ALC-Executive Subcommittee

They're out of the issues okay just will make announcement will only allow what the company presenting at the time to be in the room so no other representatives from the other company can be in the room during that presentation just makes it fair so with that arm I see we have cadents insurance at a table mister b o and mister kind if you would introduce yourself all three of you only had two names i'm sorry so if you guys were introduced yourselves we'll go ahead and get started with your presentation. No. Okay yeah cadents insurance i'm kennest is. Brendan manner han is on my right you're left he is going to speak to hired and then on my left you're right as bill berge and he'll speak on public schools peace of our presentation. We will thank you for this opportunity to to answer the rfp for the consulting services and think we'll show you why we are positioned to help you with this. As you know we're in a very hard insurance market all the way round this has been caused mainly out there due to weather events and as you know insurance is all affected by what happens nationally even globally but to make things worse for the market and arkansas specifically you know this year we had the tornadoes events that rocked little rock win other areas we've had several straight line win events several hail events as everyone also knows hot springs softball size hail doesn't help with anything right yeah so so that's that that's what's you know we're going to talk to a little bit today we're going to talk to about each of the of those subsets and get into the how we're going to help you with the consulting services so with that i'm going to turn it over to brendan on him. Good morning and thank you guys for the opportunity today to come and visit with you and with regard to the higher education segment of theirs want to provide a bit of history to share with you on how we got to this point and where we are so over the past ten years we have this craft from the top that shows the loss ratio and also dollar number losses that happen sustained within institutions of higher education in arkansas. And so you'll note that while twenty twenty three which is into the beginning of that policy year that begins seven one so those losses are still going to be quite nominal given the majority of incidents occur over the winter time period with snow freeze elements of that nature or in the spring time when we have the convective storms and traumatic events so it's starting with twenty three back to two thousand and thirteen that ten year period you can note that five of those ten years we have a a loss ratio for institutions of higher education over one hundred percent and so what that means is that there were more claims dollars expenditure than premium dollars taking in by the insurance companies that were providing that coverage so you'll also know that between twenty twenty and twenty twenty two there has been a significant uptech and the number of claims in the claims dollar amounts that have been paid out that's a combination of what we've experienced over this last three years from from a weather event perspective as well as a bit of a a reckoning within the insurance industry when it comes to proper evaluations when it comes to replacement cost so there's an increased intent in focus on understanding and verifying that buildings are properly valued given the fact that when you lose a building the insurance company is typically on the programs that compromise the all the public entity institutions within the state of arkansas there are going to be made hole and built back so that top rep helps outline a bit of that history as to where we are the bottom left hand corner is really that tighter snapshot over the past three years that's what the insurance companies are really more focused in on when it comes to that recent claim session they look at the big picture but they'll also then look at the last three years to gain a a firmware understanding of trending how things are going and. You're you'll note there that we have one of the three years of under a hundred percent loss ratio now on the the bottom right hand graphic you'll see lower and that's because of the essentially akin to a cat of insurance programs the higher ed participants are currently members of and so what that's done is by building in an aggregate retention that's helped lower those losses to a more profitable for an insurance company perspective and that's something that the ubank actually shared with us some of their thoughts they've would the risk manager for the event one of the reason that he joined up with the higher program after being on his own when you have been on their own for so many years was due to the stability the risk control resources and that expertise in the ability to better protect because they were in a situation where just given the market dynamic to play in twenty twenty they experienced not only a doubling of their insurance premium but also in the increase in their deductible up to two point five million dollars per plane when they previously had a hundred thousand dollars per claim deductible so quickly review on some of the higher program features that exist today there is that budget projectability premium is absolutely paramount and key in that analysis but also particularly given the number and dollar amounts involved in claims in recent years that retention and deductible structure also is essential when it comes to being able for that the hiring institutions to be able to understand and budget affected with four events it's hard to set aside two and a half million dollars not knowing for each and every event that may occur well you don't know how the events may over the upcoming annual period the program currently features no windhill separate deductible which is something that we're seen growing in the industry and unfortunately instead of arkansas as well and then as a mister wood mentioned the frequent loss control inspections or something that they really have found. Would be quite beneficial we want it dedicated to majority of the time to the k through twelve programs and so this point in winner turned it over to bill berge. Again good morning and thank you for this opportunity as we go through the slides we get something similar there just to kind of show you a quick snapch and snapshot course both of these programs have been a when I say both programs the absent program managed by the state insurance department in the program by arkansas school boards association both of those have been a existence for quite some time but we want to show you just kind of a ten year snapshot of kind of the experience that has been going on there and you'll see that in thirteen fourteen all the way through eighteen you know really mild and modest losses and if you look even further back you'll see that same kind of historical experience but then about two thousand nineteen is when we started seeing a lot of the convective storms start changing their path from going through you know eastern taxes western arkansas up through oklahoma I think science will tell you that now the storms are starting to come through arkansas and go into mississippi and on up and ten and see so there's some real bad that suggests that and when you start looking at probably nineteen and twenty and twenty one twenty two you'll see