ALC-Executive Subcommittee

Just say Scott Peter and David. Good morning. I'm calling to order the executive subcommittee, um, Really quick before we begin, um, Since this is my first executive subcommittee to chair as The newly elected chair of ALC. I just would like to say thank you to my, um, immediate pass, uh, co-chair from the Senate, Terry Rice for his steady hand in leadership, um, appreciate that, and certainly, um, Representative Wardlaw, uh, as the house co-chair as well and would like to welcome my, uh, house co-chair, uh, Les Eaves and less if you have any, any words? OK. Um, well, again, thank you so much for being here. Um, we'll begin with Representative Luundstrom. I think we have um uh, Scott, Peter, and David online to discuss a, um, Contract that will be considering. So in Lustroom, I'll, I'll go ahead and begin with you and you're recognized. Thank you. Today is a really exciting day for me. Um, every time you go to run a bill, you get a DFNA sheet that tells you this is how much it's going to cost or it's gonna be a loss to the budget, but we never find out. What besides static scoring, do we need? We really need dynamic scoring. We need to see not only the front of the picture, but the back of the picture, the side of the picture, because we're asked to make multi-million dollar decisions. With one economic impact statement. And that's simply not enough, um. With me today is Doctor Peter Peter Evangelius, and I'm sure I just butchered his name, so I'm sorry, Peter, and David Ingram, and they're gonna help answer questions, but. I would ask that we consider purchasing this so that we can make better decisions as legislators that have a better economic impact. I want to run the absolute best bill I possibly can and never leave here and look back and go, oh no, I didn't have all the information that I could have accessed. So with that, um, I'll allow Peter and David to introduce themselves for a moment. And Scott, sorry. Yeah, whichever one would like to begin, you're recognized if you would introduce yourself for the record, um. Yes, thank you. I, I'll begin, Doctor Peter Vangiolais, a senior vice president of Economics and consulting at Remy. Uh And I've worked with Arkansas and with BLR in the past, uh, and we certainly hope to continue that in the future. Thank you. Uh, likewise, my name is David Ingram. I'm a senior economic associate with Remi. I'm very excited to be part of this. I'm Scott Laer. I'm an assistant business administrator at Remi, said to be part of this as well. Thank you. Thank you. I'll open it up to questions. I think everybody pretty much understands the difference between dynamic and static scoring, but if you don't, I'll be glad to give you a couple of good examples. Any questions from members, any questions? I also want to thank members, um, Senator Hester and Senator Demain and also representatives David Ray and Howard Beatty and Les Eaves and Speaker Evans for getting on conference calls and spending a lot of time and Marty too, um. Just asking questions and digging deep on how we can use this type of computer programming to assist us. With that, I'll open it up to any questions. If we have any questions, if we have any questions. Uh Members, do we have questions? Uh, coach E Eves. We'll, we'll come back to you, uh, coach Reeves. Robert, I don't Representative Lindstrom, I don't know if you can answer this or one of the fellows there, but I noticed that one of the things that was added to it that I didn't remember in the beginning was a command line interface. Can you explain what that is and why we need it? So, um, uh, under, I'm, I'm happy to jump in from, from the Rami side, um, we'll defer, of course, to representative Blundstrom if she wanted to say anything, but I'll go ahead, um, so we had not anticipated that this would be a request, but when, when the BLR team was brought in, uh, one of the, one of the analysts has previous experience with Remy in a previous role, and he was aware of the command line. Interface, um, capability and has requested to at least explore it as an option, uh, it's a way to essentially make Make the process more efficient for running a number of analyses as efficiently as possible. I think they're, they're thinking is to try to be able to address as many bills as They need to be able to during a session. Uh So that, that is the, that's the request, that's something that we've been exploring with them this week to see if they Would, uh, would like to have it, um, just to, to make sure that they, you know, understand the full technical capacities, um. We're certainly happy to work with them. Either way, uh, whether they use it or not, uh, we'll be there with full support. I think that their thought is that potentially could make their job a little bit more efficient. Um, and again, that's something that we hadn't anticipated, so that's why it was in addition late in the game when they asked about it, um. Um And you're happy to discuss further, but that's that's fine. Thanks. All right, Senator Hester, you recognize? So, so I'm gonna be supporting this, but I, I do want to clarify a few things that, that we've asked in the past. Your information