ALC-Executive Subcommittee

Uh, welcome to the executive subcommittee. I'm going to ask Senator Wallace if he will lead us word of prayer if you stand with me. Give us the strength. To make the laws for our great state. Lord watch over our family or our loved ones. Watch over our military, Lord, in Jesus' name. Amen. Thank you. First up, we have Dismay, I believe you got a presentation request from C Di May. You're recognized. Thank you, Mr. Chairman, committee members, and I'll try to be brief. Um, over the last several years or the last several sessions, we've had tried to take a look at our film industry here in Arkansas and just really determine what should we do. Uh, we've done a lot of listening to the folks that are actually out in the field doing the work. We've had very little impact from those that are actually, you know, running the commission here in the state. In fact, uh, they've not really attended any of the meetings in which we even talked about the legislation presented the legislation these last two sessions, and that's OK, but the thing that. I want to know is, and what I'm asking you to do today is, let's find out what we really need. Um, you, you've probably heard, and I'm looking at most people in this room, you have heard from people in your district, uh, that think that we need to have a more robust tax incentive system or whatever it may be, so we're able to compete and have the workforce needed to actually attract film into Arkansas. Uh, none of us knows what that level should look like. We, I think we've made some good changes to our laws in the last couple of sessions, but it's not. As strategic as I would like it to be, so we're asking for is to have a study done, uh, very similar to what's happened in other states, so they can tell us what it is we should be doing. Um, I don't think it should be pointed. I mean, if that means we don't do anything at all, then that's perfectly fine with me. I just think we need to know, uh, what direction we should be heading in. And so that's what this study is to do is to take a look at what we have, uh, take a look at what we probably should be doing to have the highest return, um, and then also just as specific as where should it be? Is it properly housed at AEDC? Uh, what are other states doing? What would they recommend us doing? They have discussion representative. Senator Gilmore, you recognize. Thank you, Mr. Chair. Um, thank you, Senator, for bringing this. I, I agree. I think we need to take a hard look at what we're doing, make sure we're doing it correctly and what needs to be done. Um, any Any thoughts as to who does the study or will we get to that point, um, at some point, maybe that's a question for the chairs, but are we hiring an outside firm or are we going to do it internally? Um, there's gonna be two pieces to that. I think it would require an outside firm, uh, mainly because we do, I don't think we have the cooperation that we need to be able to have it fully vetted by AEDC at this point in regards to film, and I'm not trying to be critical. I just think that their efforts are focused elsewhere. Um, and so I think we would have an outside firm come in and take a look at what we're doing. In fact, it's my understanding they're very few numbers or, I mean, very limited number of firms that actually do this type of work, uh, one that was identified early on, and I believe that ADC already had some prior work with was, I think, I think I'm saying this right was Osberg, um, and so I, I think that's who we would recommend and, but again, that'd be up to the committee if that's how you choose to vote. Thank you. To any other discussion. Uh, Representative Cozar you recognize. I have a motion at the proper time. I'm not seeing any more discussion. What is your motion? I moved the executive subcommittee contract with a consultant to conduct a study of the motion picture industry in Arkansas to include review of the issues related to the economic impact of the motion picture industry in Arkansas, review of the existing laws and advising motion picture production within the state, recommendations for increasing the industry within the state and best practices and recommendations related to state government organizations and oversight of the industry. Executive subcommittee will meet as necessary over the coming months in order to adopt recommendations and introduce any necessary legislation during the 2025 regular session. That's my motion. They have a motion And I have a 2nd any discussion on the motion? If not on paper I. Uh exposed Motion passes. Thank you. I have a I have a secondary motion when you at the proper time. My second motion is motion, uh, to authorize sole source contract with Olsburg SPI. I move that we authorize BLR to enter into negotiations with Old Oldsburg SPI for a sole source contract for the provision of consulting services related to the Arkansas motion picture industry study and to bring a contract to the executive subcommittee for its approval, at its meeting in September 19th, 2024. He heard the motion to have a second, I