some of those significant events in two thousand nineteen you'll see that the absent program had fourteen million dollars and losses that was due to a hell storm for eleven point five me and in springdale twenty twenty a SBA had a ten million dollars lost several things that were going on in there but basically there was a garden hail storm that was based about size hill and was excess of four five million dollars on that claim. When you look at twenty twenty one you'll see absolute thirty six may and three seventy four and losses that was due to a tornado in springdale uh that he had it was also due to a fire and worn and then also we had someone that flashed freeze there was a freeze occurrence that happened in that year asba also had hill loss that year ten million and fort smith. And then also had a one point six million r loss and up in the hoxi area due to win and tornadoes storm up there. Twenty twenty two this is the year that you know we wish we could turn back time a little bit and change the weather forecast unfortunately we can't control weather it was a mild year for. Absolutely which they needed following their high last year the year before but you'll see there that we a SBA experience a hundred and forty seven million dollars this year in their program. A hundred and twenty two may and of that is when asked. That is the largest loss of any school district in the history of arkansas you know again. The history and the transfer point see you have always held frequency but the severity is always been the highest loss we had was somewhere around the tornadoes many years ago where there was probably close to ten million paid out so that's kind of what the there was a benchmark but now that you're seeing these health storms in the school districts with this with the spread and routes you know a ten million dollar loss is common occurrence and it's happening happening frequently so when you look at that you can also see kind of the loss rate shows they are on the bottom of this page now the bottom of the slide again the the absent program has a smaller premium base so when you're paying two and three million dollars for the premium and then you you got a loss two or three million that's when you see the blips asba has a little bit larger premium based they're able to absorb some of the some of the more losses in their premium but you see its bite when you see the win and you know. When you're paying out a hundred and twenty two million and then on top of that you get four point two may and our another hail house in well actually it's a fire loss in fort smith it kind of topped off our year after everything else happened and we were renewed we get go back to our reinsurers and say hey we got another four point two we got a day about but they are not year we also had jesse deal there was in excess of two million on a tornadoe we had some flash freeze claims that cannot lump together but when I flash freeze came through there was like two point two million that were spread across many school districts and some of that loss was also incurred with the absent program as well. So. You know when you have a last year that you're paying out a hundred and forty seven million dollars in losses and your premiums you know around thirteen million insurance companies. Tend to look at that and so you know what we did see from the standpoint of the you know just the state of the industry we're seeing and arkansas with schools what we're seeing nationally the cat perils the freeze the tornadoes the hails straight line winds. Interesting enough we looked at some weather data typically hale over three inches and dimerator we have one or two a year. In twenty twenty two we had seven storms in arkansas that resulted in hell that was larger than three inches. So the tornadoes were still there but the hall and and again twenty twenty three is just racking up right there behind it unfortunately. Well we're also seeing there is the inflation drive a custom material if any of you have done any kind of construction project even building the deer stand is calcium fortune to go by a lumber right now. The valuation that was kinda used to be almost in a new high schools and sept prior to two thousand nineteen or somewhere in the two hundred dollars per square foot that was actually a number of that facilities was using for their partnership funding. So why we're seeing now when when. When the wind lost happened you know we asked several contractors and trying to estimate that loss for our insurers what would it cost to build a high school. In the day's dollars. Three hundred and fifty dollars a square foot is what they told us but what we're finding is that slow. Probably to rebuild that high school with current code construction methods it's going probably be somewhere between three hundred and fifty and four hundred and fifty dollars square foot to rebuild that. So that's one of the things that you've got a look at is insurance companies are looking insured value so not only are we having to manage rating creases were also having demanded. Increasing those values of what we're insuring they'll still district for so that we don't run into any county insurance penalties and that we've got enough money there to take care of them during that bill. One of the other things that happened is the reinsurance in limited capacity i've been in its business forty four years I haven't seen the lack of capacity since early in my career in the late eighties early nineties this was something that we somewhat anticipated about four five years ago but what's happening is insurance carriers are less willing to put their surplus out there on the hook. So for instance the. Harry and harry and colleges. Up until two thousand nineteen they had one carrier that was putting a five hundred million limit out there. Same way went for the absent program you had one carrier that was putting a five hundred million dollars limit out there is the aspa I always design their program a little bit different from the standpoint of layering and what has happened now is in two thousand nineteen that carrier backed off capacity they dropped it from five hundred million to one hundred me and then now they're down to twenty five so what happens you gotta go replace that so for instance this year seven one all these programs renewed seven one two get harriet to their five hundred million loss limit it took thirty insurance carriers. And in slight now. Perhaps it it took twenty eight carriers to support their five hundred million last limit. For aspa it took thirty four carriers taken on the seven hundred million dollar loss limit and a SBA does carry a higher laws limit and will in a reason why we're showing this. As far as the you know the snapshot of schools two hundred and fifty nine school districts in the state of arkansas you get twenty two open enrollment charter schools you get fifteen educational cooperatives as far as how the programs break down now you'll see that arkansas public school insurance treats absolute their sixty seven school districts one open enrollment charter school ten educational cooperative you're looking at nan billion dollars and total insured value and they've got a five hundred million our loss limit the insurance rate on that is about seventeen cents for a hundred the program rate on that is about twenty five cents for hundred arn south