ALC-Executive Subcommittee
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Senator Ben Gilmore
Unverified
3:59
Mm I All right, members call an executive. To order, and I think we'll start with, um, Ms. Thayer Chief legal counsel for the bureau.
Speaker 37
4:30
Thank you, Mr. Chair, Jill Thayer, Bureau of Legislative Research. You should all have in your packet a summary table related to the Sedgwick Claims Management Services contract similar to the previous captive contracts that you have approved. This one, summarizes the contract, um, it's for claims administration for the new captive program, and I have a summary here of the fees, um, I did highlight for you that the
fees will range from 800,000 to $1.2 million annually and, um, if you are OK with this, we would just ask that you approve it and give the co-chairs the authority to, um, authorize Director Gary D to enter it by emergency action. I'll take any questions.
Senator Ben Gilmore
Unverified
5:18
OK, members, any questions? See none then without objection. Um Thank you. All right. Um, moving on, next
time on the agenda state captive insurance program presentation by, um, Stevens and members, I would just, um, remind you we're, as we're bringing this to a close. This is something that's been going on, uh, that started with mine and Representative Eve's, um, predecessors, and this was, uh, Brought about in a in a as a way to find a solution to control premium increases for school districts and state-owned properties, uh, been quite the process and so I think credit
needs to be given to all of those who've been a part of that, this committee in particular, there's the executive committee and then, of course, our staff, the bureau, uh, Director Gary Eus there, um, and of course, now Stevens and uh can't forget, uh, per night, and, uh, Kyle and the work there. So anyway, I just wanted to make those remarks because I think it's important. And we acknowledge where we started and where we are now, and this is coming to an end, so with that gentlemen, you're recognized.
Speaker 41
6:33
OK, I'll start. Is that OK, JR? Yes, please. Um, so I'm Kyle Hays, I'm a principal consulting actuary at Per Night. I'm also the director of our risk strategies and solutions, uh, area. What I'll do is just give a little bit of the background, uh, kind of up until this point today and then from there I'll, I'll hand this off to JR at Stevens. So, uh, as most people in this room will, uh, recall uh what happened, you know, for the
commercial property program. There are 3 separate entities. uh, within the state, uh, all the way up until maybe 2020, 2021 renewal, um, you know, everything seemed, seemed to be going fine, but from the 21 renewal all the way up until the 24th this last year's renewal, the total insurance cost approximately tripled among the three agencies combined. Uh, my firm and I were brought in about a year ago to go through the, uh, you know, the process here
and essentially kind of dig in to see what had happened, um, and ultimately what, what could be done on a going forward basis. So, uh, late last year, we came up with a recommendation of 4 separate components. One of them was to combine the insurance exposures of the three agencies. A second was to form a captive insurance company to self-insure. Uh, the third was to have an independent actuarial review of the losses
and the exposure and the 4th is to continue with an independent strategic risk advisor to help with the state throughout this process. So that pretty much gets us up to today, and with that, I'll hand it off to JR Ed Stevens. Yeah, thank you Kyle for the background. I think
Speaker 43
8:22
one other thing to note is the idea and the intent of the captive based on all the, the, the work that Per Knight has done, the idea is to both improve efficiencies
with purchasing reinsurance or excess property insurance, which is what Stevens is primarily helping obtain, uh, obviously there's going to be a centralized claims and underwriting component as well as overall, it should help stabilize long term, uh, insurance costs for all of the districts, all the agencies. and all the participants of this program that we, uh, we have come to know as state captive insurance program will caught skip for short, um, you know, I think one other thing, as Kyle mentioned and alluded to the premium changes that were
experienced by all participants in the 3 programs. Um, there was a surge in wind hail losses and, and ultimately high hazard states, specifically Arkansas. What we saw from that were both rate increases, dramatic rate increases, as well as, um, imposing very, uh, difficult to cover deductibles and it was historically, uh, something much smaller, much, uh, much, uh, lower dollar amount, moved to a percentage deductible of the values, the property values. So when you
look at the the actual uh the market that if the schools and agencies were to carve out, they would most likely experience a 3 to 5% wind hail deductible per building, and that's on property value. So 3 to 5% of property value, um, was a separate deductible that, that was something that we were obviously sensitive to in addition to the, the premium that was being charged and the rate that was being charged. So what's the advantage of Skip? I think ultimately the long term, it's a long term stable solution, and that will
hopefully stabilize the budget for all of these participants, uh, greater control over claims and naturally we have due to the state's investment in it and the the consolidation of this, uh, they have removed the percentage when held deductible at the district agency and participant level. The higher eds are included, and so that in itself is a major win for the overall program and that's going to be supported by the captive insurance company that's been formed. Um, so what I wanna do is, we are here today to ask permission
and make a recommendation to move forward with a rate and deductible structure for year one with a little caveat on year two, expectations on a few certain items. So in your packet, you'll see that we, after the analysis of Purn, the involvement of all the parties that have participated, we are recommending a flat rate year over year for all participants by rate as a reminder, that is not the premium, but that is the rate charged on their building values. So rate times building
values equals premium. So what we're recommending that it any school should have a flat rate. However, if they changed their values. So if they had an assessment done, if they added a new facility, if they deleted a new facility, they will experience some level of premium change, but it should be modest in nature. Secondly, we're recommending year one, each school district, uh, as well as agency and uh higher education facilities all have and carry a deductible, a
maintenance deductible that's below the captive, uh, they vary in size and, and, and dollar amount, uh, we are recommending changing the structure to a minimum of 25,000 per occurrence per participant, meaning that it could be district-wide, it's occurrence-based, and a 50. 00 $0 per occurrence, uh, if their total insured values, i.e. their asset values are over $100 million. Lastly, uh, on the year 2 deductible structure, uh, we're
continuing to evaluate. That's the option of per night, the actuarial advantage, who's the participant in this to determine your two expectations on both deductible and rates. So at this time, we're not making any recommendation outside of there is an expectation that deductibles need to continue to be right-sided, and, and that, that detail will come in the future. But in summary, we're, we're asking permission to move forward with a flat rate. Um Sorry, I'll take one step back. The state agency recommendation
is to move to a $250,000 flat year one deductible for Allstate agencies. So in summary, we are recommending a, a rate be flat, which is counter to the marketplace. It's a, it's a good outcome for the program. Minimum deductibles moving higher, uh, to 25,000 per occurrence from their current status and 50,000 if it's over 100 million in value. And lastly, we're recommending all state agencies move to a $250,000 minimum deductible, and I'll pause.