have a 2nd, any discussion on the motion. And understanding in the motion that will come back to the executive subcommittee. No discussion on favor I. Post Pretty like that. motion. OK, members on to your schedule agenda, uh, we have a presentation on educational facility and property insurance study apa and not if Mr. Kyle Halls and Charles Lins would come forward at the table. Gmen we welcome you back. Thank you for being here. Please, uh, state your name and who you're with for the record and you are recognized to present. I'm Charles Lenz with Per Night. And I'm Kyle Has at Pern Night as well. OK. Uh, so hopefully everyone could see this, uh, as I mentioned before, Kyle Hale, and principal and consulting actuary at at Pern. I'm also the director of our risk strategies and solutions area. Uh, Charlie Lenz is another, uh, principal and consulting actuary at per night as well. Um, So I'll go through our agenda here just at a high level. We'll give you a project summary overview of, of some research that we've done in select states, uh, the actuarial analysis, some observations and some recommendations. So the background information is, uh, there's, there's 3 different, uh, agencies or, or entities that, um, uh, have a state-owned buildings in, in the state of, uh, Arkansas and their property insurance premiums had a significant increase. Uh, about a year and a half ago, so we were commissioned by the, uh, Arkansas Legislative Council to essentially kind of do three things. One of them is to research the uh self-insured structures and financial positions in, uh, uh, select states. The second is to perform an actuarial analysis, and the third is to provide the subcommittee with a, uh, a set of recommendations and a strategic path, uh, to move forward. So we did Some research in terms of the self-insurance structures of, uh, uh, some of the neighboring states and, uh, in the report there's significantly more detail here, but in essence what we found is many of the states are structured very similarly to Arkansas. There are multiple agencies that oversee K through 12 schools as well as higher education, as well as, uh, publicly owned buildings, uh, some states break out, community colleges, uh, separately and, Uh, some of them have agencies that are essentially kind of provide property insurance for residential and and commercial, uh, entities for the purposes of this analysis will, uh, by and large just focus on the, uh, the, the property component and, um, it, it, in essence, what we found at at an overall, uh, level is many of the states functioned very similarly to Arkansas in the sense that they self-insure up to a certain limits and then they buy a commercial. Uh, uh, insurance in the open market above certain thresholds. Um, And we'll go into a little bit more detail in terms of a specific state, which is Tennessee. So we had some uh really good we had a really good conversation with a couple of constituents at Tennessee and in essence, what happened was a number of years ago in 2018, 2019, uh, similar to Arkansas, Tennessee experienced a very significant increase in their property insurance premiums, uh, that prompted them to form the Tennessee Captive Insurance, uh, Company in, uh, in 2020. 2 and what it does is it self-insures the state-owned, uh, buildings in the state of Tennessee. Uh, it is managed by the Department of the Treasury and it's, uh, regulated by the, uh, Tennessee Department of Insurance. It currently provides, uh, coverage for commercial property, general liability, cyber coverages, and based on the conversations we had, uh, they're looking to add workers' comp, uh, as well, uh, they collect premiums as usual and they set their funding level at an 80% confidence level, which essentially means that, uh, 8 out of 10 years, the amount of money that that they set aside will be enough to pay for future claims, uh, in that year. They have total insured values of about 31 billion, uh, their assets are about 400 million. the program itself provides $25 million of coverage above the deductibles that range anywhere between 25,000 and 2.5 million, and they have, uh, we're talking about increasing the coverage to to uh $50 million. Uh, and then above this they purchase a commercial insurance, uh, um, up to 600 million in the open market. The reason we focused on Tennessee by and large is because Tennessee is a state that, uh, we, we think their structure, you know, uh, in, in what they've done would benefit, uh, the state of Arkansas and they would be a good model to, uh, to, to look at on a going forward basis. Uh, so the next thing you did was an actuarial analysis and I'll pass this over to Charlie. Yeah, so, um, what this slide shows is, um, the most recent 10 years of, um, claim costs, uh, for each of the three, programs and, um, this, the, the claims are not limited. It's regardless of whether there was the losses are retained or paid by insurance and um. The, the couple of observations that I'd like to make on this is one, the latest 3 years show higher cost levels than the prior years, which, um, uh, from