong cases, but the
insurance companies chose to settle. The morale in the police department
Bill Harris
KIRMA memo
Page 2
suffered as it was perceived in the
something wrong". As we understood
would be made in cases such as these.
public "those guys must have done
the KIRMA guidelines, active defenses
This summarizes the attractive features but we also had a few
concerns expressed internally and externally.
Internally, our concerns revolved around the starting date of
KIRMA and how it differed from our normal policy dates. Because the dates
differed, we were looking at the costs of purchasing coverage for an extended
discovery period (i.e. tailing coverage) on our liability policies. This had
some impact on the expected savings in the first year.
Externally, the major concerns surfaced through the local
insurance agents. One of the first concerns dealt with the loss of commissions
for their agencies if the "business" was taken elsewhere. The other major
concern was whether KIRMA should meet regulations set forth by the Kansas
Insurance Commission. Many of these concerns were addressed during the
passage of the Municipal Group-Funded Pool Act of 1987.
I trust this summary will prove helpful to you. If you would
like to discuss any of these comments, I'd be happy to go into further depth.