school boards association has a hundred and seventy six districts to open a roman charter schools five educational cooperatives the total insurer value is sixteen billion their loss limit is seven hundred million and a reason. Asba user seven hundred million because of the concentration of risk right here in central arkansas they have little rock school district brian school district north blasky up plastic county and then they have jacksonville so there's a lot of value that sitting right here lower oxygen districts over AB and to insure value so we just want to make sure there's enough limit to take care of insurance rates is about eighteen cents for hundred again you're buying higher layers but the program rate is right in their consistent with absolute twenty twenty five cents you know it was a tough renewal you know I know one of the the criticisms was as well as the district skidding their program so light. It's a standard practice by state rise management and a SB m all of them reindependent that we try to buy these programs so they try to buy their program we try to buy the asba program by may one. Have it bound. Several and that way we can get quotes out to districts. Because of the lack of capacity we were sitting at the end of may and we were close to having a program done and then we get bad news the bad news was that we thought the wind claim was going to be about eighty five million we get the new report and they increase one to a hundred and twenty two million so our upper layers over a hundred million they said how we're in a burned layer now we thought we're out of this we want to reprice. So everybody had to reprice there. Just to can I give you an idea it was june thirty before we had all of our layers committed to by insurance companies. It would just drug out and we didn't have all of our layers. And support in our program until june thirty absent was in the same same situation they had commitments on that date and they finalized and right after the next week but it was right down to the wire before the insurance companies would actually commit to the programs. You know you can cannot look at retentions as as a way of saving money but what you're seeing right now in this market is you're getting forced retentions and other words what's happening is. You know. Went and held adopt was were coming in on certain risk not on every risk now went in held deductibles are coming in on every risk it's either a percentage of a flat dollar and we're seeing that in other. Other businesses I mean. Hospital institutions i've got a risk that's got a six million dollars when in hell reductible so that you're seeing that being forced so it's not showing up in pricing what it is is they're trying to control that loss for it show so you so that's being forced but also you look at the burn lawyer again prior history shows that the burn layer was in that you go back to the earlier slide that there was a burned layer there that really was a ten million. While I was sudden now where you have tornadoes coming in and hitting and and hail storms are hinging ten and twelve me and that burn layers now moving up into the twenty five and fifty million dollars so you can look you take more retention. All you're going to do is be in that burned lawyer you can't get high nurse if there's anything you take. You know you go way up and maybe participate at that level where you're a little bit further removed from the chance of having a loss anyway. On the last line here in summary. Should the committee decide to go through for you know a risk consultant contract our professional team is ready willing we're in house and local. We have a analytics team you've seen some of them. A manner. Fraction of what that thing can do and today's presentation. We also have in house kat modeling so that we can take all the thousands of properties and when you when you really look at this and model these risks were breaking it down to playground equipment two pressed boxes to dug outs the main buildings so we're really looking at individual and we're doing geo coating where we're looking at that from a same point of actually doing land longer to let it to so that we have a good coding of that but we're molling that for tornadoes straight land win and what do you use is for this help says. Really come up with a lawspit of what we think scores will have in this area as far as tornadoes straight land wants hail storms we do have a risk control staff and it's interesting both programs absolute and asba have all schools on a rotation so there's boots on the ground physically violent visiting these schools every three years in a rotation what you're doing is updating values checking for addition installations trying to keep the the statement of his home again all that staff resources local in present can ask this and both hold a risk and assultants license with the argument so insurance department page twelve of our page response hopefully i've had an opportunity to read that it was like fifty pages but go to page twelve in those three pages were outlined and stepped by step action steps that we plan to take with the objectives that we're trying to achieve so that we can stay on the timeline the challenges to stay on to have the final reports to present. In our fee structure in our attachment there's some options there. And again should you want to take harriet out of the study we've accounted for that. As we get into and meeting with you on weekly basis if it's determined that the actual area studies not warranted we can pull that out. We did put the captain feasibility and our proposal you know when you talk to a lot of this insurance agents they're on top captives and it sounds sexy and all this kind of stuff right because you're a government entity you've already surpassed that you got trust funds with the hire ad and with the absence so there's no tax consequences or benefits from doing a captive and you've already got the funding mechanism and in place so a captive really has no benefit you very surpassed that with your trust funding so that's why we put it in there just because we don't want to leave it out we would rather put it in and explain it and reduce the fee parameter that's a new tool that's an industry right now and what that is is it doesn't go into. The construction occupancy or whatever basically it looks at historical data and looks at the. Probability of earthquake happening or hail storm happening or straight line win you pay a premium and then there's a reduction there that you know like. If you have an earthquake if you have an f three it'll pay fifty percent this is. Fifty percent of the policy limit whether you have damage or not if you have an f it pay whether you have damage or not is just a parameter insurance product out there that you can find for tornadoes when hell but again should you decide to proceed we're willing enable. Thank you committee i'm not open it up for questions and I think. Think i'll start it off. One thing we're looking for is right now we're sitting with two different unities that offer this insurance or one in a deal offers it to state of agencies and some higher ed institutions as well as catherine twelve schools. What we're looking for is someone to come in and help us restructure those two energies into a way that's more predictable for schools and more predictable for state age sees