ALC-Executive Subcommittee

Members of you are grab your seats were going to start and. With that rule we go straight into the education facility property interest study or have mister lee and lambert and morgan to the table. They represent metals items and lee insurance. If you guys would introduce yourself a record and you recognize the start your presentation roberts lee president matters adams lay insurance commorgan public energy's matters amazonly clinton lambert matters items only. So okay then he start driving require. No you can run some good. Alright good afternoon just today nothing real earth shattering to report to you today just really giving an update as to where we are in the process that we're working on we've made AAA really really good push through most of the data that we have in and we've got our data organized the way that we want it as of right now we're really focused primarily we had been focused on the concentration the mapping of it and the weather modeling were just starting to dig into the loss analysis so we've are conversation around the losses of the pretty brief but the overwriting points of today is to understand how the data analysis is going to lead us to really setting up in insurance trust yes sir. So nor now I would do this committee but there we've met with mrperiod lee in his team this week as the chairs and looking at this calendar if you guys go to the front page of your bonder. We were supposed to hear the last section in january but in meeting with with these guys and talking with them there's going to need to be an admin to this schedule. Uhm technically by the rules center rice and myself could you sign the amendment and it would come to the committee I don't want to handle it that way so missed misgarity will send out an email the first week in january. You guys will get that email and please respond promptly but that email will outline the amendment to the to the procedure going forward and it will move the deadline from january fourth I can't tell you exactly today what that's going to move to but that will all be in that email and we gave arm mrperiod lee in his team a deadline of wednesday of the first week of the of the year I don't have a counter informed me to know that date they're going to have that information to the bureau and then that will go out to you guys no later than friday so just want to give your heads up that there will be an amendment there will be an extension of this want to be clear and make sure we're transparent or were mislease are interrupted no no problem representative word law we plan on having that to you next week. So. Thank you for that so getting through the data getting an organized um in starting to understand the concentrations where the risk is concentrated is really what's going to lead us. To making a recommendation about you know how much the state should look at self insuring and how the funding would work so we're about we're probably maybe even a little bit more than eighty percent three with our concentration mapping and what other modeling just digging into the losses so the overwriting points of today are just as simply explain where we are in the process what the concentrations are telling us we haven't made any definitive decisions about any of it yet. And and it you know what share with you what we know to this point. So the next large sister we spent a good deal of the last two meetings talking about the absent program talking about that as per program. In what I would ask each of you to look at you know quickly on this is just the last limits that are there inside apps that we have a five hundred million dollars limit in as but we have a seven hundred million dollars lost limit. Um. There's limits worked really really well for a long time and certainly we feel like that both you know of the programs really worked pretty well for a long time but with the increase in values and we we spent a good deal of time talking to this committee about the values and the valuations in studying the different valuation processes so then we had to look at where is was concentrated and we had to look at hey for these lost limits adequate to stay in separate programs or do they you know can we achieve a higher loss limit by combining the program so that's really what our focus was on the on the the mapping and concentrations. So I kind of covered most of that next slide but. So we really look into see if we should combine the programs or keep them separate and then. Looking at the loss analysis the loss analysis is going to and the weather modeling are going to determine. Really that attachment point that we recommend for the insurance or for the reinsurance. We don't really have you know an answer to what that number is going to look like that we're just getting started with that. So carlsman get better time i'm working with art giss and then also working with the national weather service and we have mapped out the wrist concentrations so if you look at this is a heat map of this state of arkansas and this just takes both programs the absent program of the absent program in it it's just a a visual representation of you know it looks like arkansas with the measles but it's really just a visual representation of white you know our concentrations look like in they're not surprising you see that our concentrations are in northwest arguments are the fort smith area central arkansas in in jones barroso we picked one of the highest areas of concentration which is central arkansas and if you look in the highlighted area there's seven point five billion dollars in both in both programs inside that area of central arkansas so. In go to the next line and and then the concentration really makes. And I thirty cord or tornadoe real hit worse case kind of scenario so. Each one of these hacks are going that you're looking at is ten miles wide. So that gives you a general idea of of the size that we're looking at when I was in joblin missouri and uhm. A decade or so ago I think that tornado was about a mile and a half wide you know i've seen what these things can do the wind tornadoe it is terrible as that was for that community and for our stay it could certainly be considerably worse if one of these things touched down and got on the ground and followed that interstate thirty us sixty seven corridor from the southwest to the northeast so in iran up just through there is right out about two point three billion dollars in values you know i've