is only as good as the information that you're able to put into the system. Are you, are you confident with the info with the information that you that you're able to with the inputs that you're, that you have in the system. Or the software Uh yes, we are, uh, yeah, we use the, you know, we use the best data available from a variety of official data sources, so that populates uh a uh very detailed uh baseline forecast and very detailed parameters of the model. Um, the, the model is also built from uh decades of academic literature and in in the the model is reestimated to make sure that the parameters are up to date regularly. The data is updated every year. Uh, so yes, we are confident in, in the model and the mechanisms behind the model. OK, uh, uh, how quick if, if, if, if I have a, if I, if I have a bill I send to you, what, what is the estimated turnaround that I can communicate to members. To, to get a response. Uh, yes. So, you know, and, and, uh, and just to clarify, so this will be, you know, obviously with, with our great support, but this will be the BLR officially running it, um, but in terms of the turnaround, uh, I can speak to what it would be if it were, if it were our team again, I can't speak for the BLR, uh, but generally speaking, a um A, a bill that's on the more straightforward side, for example, uh, a decrease in the top income tax rate as an example, that's something that I worked on in a few years ago, um, you know, that would be something. There's a static score that's inputted into the model and it's run and it can be turned around. Uh, in probably. Maybe a day, maybe less, maybe a little bit more, but in that range, If it's a bill that's a little bit less turnkey, it may take. you know, another, another day or so, um, to do a little bit of appropriate uh background research in order to develop estimates, to develop the model inputs. Um But it's, it's Yes, OK, yeah, and and yeah, um, from our perspective, our workload that we're putting on our staff also will, will, will, uh, affect that. I is there, is there any, I recognize we have the software, so there's no, um, Uh, there's no cap that we have if we want to use it 1000 times or 2 times this session, there's no cap on the amount of inputs or, or. Um, um, study impact studies we can run, correct? That's correct. There's no cap. Thanks. Uh, Speaker Evans, you recognized? He's chair, uh, I concur with Senator Hester, uh, Supporting this issue, it's something that I've appreciated the diligence of, of Remy, uh, in answering all the questions on, on the many different Zoom calls and conference calls that we've had and the questions that have been sent to you, I appreciate the promptness of always returning those answers back. One thing that I'd failed to ask, um, earlier that, uh, is in the event because once you, how you've addressed the, the modeling. Is once that model for us is built in the event that something were to happen, uh, whether it be a natural disaster, whether it be some big turn in the local economy, uh, some big shift in population, anything like how fast can we get a, um, An update to that model to better reflect current times. As opposed to setting the model up today. Yes, certainly. Uh, so, uh, I'll note in the, in the model that will be delivered, there is that business as usual forecast that's built in. Uh, there are, if needed, uh capabilities that we can assist with updating that, um, each year, the model will be updated and a new version will be sent out, uh, as long as, uh, as long as the maintenance payments are current, um, so that will be an automatic thing once, uh, you know, once the new version of the model each year is ready, it will be sent out in in between, uh, uh delivery. of, you know, different versions of the model, we can assist with any major updates. Uh, I will just note, um, that those updates will be uh. will be more relevant in understanding the, the levels of any key economic metrics, uh, they generally don't have as much of an effect on the size of an impact in the economic impact or fiscal impact analysis. The the idea there just just to say is an impact is what is the difference between Uh, that business as usual scenario and this in a new scenario, for example, a decrease in the top tax rate, looking at metrics before and after that. And If you were to change the business as usual forecast to reflect a new major event. Uh You know, there would, there may be, you know, a kind of a level change in that baseline, but that will generally kind of raise or, you know, the the the new forecast that would come after the policy would generally move with that, uh, not exactly, but pretty close. Uh, so there, there may or may not be always in need to make that forecast update in terms of doing the impact analysis, but we're always happy to help with that, uh, because I know that some clients do require, uh, those changes to be made even if they don't have a large effect on the impact analysis part of the mission. So simply outside of a special session where this body convenes. In the odd years for a general assembly and even years as a fiscal, these models could easily be updated with the business as usual. Changes