that I conclude that we're, and I, and I know this just based on inflation, the impact of inflation that were at a current cost environment that's substantially above where it was even 5 years ago. Um, the other observation here is that, um, if you look at each of the. Uh, fiscal years, you'll see that generally if there's a bad year, only one entity has, um, a bad year, um, in a, in a given year and that's been largely true for the, um, for the past 10 years and the, the reason why that's important is when we get to the uh idea of possibly pooling, um, uh, risk across the entities. There's a diversification of uh effect that can be from, um, from pooling, so that, you know, the um, the. Entities will be stronger as a whole than they would, um, be individually. All right, so this next slide is intended to show, um, the insurance risk and, um, what happens when a, um, when there's a an adverse year. So the first group of bars show, um, what we expect, sort of a normal, um, year, the blue bar is the retained insurance cost, and this is just claims, and this is excludes premiums. Um, the orange is the insured claim cost and the gray is the combined. And the middle group of bars is what I would, you know, uh. Referred to as a bad year. And, um, it's based on an 85% confidence level and what you'll notice when you, um, compare the expected, um, loss and the loss in a bad year is that the retained loss, the blue bar does not increase very much and the orange bar does and um this is a, uh, depiction of, um, what happens when a program isn't retaining a. amount of risk and that is really the main conclusion here that the um programs as they're currently structured don't, um, retain, um, much risk. So go through a couple of observations, um, and then we'll get into our recommendations. So what this slide shows is, uh, by agency, the total insured value, as well as the aggregate retain limits, the premiums that they're paying in the commercial market, what their uh self-insurance premiums are that's kind of based on how these agencies are being funded minus what they're paying out in insurance premiums and then what their net position, uh, ultimately is, so. You know, the key numbers here or the key kind of uh takeaways and it it gets a little complicated, um, but that aggregate retain limit you could see for each of the entities it's, it's 8.5 million for, um, for for M8, it's, uh, 6 million for Aspit and it's, uh, 3 million for AA and I, I intentionally didn't add these limits together, uh, if you, if you just simply add them, you get about 17.5 million, but the way the ASPA program works is there's some large deductible. that, um, they need to exceed claims need to exceed that before it starts eroding the annual aggregate. But in general, you could assume that roughly about $2000 would be like a worst case scenario in terms of aggregate retained limit for each of these entities. And the other thing too that I want to say is if you compare that to, you know, what we're calling the net position or what's referred to as the net position. So what this would be on, you know, if this is a privately run. Institution and that you would say this is essentially their, their capital or their surplus or their equity. And so what we've seen is for the 3 entities combined, there's roughly $51 million of a net position and again, going back to what I mentioned before, for the aggregate retained limit is, uh, still, you know, somewhere around 20 million again goes back to kind of Charlie's point too in terms of the, uh, retained, uh, risk that they have it's relatively small. Compared to the net position of of these uh of these entities. The other two numbers that I just kind of point out is the commercial insurance premiums right now in the open market is 57.7 million. And the self-insured premiums, you could see, you know, the number is 7.4 million. It's, uh, you know, is negative, uh, for, uh, for Amate, um, and is only about 1 million for Aspit. Again, it's likely what's happening is the premiums that are put into the program aren't, you know, aren't necessarily adequate to cover the losses in that particular, uh, year, at least for, for those two programs. So we have a, a couple of recommendations that we're making, uh, for starters, again, this goes back to what Charlie was mentioning is, uh, we suggest retaining more risk and so the main benefits is, uh, you know, is what we call this uh risk transfer inefficiency and it's a reduced risk premium. And, and what we mean by that is this is the commercial insurance marketplace works very well by and large. They take premiums, they pay claims, um, and, uh, you know, for the most part that, you know, that model works extremely well, but it's not necessarily the most efficient model out there, meaning that when you transfer risk from retaining it to uh to an insurance company, you have to pay a premium to do that. The premium is usually operating expenses that the insurance company needs, there could be some commissions involved. There's overhead, uh, and of course there's a profit margin and a