been involved in selecting lost limits all of my insurance career for my clients with large property schedules you know cost is always a really important factor in doing that so I don't fault either one of the program managers in the limits that have been selected and at the time that those were done i'm sure that those were done with this information i'm considered however as the valuations have increased it it really means that we have a lot more exposed than we ever have because the replacement cost value of it is significantly higher so in looking at this you know just if you look at number seven and number six and maybe number four likelihood of something hitting all of those is problem and you know destroying them completely probably pretty unlikely but if it did happen their significantly more than the loss limits that are there so that can't really tell you exactly what we think the actual loss limit should be or with the current market conditions what the loss limit is that'll be achievable so we don't know the answer that question yet but we do know that we think that both programs could. Uhm could use a higher limit based on the what we're seeing so any questions about the concentrations and central arkansas. Okay next line so again this is a little bit of information that's carry over from last last month's presentation but if you go when you look at the heat map again and you see. You know we're gonna have historically now when is not there's not a blue line for when this is showing a mapping from the national weather service over the heat map that we've done with the risk concentrations and there is the wind tornado line is not on there but then it is in the count that's up there so. In over fifteen year period you're going to have about fourteen f three to f four tornadoes in the state of arkansas f four not nearly as likely and f five you know hasn't happened fortunately but obviously it could now are all those going to line up and hit schools you know now they're not and that's one of these programs have performed over over time so looking at the weather modeling there's also hail modeling that we're looking at as well and the weather modeling is really going to help us understand along with analyzing the losses and you get a loss analysis. Words yes divine and to the losses in just getting started with this so in looking what this represents is just to show you that from two thousand and eight up to the current year I mean the losses have just really really increased you know and I think that that twenty twenty three years we understand is even north of a hundred and twenty million dollars so those catastrophic losses are what we need to insure for and then we need to figure out where we can retain risk beneath that that catastrophic limit in those include go ahead and go to the next line. The we have major loss causes fire and wind in hail in frozen pipes everyone remembers the frozen pipe event we had we had several losses in downtown literature pipes burst underneath the city and and flooded you know many businesses and i'm sure that lots of lots of insurance brokers experience that as well so in in looking that those are really are three major types of events frozen pipes as a new one and as a pretty unusual one to our state. But when in hail or not and fire as something that we're all you know always concerned worth so in looking at these numbers. There are these are the these are the types of losses that are driving our claims there will be additional information as we dig in this just a quick snapshot of the types of losses that were having there may be certain types of losses that we want to self insure for completely and probably most of the losses that are in the other category we're going to be recommending that we retain inside the program or our insurance company whatever or recommendation ends up being so this is really an update as to where we are on the data uhm been quite a bit of you know analysis in the concentration peace of it I think you can go to the next high car so it's leading us to really understand what structure and where are attachment for reinsurance needs to be an understanding you know what's the most likely loss that we could have what's our worst case scenario really really look like in then understanding um you know adding in hail and flied into the mapping to see if those are a wrist that we can you know retain or those are wrist that we need to try to include in our reinsurance program and I know that best programs already have some coverage for for flood and for earthquake included in their programs so that's an update as to where we are I know there's nothing error shattering in the presentation that we have today but we are making significant progress towards making a recommendation to the state that they were feeling really good about and in working through the data that we have this is what we all right now. In the data I think we've told them or maybe touched down there but were you on the wind and hail with his mate roof exposure is school large buildings I have will we be able to see some kind of cost analysis as we've talked about metal roofs who take a lot of more you know and they match the staying cosmetic but versus traditional shangles up then that you you've got to do something right we see something few men in report it that cannot chose how much we need to accelerate in the trander move towards. A different tap roofing then some schools I am. We would be happy to provide some information in regards to the different roof types how many of them that we have and you know what type of kit can we see from the data from say the last five years of three years or whatever how much more exposure that were having now. No I can't give you that answer right now but we can see we be supposed to report as we go forward to it we could see something like this about sometimes you have to just prove to you know here here's what's happening in in job got to move charity a better top roofing area plan so as they replace the roofs that they move to a different time quickest we could get him into that that hit it that direction that would be good yes sir thank you representative brooks you recognize that commissioner i've got three questions and appreciate the tear since i'm not a member of committee to welling me to ask a couple of them I just want to clarify a couple things and thank you as for for all the bad and in all your hard work and I would say it's a