from some type of of of occurring event so that when this body did convene outside of a special session, we would have complete updated modeling to be able to make more accurate decisions. That's correct. OK, great. Thank you very much. All right, members, any additional questions? Uh, set of rice, you recognized, I have a motion, Mr. Chair. All right, see no questions. Let's hear your motion that the bureau is authorized to enter into a contract with Remy for modeling program at the price not to exceed 192,000 plus taxes for the first year in 48,000 plus taxes for annual maintenance. All right, I have a motion. I have a second. All right, all in favor say aye. Any opposed? Eyes have it. All right. Thank you, colleagues. Thank you very much. All right. And then, um, I'm going to turn it over to Director Gerty to discuss, um, some of the procedures related to this. Thank you, Mr. Chair, Marty Geraghty. Um, in your packet, there is, um, a sheet that that's, uh, titled Dynamic scoring Fiscal Impact statements, procedure discussion points. So with the adoption of this, um, program authorizing us to enter it. The procedural questions that we need answered from this body in terms of how, um, we're gonna go about performing these fiscal impacts, um, including, you know, is it going to be for only bills filed or bills that are draft bills. Um, is it going to be considered, you know, each bill in its own or in relationship to other bills. So there's a list of questions that we will need, uh, to be answered in order for the bureau to begin to process these, uh, fiscal impacts once we get the modeling program. I think, uh, Remi indicated in our conference call last week. That we should be able to have it either by the end of this week or early next week. Um, so you do have a little bit of time before we have the program. To start, uh, performing this fiscal impacts. One of the bigger items on here and, uh, Senator Hester alluded to this is the workload. Um, right now, Carlos is responsible for static impacts, which he will continue to do, um, in addition, we'll have these dynamic fiscal impacts, um, Remi indicated in our conference call that we are similar to the office of Finance, I think, Office of Budget in Pennsylvania, and they have, uh, 3 persons doing these dynamic fiscal impacts, um, so our, the contract as we've received, um, considers two. So I think that's a good guideline. So I think that's something we're gonna need to look at in terms of providing Carlos with some assistance in this area in order to turn around these fiscal impacts in a timely manner. Uh coach Cheries and along with that, I think we ought to also consider. Uh Who would request the scoring impact and also with that member decide if they're asking for a static impact from, you know, DFNA or BLR or a dynamic impact. I don't know that there are some may or may not know the difference, so I think that's a question we need to also talk about. I think there's a meeting scheduled next week for executive subcommittee. It may be a good time at that point to finalize, um, these procedural points. Thank you, Director Garrity. Members, um, review those discussion points, um, and then I'm sure we'll have a further discussion at a later date as Director Gerty stated, um, Thank you, Representative. Appreciate you being here. Thank you for having me and I look forward to having some input on those, um, I just appreciate your time and just go for better bills. Thank you. Thank you. All right, um, up next, presentation by Per Knight, if you guys would, uh, come to the table and, um, Uh, Scott Peter, David, thank you so much for, uh, being on. Zoom with us. Thank you for your time. Thank you very much. Thank you very. Take care. Thank you. And gentlemen, as you get placed, if you would, uh, just recognize yourself and you may proceed. I am Charlie Lenz at from per night. And I'm Kyle Halls, a principal and consulting actuary at per night. All right. So, um, what I'd like to do is just present the key findings of the updated actuarial report as of 9:30, 24. And, um, page. So, um, the key findings are, number one, that the, um, the 7123 to 24, um, insurance claims insurance costs were higher than expected, um, based on the updated information as of 9:30, um. The main driver of that is that there were some large claims that were incurred at the end of the 23, 24 year before the June 30, 24 evaluation that we're not reflected in the June 30, 24, um, data yet. And that's a, um, that that will happen, um, from time to time because when large claims come in at the end of a period, it takes a while for them to be a. ju s ted and to know what the claim costs are and then to record those uh expected claim costs in the claims data that we then get and use in our analysis, um. Then, um, I'll talk for a couple of minutes about catastrophe modeling and um some observations on the average annual loss from the um catastrophe modeling reports that each of the three entities, um, receive annually, um, and some differences between those results and what we've seen over the past 20 some odd years in actual experience. So this slide, um, shows that in the top section, the um, the Estimated