more predictable for us hire it institutions and maybe a a situation where the other hire and institutions buy in so we end up covering all stayed into under under an umbrella. We're looking for somebody that can tell us how to structure that could tell us what kind of retention amount needs to be put there where the re insurance needs to come from how hard that that that self insurance level needs to be an we're looking for an expert that can set into those meetings set up a tarman so if you could take a minute and kind of walk through how you see that structure how you see that coming together and what kind of time you guys could put together on that. But what we take we have you do currently there is as as you said there's two programs I would I would venture to say that there's there's three programs out there right now you have the program again that has all the state agencies and they hare and I believe all of higher aired and arkansas is in that program now along with the state agencies so there's not any outliars from the standpoint of area they're all in their program and that's a separate program then you have a program the absent program which is the state program for public schools and again that's what we were trying to articulate just a little bit about what you have there and then asba has their program that was model many years ago a lot after the absent program at one point time the apps of program was under the department of education it was fledging and then it was handed over to the state insurance department so to answer your question. You have this is what we do every day we're into large property in a across our footprint of cadence insurance it's just not arkansas that we're dealing with we're dealing in the with this and other states so the first thing that you have to do is get the data and in in the proposal the response on page twenty one we cannot outline that the more data that we get the better so if we could get ten to twenty years of data again the information from the state programs is is for your ball and and available aspa that would have to be a cooperate agreement but we had outlined the current programs we would provide the schematics and we've already started some of that as far as the lightering in the different insurance companies that are involved but again with the analytics the modeling the actuarial study that's exact exactly what we achieve is determining those loss levels and what you should fund those different loss levels for and is it better to go out and buy insurance that's cheaper to find that level or is it better to fund it in a trust. And that's really what you do there and a lot of times is insurance is cheaper for instance. Fifty x of fifty on the current programs you're only you're taking fifty million dollars for the risk and you can buy that insurance for about three million dollars so do you want to take fifty million dollars or the risk in your program. The way the storms are hitting now like a win you'd hit it or do you buy the insurance the risk reward but we can outline that and show that actually what the cost of insurance would be what it would what you'd have to find in the trust it. Take that over a period of time you can fund it every three years with a confidence level of ninety percent in fund every five years as you increase your confidence level you will actually go up and what you have to fund therefore but if you know but our recommendation is that you would always find it a ninety to ninety five percent confidence level is higher but that also protects you and somebody is not running in your look and for an appropriation of money to count a cover losses you want themselves sustaining so we have that ability we have their relationships. Can was in london in january I was in london in march we're meeting with the london underwriters we're talking to them about arkansas we're talking to them about arkansas risk they're all about relationship so as we go through this process we can get them to give us indications at different lawyers. So. Internal bring one additional point that represented world laws question is. We can absolutely look at theirs take the analytics that we share on the individualized basis and look at it more comprehensively across all and then come back and provide the pros and cons because the outside of just looking at them to get collectively from a premium standpoint one important element here is that individual deductible every every institution whether it state agency where the tired whether the school district has a deductible and so come back with a list of pros and cons for you to evaluate and communicate the pathway forward whether it's one or whether if grouping by size that may be another benefit where right now let's say higher air they're all at hundred thousand two hundred for two thousand in a deductible structure collectively there may be benefit to having larger institutions that can afford that together because that's not something at the school districts may be able to do so coming back with answers and solutions and data to share related to comprehensively here's what it looks like you hear different options and then here is the mother options it may be worth considering when it comes to looking at these similarly situated as they may be particularly when it comes to size and budget affordability to do it because sometimes blending those into one program there benefits but there are the pros and cons and making sure that we would share those with you as well as we see them no not I think that's great and I think the way to do that maybe as we go through this is through the rules process and let me interest department and have the ability to bring that to us in rules and not dictating it in an actual statute cinder over new recognized for a question. Thank you mr chair just briefly what you were discussing if if this became a state program whether be the ability to I guess ab transfer there's those phones right now they're they're residing with the school district themselves but put that towards some sort of as state. Deductible find. Have you seen that before in the past with other states. In order to lower premiums. There there are some states that have comprehensive funds available whether the south carolina or west virginia those are two that are very comprehensive day and georgia as well a lot of those state the the basis by but behind which they have come to that decision is large to drive by the tort exposure in those states so what they do not have southern immunity protections and laws to the degree that we have here and so there is a significant element of funding that they can drive for that tort risk to them pool with the property risk to provide that larger pool there are ways to do that we have I want to right now within the state of arkansas we have sort of miniature versions of that in that there are these trust funds within the apps of program within the higher emit program and within the school board where there are there trying to help alleviate some of that pressure to get to contain that cost one of the big issues in the in the insurance marketplace today right now is as you're evaluating where we're in the line to draw that you know your face with the trade of the insurance marketplace saying okay well for more retention five million a more retention we will provide a