Senator Ben Gilmore
Unverified
13:14
OK, members that pauses for any questions at this time. I see no questions. OK. All right, well, with that. Um, gentlemen, if you would, um, speak briefly just to the rollout and how you see that once this meeting ends.
Speaker 43
13:34
We have been, uh, coordinating with the legislature as well as the Office of Property Risk, who will be managing this program, uh, following the July 1st date,
uh, the expectations is all of the participants will receive in the next few weeks, a summary of the expectation for their, their both premium and their deductible. It'll be a clear email message and Obviously, there will be opportunity to, to discuss, uh, individually, so, uh, expectation is it very soon disseminate this information to each entity. OK. Thank you all
Senator Ben Gilmore
Unverified
14:08
so much members, 11 last. Question or comments before we move forward.
OK, then with that, I will take a, uh, Motion from the committee. Representative Ladyman, you're recognized. Thank you,
Mr. Chairman. Uh, I move that the legislative council meeting for the month of July 2025 is canceled. Jack, sorry. Sorry. It is. You got one?
to be All right, Rosen Lehman, you're recognized for the proper motion at the proper
time. Uh, I move that we direct Steven's Insurance to move forward with the premiums and deductibles as presented today and authorized at ALC co-chairs to approve the direction to Stevens by emergency action. I remembers have a motion.
Senator Ben Gilmore
Unverified
15:20
I have a second. Any discussion on the motion, seeing none, all in
favor say aye, and he posed, ayes have it. Thank you very much. Um, OK. So, now that we're past that, uh, we'll move on to the director's report. Mr. Garrity,
Speaker 60
15:39
if you would, please. Thank you, Mr. Chair. Marty Geraghty with the bureau. Um, the only item I have on uh my director's report is the July ALC meeting. Um, usually this meeting is either canceled or moved to another, uh, week due to various conferences that are occurring. Um, so this month there are
conflicts, direct conflicts, the week of ALC, um, in the past, there's been the option to allow the ALC subcommittees to meet and to give them final authority action authority, um, and then it's reported the following month to, uh, the full ALC. OK,
Senator Ben Gilmore
Unverified
16:16
members, you've heard that this is very standard that, you know, there's always something going on in July. So with that, um, any questions to the chair or director.
See none, Representative Ladyman, do you have a
motion? You're recognized. Thank you, Mr. Chairman. I move that the Legislative council meeting for the month of July is canceled. The ALC subcommittees are permitted to meet, to take up items that have an imminent need such that they cannot wait until the regularly scheduled August meetings of the subcommittees. The ALC subcommittees are permitted to meet outside the
regular, regularly scheduled ALC week in July, and all actions of legislative council subcommittees that would normally be reported at the July meeting of legislative council will be considered final. And shall be reported. To the Legislative council at its scheduled meeting in August. I think Representative members, I
Senator Ben Gilmore
Unverified
17:22
have a motion. I have a 2nd. Any discussion on that, any questions?
See none all in favor, say I, and he posed, I just have it. Thank you very much. Um, members see no other business. Thank you for being, uh, to support, participatory in this. I think what we did, I think it's something that we should acknowledge is very big with the state captive insurance program, so we were on to the next step with that and so I appreciate your involvement and, uh, uh, we'll continue to, to work and make this successful. Thank you very much. We are adjourned.
Agenda
A. Call to Order
B. Presentation of Claims Administration Services Agreement with Sedgwick Claims Management Services, Inc.
C. State Captive Insurance Program Coverage Presentation
D. Director's Report
E. Other Business
F. Adjournment
Documents
Speakers
Senator Ben Gilmore
Unverified
Speaker 37
Speaker 41
Speaker 43
Representative Jack Ladyman Chair
Unverified
Speaker 60