01-22-2002 - FY 2001/2002 Liability Risk Premium AssessmentC�
City of West Covina
11EAORANDUM
TO: Andrew G. Pasmant, City Manager
and City Council
FROM: Erin Patricia Hoppe
Risk Manager
AGENDA
ITEM NO. C-6b
DATE January 22, 2002
SUBJECT: FY 2001-2002 LIABILITY RISK PREMIUM ASSESSMENT
SUMMARY: It is necessary to appropriate $130,904 from General Liability Reserves to
pay the second installment of a supplemental Risk Premium Assessment,
due under our Liability Risk Premium Agreement with ICRMA, for losses
that occurred during Fiscal Year 1991/92.
DISCUSSION:
The City of West Covina is a member of a shared risk, liability pool, the Independent
Cities Risk Management Authority (ICRMA). Under the prior Financial Plan of ICRMA,
there was a feature known as the Liability Risk Premium Adjustment Formula. These
Risk Premium adjustments were calculated using, a formula contained in the Liability
Risk Premium Agreement.
In the event of a loss, the formula stipulated that the city incurring the loss fund the costs
up .to 150% of the city's total premium for that loss year. Thereafter any additional
amounts are shared by all cities based on their Risk Premium Proportion. Money is taken
from premiums on hand in the loss year until the funds are exhausted. The remaining
amounts due from all years are aggregated for invoicing and collection. This amount
cannot exceed 75% of the current year total premium. Any amount greater than the 75%
is deferred and collected as Supplemental Risk Premium. The Risk Premium for a
particular year cannot be calculated until all losses pertaining to that year are closed out,
which in itself can take several years. It is then collected in five equal installments over
five years. In this instance, West Covina's claims year was not closed out until FY 1998-
99.
The first installment was invoiced and collected with the City's 1999-2000 Liability
Insurance Premium. The 2000-2001 installment was placed on hold as ICRMA explored
a Loss Portfolio Transfer, which if successful may have forgiven these assessments. As
the Loss Portfolio Transfer did not work out, the remaining four installments must be
collected. Therefore, these assessments are being resumed this fiscal year and this
represents the second of five installments. The final three installments will be included
and collected with our Liability Renewal Premium over the next three fiscal years
beginning FY 2002-2003.
FISCAL IMPACT: .
Adequate funds are available within the Self -Insurance Reserves to pay this assessment.
RECOMMENDATION:
Appropriate $130,904 from General Liability reserves (361-301) and transfer it into
account 361-320-2570-6411 to pay the second installment of this Supplemental Risk
Premium Assessment.
Funding Reviewed
Prepared By: and Approved By:
Erin Patricia Hoppe
Risk Manager
Finance Director