cost savings of five hundred thousand dollars so there's an is not a one for one right now and unfortunately when you look at whether bill mentioned that burn rate that burn rate being wear the probability of having claims occur as at its greatest you really think that's going to get burned through per se is going to occur and so having that part of that that that analytics and in in the valuation the same okay is is this a trade worth making of that extra five million to reduce the premium savings by five hundred thousand in once again please those are not actual numbers that's representative but yes there was to do that and then one follow up question in your taman on page fourteen of your response. It talks and you did briefly touch on their travel to lloyds of london and meet with underwriters to discuss program management and build reporter and support can you just explain to me why that travels or london would be appropriate and important. You know what you find with london is there very much are they. They like the contact and we have found with our experiences that if you sit down and from the underwriters and and when you talk to london you get lloyds alone and what you might have is under that layer or that limit that they're providing there may be twelve carriers are twelve cynicates that are actually participating at some level there so there are very much into the relationship they want to hear how your controlling rears how you're managing how you're getting your you know an insured value right and they want to look how you're managing the program and they it's more of a face to face conversation more so than it is in our domestic markets so they really want to have a long term relationship they want to understand what's going on with the risk and we have found that establishing the relationships. Directly impact favorable pricing it's just the way they operate you know the the thing that we're doing there is we're turning that meeting in with some others that we're doing for other accounts so it's not really a high cost or charge that'll be put back forty and again it's almost like a speed dating when we when we go there we have three days two days i've just backed back to back to meetings and we're talking about the risk but it does. Impact and give a favorable pricing result on the and I will mention on your first question part of this also was working with the BLR to look at potential legislation or whatever in that something that is part of the scope that we would have to look at to see how the current trust funds for our air and the absolute program could be could be might be merged or some kind of document that's prepared that allows the merging of those legislation and that it allows the merging of that those funds thank you. One one no other thing I want to add into discussion looking through the proposal members so you guys can follow me along to go to the bureau docs bonder they're gonna have to travel part of the experience when I go to the last pcr's part you gave us three options and at the end of the three options. You made it clear that these options are all inclusive except for the travel portion when we do a contract through policy and third bureau. We have a max allowed okay so we need you to give us a number of what you think travel could be so that we can set the macs allowed contract price. So if you think you're gonna spend five thousand dollars and travel we need to add that to whichever option we go is so we have a max. Okay we can do that you need yesterday that today we're right near black right now with an ex few minutes a few minutes note no process but we're going to make it yeah I got a number. Mr chairman yes sir you recognize our maximum travel expenditure would be three thousand okay deal can we get that added thank you thank you guys at it's just really important that we have that max amount now what we use is between how we go through the process and it's not i'll say this because they've done this numerous times is not a get it's not against the record if we get to the end and we need another month that we go back and add some money to the contract we've done that before but it's never been done for travel it's been done for extending other contract so so make that is clear as we can any other questions from the committee. Cn we want to think you guys represent your hard work on putting us together and will get back to you guys with the decision for the end of the day thank you. And committee will give a few minutes recess to get meadows adams in lee insurance incorporated in here so I would take two minute break guys go the restroom if you need to. He started. We're here from mr cow morgan and mister roberts lee if you guys would introduce yourself for the record and you're recognized to present. When a mike turned read it it's good it's okay yes sir my name is robert slee president saver ceo of matters items and lee insurance just down the street here in the in the river market don't know if you're familiar with our agency or not but we've been in downtown literate for over a hundred years since nineteen no no my name is kyle morgan i'm from hot springs I have. A background and political science and public administration and I run the public energy stuff out of matters amazonly. And yeah. Yeah so okay so just a little bit of background on the agency we've been in downtown literacy as I said since nineteen oh nine we're one of the largest privately held property and castle insurance agencies in the state we have a mix of business that includes real estate we do lots of large real estate portfolios across the state all of our work at this point it's been has been primarily private however it's applicable to public area as well we do construction transportation manufacturing and all of those industries present different challenges that we face in the market so my company has a long history of providing insurance solutions and competitive insurance solutions to clients throughout the state of arkansas so having said that we'll move to our next slide ok so i'm gonna turn things over to kyle and he's going to talk through a little bit of the research that he did prepare for for this sir for this. Awesome so we believe. Like after our experience with a lot of the research that whatever answer comes out here transparency and collaboration really needs to be at the heart of it there is a stark difference we've known for five business days that we had progressed in the bid and there's a start difference in trying to acquire the information to kind of like former presentation and stuff before and after an. We we we talked to randy robinson at the insurance department very helpful man he was super like eager to show us how it's currently working and explaining everything to her so that we could like former presentation. He did a great job and we want we think that future the future answers out of this and collaborations and support guys like randy is doing a great job and we just really want to build this one making a public issue a public issue because you can't walk in a building anywhere you can't walk in the insurance agency anywhere where their kids aren't in a public school that they're not impacted by raising rates because that's less money that could go to the cafeteria food for somebody or the sport seems or whatever so we really fully believe will participate