cost in millions for the latest 6 fiscal years, um, as of, um, 6:30, 24 on the top, and as of 9:30, 24 on the bottom. And if you look at the second bar from the right, you'll see, um, that cost more than doubled going from, um, just one quarter from 6:30, 24 to 9:30, 24. And because we use, um, historical experience to make estimates for future policy periods, um, that impacted our view of the looking forward costs and you could see, um, those estimates for the 2425 year, um, on the right, that's the right most bar on the top section, um, and then, uh, the rightmost bar on the bottom section is the 2526. Um, fiscal year estimated claim costs, and you could see that's a, a sizable increase, um, one to the next. So what this, um, slide shows is 5 claims that were, um, Incurred in uh towards the end of the 6:30, 20, I'm sorry, the, the, um, July 1, 23, 24 policy period. These are, this is the change in the um claim costs that was in the claims data that we received for our analysis, and you could see these 5 claims, um. Increased in in um in um the value that was placed on them by over $27 million over that one quarter, so that was the big driver of the increase in the 23, 24 year which then had an impact on our looking forward estimates that I spoke of a moment ago. And then um I wanted to, um, before I show a comparison of modeled claim costs versus actual claim costs. I wanted to just say a few words about, um, catastrophe modeling, um, and all three entities, uh, MA, AA and Apsit, uh, every year they get a cat modeling report a catastrophe modeling report from a firm called Cadence. And that information, um, what did, what these reports do is they use a variety of data, um, to simulate potential catastrophic events and estimate the resulting financial losses across a portfolio of properties, um, and the reports are used for various purposes, but mainly to support insurance pricing and underwriting and reinsurance buying decision. So, um, for example, the, um, the insurers for the state when they're um looking at their, um, renewal premiums, they're considering what these catastrophe models say because it tells them, you know, what to expect in a, a 10, 1 in 100 year event or a 1 in 250 year event and then the reports also provide an estimate of average. annual loss, and that's what I'll be focusing on, that is the expected costs for various types of catastrophes in a given year. Um, and the, the top row here shows um severe storm and um the Um, modeled the from the catastrophe models, the estimate is about $31 million on average per year for severe storms and um we looked at the histo historical claims of all three entities, and we had anywhere from 16 to 23 years of data, we calculated in current dollars what the historical average annual losses, and that came in to about 27. million dollars and for the catastrophe losses, that's pretty close. Uh, that was, um, uh, you know, kind of a, a, a good result and um severe storm losses are fairly frequent, so the historical data is useful in predicting, um, what average costs will be, but for the floods or earthquake, I'm sorry, the, the perils of earthquake and flood, those are less frequent events, obviously. earthquakes, um, you can have 100 years between, um, severe, um, earthquakes and floods will be a little bit more frequent than that, but still not so frequent. And for those two perils over the history period that were um using in our work, uh, the model average annual loss was over $35 million in the average was Less than a million dollars. And with, with really flood being the lion's share of the difference, and I thought that was a noteworthy, uh, results, um, because it, I think, gives an opportunity for taking risk, um, that, uh, the captive can take advantage of, um, moving forward. It wouldn't be something that, um, you know, uh, a significant portion of the risk could be taken in the captive. early on, but, um, uh, a small amount of risk could be taken, uh, early on and exposure, um, increased over time. So, um I'll just add 11 thing to that. So, uh, when we previously had done the uh actual reports and made estimates for the captive and stuff like that, including catastrophe losses was not necessarily something that we had originally looked into, but now after seeing this updated, uh, actual report, it seems like that's, that's certainly something that I would consider on the table for potentially as Charlie mentioned, uh including some additional risk in the captive that will help uh with catastrophe loss. On an overall basis that should help the, the total, should help to reduce the total cost of uh of insurance because as you can see, I'll go back here, um, a slide as you could see the estimates for what the losses would be on, on an annual basis are significantly higher than what the losses have been earthquake that's not unexpected, but floods should be a little more common, so again, it's, it, it's certainly an opportunity to utilize a captive to kind of self-insure more of that risk. And to, uh, on an overall basis kind of reduce the total cost of of insurance. All right, and so this last slide is, is sort of just a recap, um, the projected losses for the 