contingency margin. So in essence, anytime you transfer $1 of risk off of your books and onto an insurance carrier's books, they're not going to charge you $1 for that. They'll probably charge you $1.30 dollars, $1 50s, maybe even more, depending on what their appetite for that risk happens to be. Uh, the other thing too that happens is, uh, especially over time is that for in property coverage, especially for catastrophic type. Risks, uh, catastrophic risks think of floods, think of earthquakes, think of uh windstorm. They're very low frequency, but when the severity comes, it's extremely high. What insurance companies do is they charge a little bit each year to kind of, you know, uh, essentially charge an average, uh, amount of risk and they use that to build a capital position to pay for those bigger claims if and when they hit. Um, but going back to the other slide that I had mentioned, you could see that that position that's currently uh, been built up by the three entities is, you know, is more than enough right now to pay for uh claims on a, uh, you know, on, on a going forward basis, based on the current retentions, and again, we think that retaining more risk will be, uh, you know, uh, you know, ultimately we'll, we'll save more, uh, money and I'll go into, uh, more of an example in, in that, in, in a little bit. Of course, it doesn't come without its disadvantages. You do put more capital at risk if there is an adverse year or if there's several adverse years back to back, especially early on, um, you could tend to, to lose a lot more claims, uh, and then there are administrative costs too in terms of setting up a structure in that, so, um, as we're kind of showing in this chart here while some of the operating expenses and some of the other components do go away. They don't completely get a limit. Uh, so our second recommendation is to perform an actuarial analys. and I'll have Charlie talk about that. Yeah, so, um. That there are, um, uh, a number of benefits of uh performing an actuarial analysis and um one is just accuracy, and it, it boils down to knowing your, um, knowing your costs is accurately as you can know them, um, you know, based on the most recent available data, um, and then, uh, if you, if you're in a situation like a young captive insurance company and you're building captive, uh, Capital, excuse me, um, you may want to, um, fund at a, um, confidence level that's higher than expected value to to so that you accrue capital over time and, and build the cushion that you need to absorb the very bad years when they happen. Um, another benefit is just, uh, reducing, uh, surprises. So on a fully insured program when premium renewal comes along, that's the first you, you really know about. What your costs are going to be. If you retain a significant portion of your costs, you can do an actuarial analysis in advance and um turn that, you know, at least part of that unknown, um, which is the cost level change into a known, um, a third benefit is flexibility and what I mean there is, um, when you're looking at renewing, um, a program. Um, you could look at, um, a number of different insurance structures and, um, and take advantage, for instance, of the, um, the underwriting cycle and, you know, buy less insurance if the prices seem too high and you know, you know, likewise do the opposite if the market will, um, will allow, um, and then finally, um, it allows you to, you know, have a clear plan for funding. For catastrophic losses, so, um, what we mean here is, um, really doing, um, understanding what your exposure is to catastrophic claims and, and having a plan to, um, accrue, um, losses for those over time so that when, um, you know, those catastrophic events do occur and eventually they will, um, you're equipped to, um, to deal with them. And then, uh, this next slide here is just kind of like a graphical representation of. Some of the things that Charlie mentioned this, uh, this is just a sample scenario. I, I made up these, these numbers and that it's just, it's just a kind of, uh, show from a graphic standpoint, what likely happens. So if you look at the blue line here, that's essentially what we're calling an actuaryly appropriate premium. So at a given basis, again this this starts at about $1 so if you see the actual appropriate premium is, is at $1 on year one. The market premium may may match that dollar as well, but then if you see, usually What happens is the market premium doesn't exactly go up at, at the actual, uh, appropriate rate. There's a lot of reasons for that in terms of uh capital constraints in terms of how many other players there are in the market, so on and so forth. And so again, in this example scenario, you could see where year 2 may have where the market premium is above what we think the actuarial appropriate premium would be. In that instance, we would want to take on more risk because essentially we think the the cost of taking more risk is actually lower than what the how the market is pricing it. You see, by the time we get to year 4, and again, this is very common in market