with whoever we're here for the right reasons we own a work with people and we see a problem that we're going to solve and amount how this goes we intend to help research and to the best for ability trying creative solution. In debate and said we know that current initiations right now is the arkansas public school insurance trust in the school board associations and they have been bill that proceeds on insurance they're like the only of like two hundred and thirty four school districts in arkansas to do that. And we spent a bulk of our time focusing on the absolute program. Because of the short span of time that we knew that we're going to progress further in the bid process in radio robinson again great help in I really just want to give him his flowers he showed us a lot about how works and we know that as a public program itself is probably the best for us to focus on oversight in the best to link have a potent approach soon an opponent solution. Okay so it's call said we had you know five days to respond to this we come at this with you know basically none of the the nolider history or information that had been involved with absolute aspect or with a bent involved school district so it was a a lot to attempt to put together some type of meaningful presentation for you to consider when we didn't have as much information as maybe some of the other people that had respond to the bid having said that we chose to focus on apps because number one we knew that the arkansas insurance department would probably be eager to provide us with information and and and they were in the uh they did that and so we're able to to really focus on that we can't speak much to what's going on with asber but you know again given the time in the information I think that we could put together some meaningful thoughts on that program as well having said that i'm just looking to historical view of apps. Really it's been a very successful program and talking through it with randy and in amazon that. That are friends at caden's insurance that we're here before us did a really really nice job of explaining the market conditions and explaining the storms and all of the things that have happened so we're just not going to spend as much much time with that but we're all dealing with the same struggles across the industry so feel like that the program has worked really really well uhm they went through a twelve year period of time where they maintained a flat rate structure for all of the schools that participated in the aspect program. And in the last five years there's been an increase and claim activity and then also simultaneously in increase in insured values that are. Okay insured values that have hit it the exact same time which is really caused it's caused these rates to increase so rapidly so the market conditions are dictating the strategy change in what we've attempted to do is just to give you a general idea of you know something that your might consider as a strategy changes we're not saying that this is exactly what we're going to recommend we haven't had as much time as we'd like to really do our homework and research all of this but. What's worked we think that the absent. Program and we think that the people at the argument so insurance department have not a fantastic job of working well with school districts. The. It it really seemed like they're very proactive. In the procurement procurement of insurance and we feel like that that's a really really important thing to be very proactive in the placement of the actual insurance program and best we can tell the uh rainy had been very very active in that I think had done a is get a job as anybody can ask for someone to do with the market conditions that we're in. Randy made it very clear that there is no guessing what the absolute program there is people sent to every building and every school district to make sure that every square foot was like. As it was on paper there's no fat there's no nothing they don't wait around for like problems to arrive they were outreshopping you know frequently for these places and that's something that in the insurance industry a lot agencies do not have to do. And yet the very proactive and more than just a procurement but also the appraisal and making sure that they're not getting lazy this is not a lazy program are they they have kid actual aerial services at the department and get appraisal services and I think the risk management services are providing a good best we can tell claims have been handled well and been closed out as quickly as they can there hasn't been a lot of ibnor or anything like that over the program so next line so what's not working and are opinion. The the current structure of the absent program is there's a two million dollars self insured retention that is is funded through the program with in attach are two million dollar attachment point where it's reinsured above that we feel like the sir that's in place is is too low at this point while it worked pretty well for about a decade going forward the SR is just just too low second thing there's not any state funding for the program now we're aware that in it was a self sustained program up until now we're aware that the governor has provided some discretionary spending to address this problem we don't see this problem going away if it is a without some state participation so we think that there will be need there will need to be state funding going forward and we want to be wise in the recommendations that we make where those dollars go. Third thing there is a bit of a one size fits all approach and I don't really think that this is something that is. You know unusual about the absent program I think this is a very very typical thing inside our industry that it. It it really is in really has had an adverse effect on large property schedules so any time that you're trying to place her handle a placement of a large property schedule if you have the the smaller locations are always hurt. To the better meant of the larger locations when you get into a tough market and so if you look at and i'll get into the lack of competition in the procurement process on the excess insurance so if you'll go to the next slide so if you work at the just a a couple of couple of examples here so we talk about a one size fits all approach. And you look at two different districts to participate in this program one of them is the hammered school district in south east arkansas and it has a approximately hundred and one million dollars of total insured values in the program and then you have the springdale school district in northwest arkansas with one point one five billion dollars in total insured values in the program the hamburg school district it's in a part of the state that doesn't have as much convective activity or storm activity as the the much larger one that sits in northwest arkansas. And if you look at in your. If you look at the rate the hamburger districts pay in a twenty five cent rate per one hundred dollars of value where the sc- springdale school districts is paying a twenty six per one hundred dollars a value but when an insurance company is looking to insure one of these they look at the the the higher values higher concentration in a much much more difficult part of the state to provide insurance coverage because of the convective activity in northwest arkansas