pretty big left to put all this together relative to to the I guess page three no state funding for has harassment just real quick on how how each one of those entities paid obviously and I would got quite a few employees in the insurance department who are doing the aspect problem am I correct. That is correct okay so now we are refunding that we assume we find those employees i'm not sure I know the answer to that question I had I know that I think there's three or four employees and that as per program that are paid out of the program. And then on the losses had a question is that include hired it is not include higher ad we're just looking at absolute nasbar right now and the last question the clarified on the twenty three losses that page nine has it at ninety two million cutting you said you thought maybe it's north that when the wind loss or give the higher and they just you know it's I think the wind lost started at sixty million eighty million and some public adjusters got involved in the numbers kept climbing and climbing I will tell you that i'm anybody that's done this for any length of time can tell you that the numbers for a claims moving targets and change constantly and we would be delighted to have any updates in anybody can provide us at any time for any claims increases or anything like that that's available thank you sure. Soon urban you reckon us thank you mister chair appreciate your presentation the question I have we are dealing with a little bit of an insurance issue with and one of our current institutions how are these structured as far as when a loss occurs. Can you describe that process. As far as when a loss is occurring so it so we have damage. And and it is the typical that these are structured ads like reimbursible orders are an estimate that's done with a payment how is how with these plans be structured. Are you asking how the current plans restructure the are you asking how it will be structured moving forward moving forward it will depend on what type of structurally where we recommend and. You know if we stick with separate programs you know I can't tell you what that recommendation is going to look like but I would say it would be similar to what's currently going on I know that the AID has a team of they have in house claims adjusters that handle their claims there's a i'm sorry there's a tpa a third party administrator that best programs use that handle the claims and so those claims are handled by a third party adjuster who goes out and values the claim then the value that value is reviewed and a settlement is reached and that's how all insurance claims are handled and that's how it would be handled moving forward. Okay the reason i'm asking and thank you for the latter two mr chair but the reason I asking is where we currently have a situation right now where we've been asked to front the money and then the insurance company would reimburse us that amount of money I guess after the work is completed my concern with that is we're not using my money we're using taxpayers dollars and so if a project gets you know if we have an entity a state entity that's why doubt and we don't have enough money in our balance budget to front the rebuild of it. I don't know how we do that as a state if it's an incredible amount of money and so i'm just can you define it incredible amount. Well if that depends on our balance budget so. I think those questions are very valid and I think I agree II think they just get I think it's an excellent question here's where we need to ask that question though in a few minutes about the interest department to the table and I think that policies through them okay so we get that in and also there was a report. Are given in peer this week what was the first quarterly report that we asked for when we fronted that money so i've got the bureau get you a copy of that report right now that was present and so if you would have no fence but will have questions here and then i'll get the interest part of no not an appreciate that mr chair I also I just think it's important to the industry experts which you'll are we've chosen you as thank you give us their opinion about it as well so II think that anything that we recommend in our again this we're far from her final recommendation. But the point is noted and I think that what. The direction that we are leaning towards in what we have in mind I think there's a way to address your concern II can't really say definitively but I think it it's a excellent question and I would ask anyone that's on this committee that can provide us with any type of information where there are situations with claims or with current insurance programs that are providing stress you know on the schools to let us know so that we can consider that and in part of the program that we recommend i've really appreciate the question thank you. Any further questions for a committee. See a nine o will go to the interest department first. Thank you. The. So you guys would introduce yourself for the record and I will recognize you for any comments on the report and then we'll go to sender urban first for her question. Helen claims state insurance commissioner randy robinson. Risk manager for the state. To do you guys have any comments on the. On the consultant report for today. I think I would add a color to in the hand handle it but the questions is for its the funding of our positions. Randy and his team and our risk management divisioner paid out of our insurance department drawn up put me up appropriation it's no funding that there's no allocation from the premiums that are paid from our school district etc specifically allocated to the expenses of the of the division so that's that helps clarify that then I get the hard questions to randy. Yes sir I think that the presentation a day pretty spot on on the concentrations this map here was very it it really shows the way that both programs are really in that at thirty court or have a lot of a lot of value however i'd like to say that. Currently our five hundred million lost limit that's we purchased that limits because that's what we could purchase there's not there's not a lot of companies out there they're just thrown out capacity that's why we meet with brokers meet with underwriters whether it's domestically or trying to get over to to london to meet with international brokers so that we can and and and underwriter so that we can get as much coverage we can and we have requested. Additional