cycles where, uh, you know, the, the premiums go up and then they, uh, stay level. Then they go up and then they stay level. So you see in in years 4, in year 7, that the uh market premium is essentially, you know, remained flat, whereas the actuarial analysis would say which probably has to go up a little bit more. So in this case we would suggest purchasing more. in the market because essentially you're getting this at a little bit of a discount to where we think it, it will be. We'd likely think we're in a scenario currently which is closer to year 9 where there's a significant increase in the market premium relative to where we think the act appropriate premium is at some point we may get to year 10 where it drops down and we reverse that trend. But, but again, we're just trying to show this, um, you know, more from a graphical standpoint. And so our 3rd recommendation here is to, uh, is, is to form a captive and essentially what the captive can do is a number of different things, but it gives you a big advantage in terms of pooling the risks for the agencies, uh, is Charlie slide before showed, it shows much more stable results when we end up pooling these risks. Usually if one agency has a poor year, it's very likely that the other two will not have that. Um, it also allows for the Cooling of the net positions. What this does is it makes for a more financially stable entity that could retain higher losses as well, um, having a captive two will allow you to strategically respond to a hardening and softening insurance market premiums, as they showed on that last slide, we could, uh, shift the amount of retained risk either up or down depending on, on where the market forces are and the nice thing too is because we're talking primarily about, um, property insurance. is property insurance claims tend to settle fairly quickly and we tend to know about them fairly quickly, so we could easily have a captive entity that year over year retains different levels of risks and we'll go into a little bit more in terms of some examples here. Um, it also allows for the, uh, potential to add some additional coverages in the future. This helps with some diversification benefits in the last one too is there are some economic advantages to the state for, uh, including. Uh, you know, for having a large captive domicile there, typically what it does is it encourages other captive managers to domicile potentially large captives in the state of Arkansas itself. We put some numbers there in terms of how Vermont, Hawaii, and Tennessee's, uh, uh, you, you know, the number of captives and what their premiums are in that. So in terms of our action plan, we kind of essentially have 3 plans here that will go into in a little bit more detail. I call them plans, uh, A, B, and C, and, um, I'll just jump in. So for plan A, this is an option that is, is available and what this is, uh, is, is essentially kind of the simplest option. The way that this would work is that each agency would uh retain in addition to their current retentions, they would retain 25%. Of the losses in the next uh excess layer, so that lowest excess layer, they would take, uh, 25% of those losses. You could kind of think of this as a co-insurance, uh, how that works. So his losses go into that layer, they're responsible for 25% of those, of course, by doing that, you're reducing the premium that you're paying to the insurance carriers by 25%. Um, but of course, you are retaining additional, uh, losses. When we've net these out, we come up with an. annual savings of $5.1 million. So it's again, it's for all three agencies, uh, combined to $5.1 million savings by simply retaining approximately 25% of the losses in the next highest layer. The absolute worst case scenario would be that each of those agencies has a number of losses, and they all, uh, end up with full, uh, claims in that access layer, but even that absolute Worst case scenario, which is extremely unlikely, we're still talking losses of about 43.75 million and again that that position that we have is 51 million. So there's plenty of, of, uh, capital to support that type of a, uh, you know, of, of additional risk taking. Um, and a couple of things, other things just to kind of note, note with this is this does not involve the formation of a captive. This, uh, just simply keeps everything that we're doing currently in line right now. The only difference is we're just retaining, uh, some more losses in the in those excess layers. Um, our second option here, which is what we're calling Plan B. So what Plan B essentially is, is this is a strategic use of uh of an entity which in this case we're suggesting a captive and uh these are the actual premiums that were quoted for that next excess layer for M8 and essentially the way that it works is uh Amate's first layer above their retention is $50 million. So each of these companies, um, re certain amounts of, of losses within there. uh, the way to to look at this is company one retains $25 million of a $500 million total. So it's really 50%, so they retain half. That's kind of the way