now want to be clear big fans in northwest arkansas have a son that's in college there were opening an office on block street variable and we are very proud of what's taking place in the northwest part of our state however their other reports of our state that you know don't have the tax base don't have you know the uh the maybe the same type of environment and community that you have in northwest arkansas and a growing area so schools like hamburg another school that was a dewit is another example of a school district that is really you know impacted by having a one size fits all approach so what we would do about that and if you look at some proposed proposed solutions and I sure you given more time and more information I think we can do a much better in much thorough job than we've done but this is what we've had to work with. We think there needs to be state funding of us self-insured retention. And the self insured retention that we're going to propose to you today is simply an example it is based upon the loss data that we were able to take a look at with more lost data that retention may go up and make a down can't really say. But we also think that grouping of similar size districts during the procurement process could potentially provide some dividends and in in rate and rate control the third thing is easy and participation and access requirements for the different districts so for example that we would recommend that the way that it structured now that if you participate in apps that you participate in the entire program you can't just which makes sense because of how it's funded but once the state begins to provide funding for self insured retention or self insured trust so to speak that would then allow people to participate in that portion of the program but then go out and procure get enough hamburg wanted to go out on their own and look to procure insurance reinsurance above the self insured retention that they could do that on their own or there would be an option for them to participate in the state program so we think that allowing districts to take competitive bids in the excess instead of having it controlled by one insurance broker we think that that could could create some opportunity for some of these districts to improve their situation so we would ease the participation and access requirements if you look at the next slide I don't think that any of you can read anything that's up there so we've made a much we've condensed it but basically the two columns to the right show the loss ratio in the losses inside the absent program over the last fifteen years so this is some this is a snapshot of the law stature so if you work at the top the tops in from two thousand and eight. To two thousand and eighteen that's with a two thousand dollars self insured retention you can see that there's only been five of those years where you actually would have had insured losses and then if you work and and that's when the program was really performing really really well and was a self sustaining insurance program if you look from twenty eighteen at twenty twenty three the loss is really got out of hand there was only one year. In that entire span of five years where you didn't blow through what the self insured retention was so for the insurance companies they look at it is almost a guaranteed loss if they write the coverage and that's part of what's also driving this rate it's not just the increase in values and their increase in uh the increase in insurance rates that striving this with storms so go into the last slide so if we're looking at a moving to a state funded and we picked a ten million dollars selfdashinsured retention and there's three different levels of funding that are in this one of them is a five million dollars level the second one is a seven and a half million dollar level and then the other one the third one is a ten million dollars we're aware that the governor is just allocated eleven million dollars towards the problem so you know I know that's a lot of money and we understand that but we also understand that the goal here is to control the cost for the school districts in the only way that we believe that that's going to happen is to increase the self insured level to where we're not subject to insurance company market fluctuations and that's going to be to take more risk they'll eleven million dollars that the governor just allocated towards this program went to the insurance companies it's gone you're not gonna get it back. So the only way to keep this money in control this money is to put it in inside a state funded self insured retention that this program can operate off of because you don't ever get money back from the insurance companies anybody that small insurance knows that so having said that if you look at the first example that we gave you it's a five million dollars example the program doesn't really work at that number if you look at it you got five million dollars in state funds one point eight million dollars and losses that would fall inside the s hour and the twenty eighteen twenty nineteen year that gives you a three point eight eight million dollars three point one eight million dollars surplus you carry that over so you can work the math through this and when you see the years where the uh where it's blacked out that shares where we blew the state find um it's seven and a half million dollars the second example that we're giving you. The math starts to work in and truly this is a math problem this is not any more complicated than understanding where we can find where we're trading dollars with the insurance company so that we're trading the dollar the arrow and then we're not trading a dollar for a dollar but we're trading a dollar for thousands of dollars tens of thousands of dollars hundreds of thousands of dollars with the insurance company and that's why i'm having the insurance company's attached at a point that's above where the losses are occurring we're going to insure for the catastrophic risk and we're going to control the claims inside the self insured in inside the self insured retention so currently the way it's written as a two million dollar sir. This problem is not going to go away with two million dollar sir and there has a five hundred million dollar limit so currently. Spring dell and in school district has a six hundred and fifty million dollars uninsured deficit at the moment now that's probably you know you look at the spread of risk but look at the students some of the storms that have come through there I doubt we would ever have a billion dollar laws up there and I hope that our state never endears anything with that but you know I was on the ground after hurricane katrina I handled thirty five million dollars of losses in new orleans and miss sippy and I was in job in missouri the day after the tornado hit there and I handled twenty million dollars of losses in joblin so i've seen that these things can happen and i've seen the devastation that can occur so this is not something that we don't understand it's not something that we can't help this committee with her heart is in the right place we don't have results to defend. We haven't been participants in this process we're here here to help this committee find solutions for the school districts I will be more than happy our team will be happy to work with anyone that has responded