71, 25, 26, the upcoming renewal, um, period based on claims data through 9:30 24 are significantly higher than our prior estimate, um, from the June 30, uh, 24 report for the 7124, 25 year. That's because of, um, a, um, a Change in the, um, the cost associated with the 23, 24 year, um, and. Combined with the impact of increase in um in insurance values of 10.3%. And, um, and then the final point is the actual earthquake and flood losses over the past 16 to 23 years have been minimal and well below the nearly $35 million annual loss for um the from the catastrophe models and This represents a um opportunity of retaining risk over time. Any questions? Um, Senator Dismay, you're recognized. I just to make sure, what do you, what, what is the dollar amount forever? How do you get on this report? Does that make sense? What is calculated to be severe versus just uh an ordinary claim. Like what is it? I'm assuming it's a dollar threshold. It's um if I think if it gets a um a catastrophe code assigned to it. So if it's, it's deemed a catastrophe, so it would be, you know, major storms. I'm not sure what the um, what the criteria are for the assignment of a catastrophe, a code. to a, a cat to an event, but it's, it's a predefined definition in terms of what that will be, it's either like a dollar amount or it's a certain number of buildings, uh, damaged or it's like in terms of hurricanes and that, it would be if there's a named storm and and things to that effect, so yeah, on the 16 to 20. 3 timeline that you looked at. I mean, is it pretty consistent year over year when you adjust for inflation or have, has, have those been going up? Even including inflation, have we had more catastrophic or severe instances over the last, I mean, I understand in recent years that may be the case. People are saying maybe you're maybe not, that's been a trend, um, and really the, the 21 to 22 through the 23 to 24, uh, periods have had a, um, significantly greater share of catastrophic events I mean that an expected trend that's going to continue really, or did something happen even aside from even how we. What we're calling severe and what we're not. I mean, did the definition change in some ways, uh, or were there other factors even outside of just the fact that we've had more, uh, you know, storms or whatever it may be that led to this higher number because I mean we go years with almost nothing, and then I had a hard time believing that The climate changed so much in 3 years that it led to all of this change when is it more people that we have. I mean, I'll just say, is it, do we have older roofs that are, uh, you know, subject to greater damage even on a smaller storm but still considered severe or I've seen this in, in multiple regions of the United States and it is, um, it to the best of my, you know, knowledge and training, it is related to, um, they're just being more severe in the last few years. Did you see that in any of your other 16 to 23 where there where there and years where maybe you have. Sure, yeah, there were some years with high losses, but none as high as um. It is any of the most recent 3. Even adjusted for inflation. OK, and, and I want to make sure I understand. So on your, when you, when you're saying there's a place to have savings and when you're looking at severe storm, earthquake, flood, earthquake and flood, we're gonna delineate those out and we're gonna buy insurance just for flood. We're gonna buy insurance just for whatever, whereas we were probably buying, you're saying we were buying too much potentially or At this point, it's just an opportunity for us. I think it's just an opportunity at this point, I, I, I would agree with that. I, I think really what what you're trying to do is look at to see how the market is pricing the risk versus what we think the risk would be kind of if you were to look at a longer run average and so, yeah, and, and, and so there's, there's a potential for some savings there if we could self-insure, uh, that where again, instead of going out and paying the market price for that. bring that risk in-house. Still charge ourselves, uh, you know, a market price or something a little bit more of a, you know, of a reasonable, uh, dollar amount. And again, if the losses don't need to, you know, if the losses aren't there, that's surplus that's retained within a captive and and. All right, so 35 million generally reoccurring in severe storm storm damage annually or well, that's what the estimate is just flood and earthquake, and I will say that um the, the, the costs in the latest 3 years are almost all wind losses they're they, they aren't flood. Flood has been pretty even across the, the 20 some odd years, flood losses, there haven't been very many, and this is what a total losses, y'all have that? On a total loss average, I mean, if we're counting severe and even the minor claims that come in. So we're estimating, yeah, uh, current, um, round up unlimited loss of a $55 million. OK, thank you. 55 million is what we should expect to lose in or having claims every year the lose may not be the right word. Yeah, and it's gonna be highly variable because the. We, we hope it would be right, yeah. Thank