to look at it. I highlighted Company 3 where they have, they retain 5 million or in other words, 10% of that limit and they're quoted premiums when you, when you really break down what they quoted premiums are, you have to get them on an apples to apples. Basis. And so the way you do that is you essentially look at their premiums, you look at that per $100 million of the limit and then you also compare that to the total insured value of, uh, you know, of all the underlying buildings. Well, the total insured value doesn't change. All these companies are looking that, uh, at that at the same. But what they're saying though is that the limit that they're providing relative to the quoted premiums we I highlighted Company 3 here and what you can see with this company is that they're charging a rate of 1557 for, uh, you know, uh, for the, for the coverages that they're offering, if you compare that to what the total is excluding that company, it's essentially they're charging 25% higher than the other companies in that layer. So what this essentially tells us is that there this company would be, you know, quite a bit higher than the others within that layer, and we strongly would recommend having a captive come in and instead of Purchasing insurance through company, 3, the captive would be the one that's providing insurance within that layer. Um, one other observation, you might look at this and say, well, what about Company 6? Company 6 has a rate that's even higher than Company 3. Why didn't you highlight them? There's two main reasons we didn't do that, uh, for starters, is that their limit that they're providing is higher. So, uh, it would be more risk to uh to a self-insured entity, uh, to take on that higher amount, but, but more importantly than that, Company 6 participates in layers that are even higher than the 500 million. So if we removed Company 6, We, you know, we run the risk that they may take all of the coverage away and again this is something we would need to strategically, uh, you know, you know, kind of, uh, decide or, or what would strategically need to be decided in terms of, of, you know, what makes the most sense, uh, for this, but yeah, in, in essence, our recommendation for this would be to remove Company 3, have the captive strategically, uh, uh, come in here and replace that. We ran this for all three entities and essentially we found that there's roughly about a $4 million annual savings on a year over year basis by strategically placing a captive to remove some of the carriers that we think are being, uh, uh, you know, charging what we would call above market rates or in this case maybe significantly above market rates, uh, for that. And the exposure, uh, is essentially about a $23 million exposure that it puts us onto again, significantly less than the 51 million. So we think, um, again, the programs as, as a whole could, could, uh, withstand that. But our final recommendation really is what we're calling Plan C. and in essence, what this recommendation does is it looks at all, uh, it's really a combination of plans A and Plan B. So we're gonna retain more risk and we're going to uh strategically use the captive to, uh, essentially kind of cherry pick the removal of the, uh, reinsurance, uh, carriers. It does a couple other things too. It simplifies the limits, uh, on this, so, uh, instead of having, uh, you know, various, uh, uh, underlying limit structures. This makes it more uniform, so each claim is limited to 20 with a $15 million for. All three of the agencies combined, uh, if we did this through a captive, uh, model or this was done through a captive model, it would be, uh, 45 million in uh, initial, uh, you know, would be your worst case scenario for, uh, losses again, the net position for all three combined would be 51 million, so it's it's well within the, uh, uh, range of, of what could be, uh, uh, withstood. We have estimated some uh uh captive funding to be about 30%. 2 million. We don't know what the reinsurance savings will be because we need to have the reinsurers kind of reprice this at those, uh, different underlying limits, uh, based on the last two examples that we, uh, showed, we're, we're thinking it will be significant and certainly significant enough to overall, uh, save the, uh, the three entities, uh, you know, significant amount of money. Um, And just some final notes here on the uh formation of of a captive kind of ran through some scenarios. A lot of this is based on experiences, um, that we've seen in, in other states and with other, uh, uh, I'm sorry, not states, but with other entities and other companies that we've worked with is we think it's about a 3 to 6 month, uh, time frame. Many of the things could be started almost immediately. We've estimated, uh, setup fees, uh, for this. We have included pro forma in terms of the. The uh reports and the supporting documentation. Um, but in essence, really the, the main takeaways are that the agencies, if they choose, can continue to operate as they currently are. So they would do the risk management, the underwriting, the