to this rfp my friends from cadans bilberts in kennestus i've known for twenty years their great friends of mine we would do anything that we could help anybody that that has a solution to this and we will listen to anybody that has a solution to this. Our agency has a reputation in this business community that is absolutely stower and how we conduct ourselves and how we operate our company. We can be an asset to the state and we can be an asset to this committee if we're chosen for the ad and awarded this this bed. So having said that I can answer any questions the only eff. I really appreciate this last large that's exactly what oh I had pictured in my head since june fifteenth when we found out that we were looking at this type of deficits in this type of increases. I would say that the number of sr that out this hour that I was looking at was more between fifty and a hundred million looking at state surpluses and looking where we're at it wouldn't be hard for us to build that account on the front and then let us you know build it into premiums going forward to make sure that it state fundamental whatever level that we saw fit um so. Just want to say kudos to this last lot cause that's exactly we were looking at and myself in a couple members of the leadership I discussed something like that thank you and like I said with more information available and I do think that in in all i'll do respect to everyone here to try to respond to this in that shorter time and it did for this amount of information there are people that there's very very good insurance people in this state there's very very smart people and there's people that really really care that want to help in jeff if you give us 50-100 million dollars to work with i'm sure that we can figure that the solution this problem out so what you will give it to you is put in an account for us so I what why don't you why don't we start with ten and i'll see what I can do yeah we're scared happy I just wouldn't when you look at the losses and you look at the amount of money that was needed and insurance that was already lacking as you mentioned was springdale yeah oh and when you looked at springdale the way they were buying their insurance they didn't see the increase that everybody else sock as they were buying outside the market and I think they saw forty percent increase when everybody else was around a hundred seventy so I agree with you in the short amount of time that we had to look at this it it's it's been astronomical but we got to get it fixed at we spent labor day weekend or yet on this understand any other questions from committee. Sender or when you recognize thank you just m briefly you really just have i'm just looking in countercomparing the two proposals that you really just have supervisor price per hour two people as as that would be working on the do you anticipate like so absolutely so that wasn't really detailed in your deed to be quiet honest with you the focus of our proposal was chest to try to understand what what we were responding to as much as we could and not necessarily as much to come the number of hours and the number of people that would be working on it but the team would include myself it would include patty horton who heads up marketing for me also clint lamberth who is over our overall marketing for our insurance agency jeff who is our ceo and between those individuals that are would be involved in this you're talking over a hundred and fifty years of combined insurance experience and some some pretty some pretty well respected and hard work in people that are well known in the industry and then are public entity account executive cattle in we don't have a very detailed price proposal sheet because it's not about the price for us it's a small number next door number supervisors were not here for the money will call anybody at our agency that we need to help. Whatever we get out of it we get out of it we're not worried about that side where II appreciate that I just for me I just wanted to know like specifically do you have the people like in house or would you be sub contracting with me bunny or like that how's the actual warehold of acumen to be able to look at these different things I mean I understand you have people in marketing but that's different than my or look or not we're not seeking a proposal for marketing the plan it's really for creating fidition responses you know within our state governments ability to offset the risk that our school districts and the rises in the premiums that's what we're really specifically looking for and then. Do you have legal legal and folks on in your team that would help with the looking at current structures of different trust funds that may be existing or to help right legislation or rules that would need to be changed so you know it in terms of we do not have anybody on our staff anything like that that we do we typically have we have a firm that we have worked with that that's helped with that we've chosen not to bring those resources in house we've chose to work with the best people that we can work with if needed I will tell you in regards to the actuarial services we feel really really confident in the services that are already being provided after talking to randy over the arkansas department I mean these people are really really good and then a no cow has some thoughts on this issue that would be happy to share on kind of like the legal side the public and inside our assistance there i'm a graduate assistant at the ubank and i've been in communications with my department share the guides over all my stuff and he's told me I have the full support of anybody I can ring any of their phones at any time any advice knock on any other doors and they'll help me understand help me research so I have all those minds behind us as well. And I don't know that we have to reinvent the wheel with any of this either um in a this is night is something that we're starting from scratch on these types of programs have been in place these trust have been in place. You know there's other I mean there's a plus fine that's out there already for either environmental liability for other things that we work with so there's things that are in place and I don't know that you know those resources are resources there is necessary to have a successor give quality recommendations to solve this problem. All right but but if necessary we're willing to engage with whoever we need to engage with. That's back in from recess we give a few seconds for the audience to come back in. This. Members i'd open it up for discussion before I take a motion is there any discussion. Cnn representative. Thank you mr chair like I make a motion that moved to that we authorized that beer of legislative research to enter into negotiations with merals adams and lee for a consultant service agreement in cooperating in in cooperating the terms and conditions that are fee for education facilities property insurance consultant services in the consultant's proposal he response to the rp to be submitted to a or c policy making subcommittee for review with the elc having the final approval of the contract as my motion is to probably motion. I have a second from representative or sender history. Syne discussion on a motion. See a non auto's favorite sa opposed as have it with that we have no further business we stand adjourned.