limit on both of our programs we weren't got the school program and then we also again have the hired program the state program is all under one eight program and and we we have request that we get higher limit on both of those programs we've already got even now in january broker I mean uh december looking into january our brokers looking at trying to get increased limit. The. The. See if I haven't. Why you're on that subject. I think and I was made aware of this in our very early meetings randy when we were meeting where you back in the summer. You guys if I have this wrong correct me please but you guys insurance everything north of the river and the school board has everything south of the river argent vice versa. When it comes a little rock norfolk rock. We have not a little rock school district yes and in that because of the exposure that that's basically laid out in this in the slot is that correct. The. It's just the way that those districts fell into our programs but for instance little rock was seeking cover just two years ago and they came toward the end of june and we had already finalized everything on our program and we we didn't have time to bring them on and and shatten in her team we're able to bring them on to their credit so that's that's where little rock landed and then a lot of the other programs have either been on our program i'm excuse me other schools have been our program for. Since for twenty years or they've been on her program for since their program began and some of them will would switch back and forth just trying to get just better terms the branch of district move from our program to say this program about four or five years ago just because they they were able to get better offerings from asba okay thank you send our new recognition thank you thank you so much glad to have you here and and I think you know when I look at these weather map concentrations to me and and I really appreciate the modeling that was done but I think it raises the alarm for me in this whole issue that we've got going on with the state hospital and I know that it's not necessarily connected to the presentation today that my concern is we have we had a front five million dollars which was not in our budget or appropriation we had to pull that out in order to complete the work so that before we could get reimbursed by the insurance company how i'm understanding that if I understand it correctly please correct me but my concern is. What if this building gets taken out. We would never be able to have enough money or maybe we would but it's not something that i'm willing to do. To friend the money to be reimbursed by an insurance company so do we I guess is that is that to in order to get premiums down or why is it structure that way. And center thanks for your question but normally that is not the structure that that state hospital loss was a special it it went different than what a lot of them do and normally you have a loss the adjuster will get to the to the scene. They provide numbers those numbers go to the insurance company. Or to us and the insurance company to figure you know to who's going to pay at what point. And then the insurance they reserve the money for that entire adjusted loss and then the the school district or the agency can they can request a in advance based on the depreciated amount and then they would get the replacement they will get full replacement costs after they rebuild men that's the way it was weird normally works what we had with DHS is our gesture whose third party he's done work for the insurance company he doesn't work for the state he's an independent adjuster he was laying that loss out at about two million dollars. And an architect was saying that it was going to take based on. Probably some age in the building and some other factors it was going to take about five million dollars and that those are just big numbers whole numbers are I don't know the exact numbers but it's what we have what we had to do there. Dhs did not want to ask for an advance so what they did was they tried to get those restricted reserve monies so that they could get not just an architect to determine the rebuild cost but they also wanted to get the contractor and get it in there and find it what what true is it going to cost to rebuild this loss in an order for them to get. That contract they needed to have unobligated monies that's my understanding of what went on with that loss and they got the they didn't have enough unobligated monies to and so that's why they came for restricted reserves that they get moneys to pay the contractor to find out how much it's got how much that loss is going to be so if they had taken an advance from the insurance company based on the premiums that we've paid the insurance company and we're going to take an advance on the money that they owe us anyway because there they've covered their covering the damage without lock them into a reduced amount of money at the end of the project. We want why why come to the state for an advancement instead of to the insurance company for an advancement center out adult I don't know the answer to that one what I do know is that if they would have come to us it would it wouldn't lock him into a lower amount of money they would have got nothing to do with premiums nominal there at this structure is nothing to do with the premium sad or anything I am very concerned about this II don't like this. If we're going to pay for an insurance policy and i'm glad that the folks are in the room and we're discussing this because if all state insurance whether it's schools or whatever if an entire school gets wiped out. Okay I do not want to make this common practice. That a fourteen million dollars school building gets wiped out. And then they come to the state of arkansas restricted reservations to front the cost of rebuilding it without going to the insurance company. And get that advance on the money is that we paid them for a premium i'm not interested in insurance companies make an interest on our money and not paying the claims. So I i'm not sure II don't I want to make sure as we move forward and I think it's very important discussion to have more discussing this and remodeling then restructuring that we're real clear about our policies as a state as well hours you know the policy and how it structured cause to me I don't see we're getting any benefit at all except for their getting the benefit not us so II appreciate your questions I