01-19-1993 - Appropriation of Funds from Unappropriated Self-Insurance Reserve•
TO: City Council and City Manager
FROM: Risk Management
SUBJECT: APPROPRIATION OF FUNDS FROM
UNAPPROPRIATED SELF-INSURANCE
RESERVE
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City of West Covina
Memorandum
AGENDA
ITEM NO. J-1
DATE January 19, 1993
SUMMARY: The Council will consider an additional appropriation of
$183,107 from unappropriated self-insurance reserves to
cover a premium adjustment.
Background
The City of West Covina, as a member of the Independent Cities Risk
Management Authority (ICRMA), participates in the Liability Risk
Management Program for the purpose of procuring excess liability
insurance coverage. The annual audit of ICRMA's Liability Program..
Reserves has resulted in a mid -year Risk Premium Adjustment to the
City in the amount of $225,446.
Analysis
Risk Management's funding for liability insurance is derived by a
charge to, each of the City's operating departments. Risk
Management has an approved budget of $520,330 for the purchase of
General Liability Insurance for Fiscal Year 1992-93. This budget,
as in previous years, is based on the average premium which ICRMA
may charge the City for liability insurance coverage. The actual
amount charged is not known until after the beginning of the fiscal
year and is impacted by several factors, including ICRMA reserves,
the City's past history and the level of the City's Self -Insured
Retention (SIR). This fiscal year West Covina paid $477,971 of
that budgeted premium amount. .$42,359 remains in the City's
operating budget, therefore'an appropriation of $183,107 is needed
from unappropriated self-insurance reserves, to fund this premium
adjustment.
In December, 1992, ICRMA conducted their annual audit of their
outstanding liability pool reserves. The audit concluded that the
reserves calculated for fiscal year's 1989-90 and 1990-91, which
are still active years in terms of when claims were filed but not
yet settled, were under -funded. In order to bring the reserve to
the. required levels, ICRMA has made the appropriate adjustments in
member city premiums. The adjustment for West Covina is $225,446,
which is due by January 29, 1993, to insure that ICRMA maintains
the required. reserve levels and, that West Covina does not lose any
liability insurance coverage.. These funds remain the property of
the City of West Covina and will earn interest while on deposit.
If the money is not used to pay claims, it will be refunded to the
City at a future date or credited against future premiums
Fiscal Impact
There- are adequate funds available in the City's self-insurance
reserves to fund the premium adjustment. Staff is recommending
that Council appropriate $183,107 from the self-insurance reserve
fund to provide for the mid -year adjustment in the City's liability
insurance premium.
RECOMMENDATION
It is recommended the City Council approve
$183,107 from unappropriated self-insurance
necessary Risk Premium Adjustment.
Erin Patricia Hopp
Risk Manager.
an appropriation of
reserves to fund the