claims handling, all of those, uh, components. The captive would just really act simply as a risk transfer mechanism through which the agencies they run their insurance premiums and they have the claims payments, uh, uh, go through. Them. And the other main advantage too with, with this is again, as I mentioned before, the net positions are very strong for these entities, uh, in essence, it could be set up really without an infusion of capital other than those net positions moving over into a, uh, you know, into the, you know, into the formation of of a captive. We would, uh, uh, you know, what would need to be done is to go through just to kind of make sure that it's done in a very equitable way based on the. Total insured value based on, um, what the, uh, you know, how the, uh, insurance premium structures are in the underlying, uh, coverages, but it's, it's not really an overly complicated exercise to, to do. Um, So that's all I had. members with any questions. Representative Brooks, you're recognized. I Thank you, Mr. Chairman, and, uh, Kyle and Charlie, I appreciate y'all being here in your work. Just a couple of questions if, uh, the chairman would allow, um, we talked a little bit about Tennessee, that was kind of the, um, the example is used from a captive perspective, and I want to clarify, so they don't include their, uh, their school properties in there because those are owned by the individual municipalities, correct? I'm not sure who owns it, but it is correct that they, they, that it is only for state-owned buildings. And did we, it's been around since 2022. Were you able to get any data from them relative to the savings that they've realized. So obviously we're talking about, you know, to insure value, you know, the, the, the cost per 100 million as, as detailed in there, have we gotten any data from them as to what they've been able to, to realize over a couple of years of it being in place. Uh, I don't know that we actually have, uh, that data because I'm not sure that they ever provided anything again, it, it happened over a long period of time. So there are issues really were 2018, 2019. I think it's hard to say exactly kind of what their numbers would be. I did include the financial statements as part of the, uh, you know, of some of the appendices that, that we, uh, put together, but I don't know that they gave us an exact, uh, number in terms of what their savings were. I do know though that on an overall basis they were very happy with. Uh, how everything was running, how it was structured, uh, you know, and, and, as I mentioned before, they're looking to put in more coverages are also looking to retain even more risk, uh, within their program. Follow up Thank you. Uh, so, uh, part of the presentation talked about the savings that would be resulted from a captive, uh, which obviously as a state we're we're always looking for savings, of course. Um, so did you have a chance to take a look at what the additional costs would be relative to, uh, adding personnel to the insurance department, um, adding ongoing benefits and, and things of that nature. Do have we analyzed what, what the offset of those savings would be with additional costs. So those additional costs offset for the additional expenses. So in the pro forma that we put together, we removed, uh, so it's, it's a, it's a true net saving. So it's the initial cost, the startup fees, all that type of stuff, minus what would be, uh, you know, for the captive model, uh, you know, what would have to be spent, you know, in, in terms of that. So in other words, we built into the captive, all the overhead, everything that would go into the captives. And one more follow up, if I could, Mr. Chairman. Uh, and this may be a question more for Commissioner McLean in the back, uh, so, uh, we can answer this in the future if we need to, but just, uh, the question I have not been able to have answered, um, as we've gone through this for several months is, is there an issue relative to insurable interest when we, when we look at the, uh, facilities being owned on the local level, uh, structuring something from a captive perspective that we run into potential legality issues. Based upon who owns the property that we're insuring. Have y'all looked at that as part of what you did and the commissioner Kla is that's something that you can answer? I mean, to answer that question, we did not look, uh, specifically into the ownership or anything, I mean, the way that we would look at it is truly more from the insurance standpoint from the premiums in premiums out cost savings, risk management, all that. Anything to add, commissioner? Uh, it's not his decision. Come ahead, commissioner. I think it would be brief because I think it's a good question, but I don't really know the answer to that. Go ahead and you never know where this will go. Sorry to open a can of worms, not trying to do that er Randy Robinson, State risk manager over there, but, uh, who, who has on, on the properties that we have under our program which the AA program and the, um, the public school insurance