you, Senator, uh, Representative Brooks, you're recognized. Thank you, Mr. Chair, Kyle, Charlie, good to see you guys again. Uh, a couple of questions on, um, Page 3 and then at the end, on slide 3, looking at the, the lost data. I want to clarify the, the 22, 23 cycle, 71, 22, 71, 23, which, uh, was inclusive of, of the Wy school loss, is that total dollar amount in there? Because my understanding. kind of this entire time has been I think they reserved like 120 million-ish for that loss. So what, what's the, the status of that is, um, I, you know what I, that's a, I don't know the answer to that. I don't know why the full $1020 million isn't in there. I think for that loss, the claims data that we had had 90 some odd million. So I don't know why it wasn't the uh the full amount. And so, and then like I said, all along, that's what the number I've kind of heard. But let's say that that, uh, is an accurate amount, 120, 125 million. Uh, that's a significant higher amount than what we have in here. So how might that have affect our modeling when we bump it up by an initial 30 millions in on its own doesn't have a significant impact on the, uh, the projection. That's just one event in one year. OK, so, so an additional 30 million in claims in any potential given year wouldn't have a significant impact. It would nudge it up, but it wouldn't be a significant increase. Um, and then, uh, question relative to what you're talking about retaining a large, uh, amount, uh, for earthquake and flood. So if I understood what you're saying to to center dismaying, we're looking at self-insuring more for, um, under the captive for flood and th quake. Potentially, right. That, that's not something that we specifically looked at previously because we didn't have the data broken down by, uh, catastrophe versus non-catastrophe previously when, when we had done this, but now that we have that a little bit better. It's, it's an opportunity to, uh, put some of that risk. I wouldn't say 100%, but it'll be a portion of that, you know, we want to look through to see kind of what that, um, opportunity would be and kind of what the risks are, of course, with, uh, you know, with including that in there, but. And the numbers seem to be pretty, uh, uh, telling that the models are showing for, for, uh, flood and for earthquake. They're showing significant, significantly higher average annual losses than what the state has experienced over the last two decades. Uh, follow up, Mr. Chair. And, uh, so what we look at transferring and when we look at at premium basis for the different school districts, we look at transferring, uh, that onto them as a part of the, the premiums that they're paying, um, possibly an increase for, for premiums from the schools uh for the self-insurance, I guess what I'm, where I'm going is that we have a significantly different risk profile when you look at Pocahontas, Arkansas for earthquake as opposed to Ashdown, Arkansas, um, you know, in proximity to New Madrid. Fault. So would, would there be an evaluation of, of a, almost a per school district risk profile. Right, yes, so you'd want to allocate that loss, or sorry, not the loss, but the exposure as is appropriate so to go through and to kind of um update to say, OK, if you know, if it's a area that's more flood prone versus not. If it's an area that's more earthquake prone versus not to, you know, adjust those, uh, premiums so that it's more appropriately reflects the risk. At least we could set it up that way. Now it doesn't mean that it has to be charged that way, but we'll at least have that information available, so if the decision is. Made to allocate the risks that way. Clearly, there's going to be some, uh, you know, looked at to see how much of a change in premium on a, uh, you know, school district by school district basis that's gonna, uh, incur and then see if there's, uh, you know, appropriate adjustments that need to be made. And, and I believe the, the currently underwriting is done on, on an individual school district basis. So I don't think that would represent a change. And then just thinking about kind of the flood, uh, Flood issue, I'd ask a question in December relative to, to Tennessee because I know we're basing this on, uh, on their captive model relative to Tennessee and some of the challenges they're having with flood losses and FEMA. Have we gotten, I know y'all are going to be talking with them. What, what additional clarification have we gotten in terms of the relationship of FEMA and their captive. So do you want me to speak to that or do you want? OK, so we're having a meeting, correct me if I'm wrong, next week. Hopefully next week to, um, just kind of make sure that we have any of the issues ironed out and, uh, you know, make sure that there aren't any uh concerns with FEMA. Thank you, Mr. Chair. Like you represented, uh, President Hester, you're recognized. Thank you. When we say when tornadoes is classified as wind, right? OK, yeah, so that we, we, we know what's happened with Wy and Little Rock in Northwest Arkansas and that. So with these, the new numbers, uh, what, what, what is our estimated savings if, if, you know, when we go forward