mean I appreciate your answers I think we as a badly have really got to understand that and make sure that we hold in a holiday ourselves accountable and have a better policy when it comes to this yes and if I could see again that was that was a one time that dhs lost was different warrant school district they've taken advances they're rebuilding their school spring down tornado it worked the adjusters came in the spring bill school district got money from the insurance company the real to school. We deliver to check this week to watson chapel for one point eight million dollars in the loss occurred maybe two months ago I mean so normally it flows well this in that loss because of the difference in the amount of monies between an adjuster. And the architect. We needed to get the contractor in plate we need to get find out what the true cost to rebuild was. And DHS I don't know if the if the advancement excuse me yeah the advanced payment from the insurance company would have been enough for not I really I don't know from them all I know is that the they they needed that money from the state in that doesn't happen in fact that's the only time I ever know of that happening I did in that meeting where I was I think I had a dial into that meeting but I did recommend that we do it because I wanted to get that move for an it that that building needs to be fixed but that's the only time senator that we've done that and in other in other cases case back in his per case the edge at the lost the adjustment the payment has worked thank you so much I appreciate. Any further questions. Sir none thank you guys thank you for coming. And with that our channel see you and you guys here if you guys want to come to table. You guys would introduce yourself for the committee and you're recommended. Ratshan and more and the director of the wrist management program with arkansas school boards tony prothroat director of the arch sauce gorge association. You recognize to make any comments on the report that just feel nicer clarification on the as far as modeling just alert the committee no at renewal each year our broker we model our program every year to come up with a a loss limit that they feel like this is comfortable for the districts that we have so we've got thirty eight couriers on our program and every year at renewal modeling is done so that is something that we do annually another clarification on the wind school district laws and I think it's just matters adams and lee I brought this up in october how are lost running as it's maybe a little confusing but what has been recovered subtracts from the tube will incurred on a law so if you look at the total and current with something that's been recovered it's going to show the ninety two million when actually that loss is about a hundred and thirty two million it's been reserved at that since probably due. Just just to echo you very familiar with the warning loss myself and saw some of those same differences in in it as well and and I pointed those out and I actually called down the warning out the actual number of day and in the projected number of the total claim and I think randy's number is matched where that was headed but that's something that it wouldn't just own your side we noticed it only. As well does sound very she recognized. Who did you say those are marketing per year our broker amwans okay is there ever any issue more than one model looked at during the objective that hours the data just what it is according to where the records are is there something subjective for somebody else to look at. Well it's a report that they do they take into account the concentration of all of our members that we have and then the weather patterns and the losses and they take into account total insured value is it objective. Yes it's based on total insured value and losses. Okay is it a lot of love those we've and see current legislature consultants thanks i'm downs if it's a certain agency can get skewed in my view in there and that's originally asking if it was objective where it was just good foundation regardless of who who was writing policies or whatever yes there is objective. Any questions for school more association. The. See in the further questions thank you guys and really appreciate you participate in insurance so with that members of this the close of our thirty for the day will go to the director sport and segarity you're recognized thank you I just have one item for your consideration and guidance especially these last couple months we've started having quite a bit of failure is with our audio system in big mac a and big mac b and it was implemented first put in in two thousand ten with technology it has a lifespan and so I was. Considering if this committee so approves to move forward with the possible rfp for the replacement of the system in committee remain. So committee i'm gonna i'm gonna ask for consideration in this just last month we were setting in a committee meeting and could not recognize a committee member without moving on to a different das because the microphones were unhelp in operal the same day this room was in opera as well because the computer from here had been moved over there and set for repairs so II just want to make everybody aware what we were going through that day we actually keep two computers on hand all the time because of the two committee rooms but on that day every computer we had was down so sinder urban you recognize. Thank you i'm glad you brought the that too because with technology and we have a lot of people that are joining us are presenting to us via zoom I would hope that if you'd have we do do the son i'll make a motion to do this. Ummm but if we can include an rfp like an integrated system so that those present into us on zoom are participating in same can do so with as being able to hear them and then be enabled to hear us that that is already one hundred percent of what we're incorporated but that i'll make that motion at the proper time mr chair I think that's probably motion to have a second. Have a second holidays in favor they are almost as have it so if that will get the rfb going and then as that contract gets approved we have to care that the policy to care to also will submit the repeat for consideration for this subcommittee for us before we let it out and then yes and then any presentation for the alcohol through the staff committee thank you. So if that members we have no further business we stand adjourned.