trusts, which is the smaller amount of the, the schools, uh, he's measured every Every building in our program in terms of, uh, uh, insured value, but as far as the ownership of it, and, uh, Matt, that was a question I had as well as far as, uh, what you would want to decide as far as, um, the, um, Uh, the legality of, of, uh, of, um, requiring everybody to to have full participation in the program to make the model work so uh I, I actually have the same question. Thank you. And I assume there's something that the consultants have, I, I really applaud the study. I think it's great information, but I, I, I do have to, to ask whether, you know, you know, you know, there's gonna be mandatory participation among people who don't own the, the state doesn't own their property. Randy, do you have anything you wanna add? Uh, Randy Robinson, state risk manager, uh, no other comments, no thank you, uh, Represent Brooks, you're back in. Thank you, Mr. And that's why I asked the question because obviously, when we look at an actuary analysis that you guys have put a ton of work into again, thank you for doing that. A lot of it's based upon the, the numbers of assumption that we have this large pool of risk and, and should there be some dynamics there that may impact that large pool of risk. Um, I want to know how that would affect the numbers that we're looking at. Yeah, it, the fundamental recommendations, in my opinion really don't go away. So in other words, still taking on more risk, still being able to strategically place a self-insured entity to kind of remove some of the, uh, the reinsurance, uh, charges that are, that are above what we think, uh, the market premium should be the pooling of the risk and stuff like that, even if it's not 100% of, uh, you know, participation, we could go through, we could set the actual rates and the analysis. and that so that again, you know, could be a, uh, you know, could be an optional participation. If you do, here's kind of the structure and how it would work. Here's what the buy-in would be. Here's, you know, how, uh, everything, uh, you know, works from that aspect. Otherwise, you, you know, whatever the alternative is to not participating in the, you know, each of the, uh, you know, uh, agencies and that or, or the even the underlying, um, you know, essentially kind of owners of, of the buildings would have to go through and just kind of way that, you know, do their own Cost-benefit analysis. We think, again, going back to the actual analysis saying pooling it, this makes sense. It gives, you know, you're much, uh, stronger position, even not just financially, but also a stronger position to negotiate a lot of those, uh, insurance contracts. Again, we'd see a lot of benefit, uh, to that. We won't know any final numbers regardless until we get those renewal premiums come, you know, uh, that come up because again, one of our suggestions is to, uh, adjust that under lying, uh, levels of retention. So then we'll need to see how the reinsurers kind of price above those, uh, updated, uh, losses, you know, those, uh, retention, sorry. The, the one other thing I was gonna add is, um, you know, assuming that everything that we've done is correct and there would be a significant savings, I think that, you know, a, uh, uh, a property owner that made a choice or was faced with a choice of, uh, opting into the program or finding someplace else would probably wanna participate in the program because, but I think it'll, it's gonna be cost effects Senator, if I may, the legality of the insurable interest from the real property standpoint was answered, uh, the other question on legality would be on the net position, particularly ASBA, that's a nonprofit, um, that's not state money. Uh, so that net position would really need to be taken out of the 51 million. That they've listed, I would think, because I don't think we can legally get their money. You know, yeah, I, I, I think that's probably right, but, um, you know, if they wanted to, um, participate in the program if they were part of the program, there would be a certain amount of capital that would be, you know, uh, required as a, you know, as a buy-in to the program, you know, that, and that would be true for, for, for all three of the entities. Right, so I mean it could be structured where each of the entities they get that that position back. And then the buy in to the program is whatever it happens to, to be when we go through it again, price that based on, like I said, total insured values, what their limits are, what the, you know, how the policies underlying, look, again, this goes back to that plan C, which I think it makes more sense to have them more have uniform, uh, underlying, uh, policy retentions and that, so it, it, it just, it's more of an apples to apples or more of an equitable uh type basis. OK, not seeing any more questions. We thank you gentlemen for being here. I appreciate your presentation. And nothing else. Members, we will meet again during council week on September 19th. Thank you everybody for being here today. We are adjourned.