with this. Do, do I, do I tell the member sitting next to me, we think we're going to save $30 million a year, 50 million a year, 70 million a year. I mean you're an actuary, so like what is that estimated like with this update. Yeah, so unfortunately we don't have any, we don't have a great answer for that yet. So what we would need to do is, is go through, see what the renewals come in and then see how they price at various retentions and see then which retentions are optimal for, uh, self insurance versus not optimal for, for self insurance. When we looked at it previously and now I'm not gonna remember the numbers, you know, off the top of my head, but we had done presentations before where we went through and looked at, at what the figures were, um, you know. In terms of, uh, potential savings and, and there was, you know, certainly several million dollars where if, um, you know, again, looking at certain layers of risk if the captive were to participate in some of those layers, um, what was happening is the, you know, some of the carriers within those layers were charging. It was pretty obvious, significantly above what the, you know, the average of the remaining carriers were. So again, those would be the opportunities, uh, for the captive to come in and kind of strategically. replace a carrier that had above or significantly above market, uh, premiums on that. We won't know an exact answer probably for several months until we go through, we get the renewals, we see how the reinsurance tower is structured, how everyone's charging, what they're, uh, you know, what they're, uh, their rates are and then seeing, um, you know, where the captive could ideally come into play and what, uh, coverages could essentially be removed from the reinsurers. Put back into the captive. OK? And like, so. Most of the answers we've been sitting in here, uh, you know, and I think like the world would just assume like it's going to get more expensive for insurance. Uh, I, I have a real concern with and and after learning through this process that it really all comes down to just ultimately a handful of ultimate insurers that what's happening on the West Coast with their irresponsible management, uh. I don't want the taxpayers of Arkansas to be subsidizing the irresponsibility of Californians. And I feel like that's coming. And they're gonna lose billions of dollars on the West Coast. Which, which falls into this. We've talked all along about trying to get this done by July 1st. I want to get it done by July 1st. If it's good policy, I. Can you tell me not from like the bureaucratic side, but from the insurance side, why can we not have this implemented by July 1st. The challenge, the challenge is gonna be this. We need to have the captive up and running in at least an idea in terms of what the structure could be. That's not overly difficult to do by July 1st. The challenge though is going to be when we go through and we combine the entities together. It's different than where we are right now because we're looking at 3 separate entities versus combining them. Again, we've gone through this, you know, we're in the process of, of uh uh. going through the RFPs looking to see kind of what that new, um, structure is going to look like, and it's, it's gonna take time to get that into place and the worst case scenario that we want to ever be in is a situation where it's not up and running, but we've gotten quotes and everything at this new, you know, uh, under this new structure, but that new structure is not ready to go yet. And so if that's the case, then we're going to be really have our hands tied in terms of then. Going backwards and saying, well, OK, now if we need to extend the current structure, what does that look like? And we're in a very disadvantageous, uh, position if we need to extend it that way. It's, again, in my opinion, it's, uh, you know, it's better to, uh, you know, make sure that everything's up and running and structured properly and, um, you know, and in place with the, you know, with the right vendors who are gonna run this and oversee the whole operation just to make sure that we're not missing any. anything we're not, there's no gaps in coverage. There's, uh, you know, nothing, you know, kind of falls through the cracks. The worst case scenario would be we, you know, the, the state goes bare and, and that's in my opinion, that there should never be an option. Uh, yeah, that's, that's not an option. I, I would like because look, I'm, I'm a home builder. I, I don't know, but, but. I'm not afraid to ask for things. I don't know how many bidders are looking at this if it's 4 or 7 or 2 or whatever it is. Can you ask them? I, I like through some of the responses are, can you ask them, can anybody deliver? And if, and if you say no, why? And maybe the answer is all of them say, No But what if 3 of them or 4 of them say we can deliver by July 1st. We need this. I would like to know that if it's appropriate for you to, for you to ask the people considering a therapy. Can anyone deliver? Uh Again, to get this switched over by July 1st is, um, you know, it's typically, uh, a 6 month process. I'll outline a little bit in terms of where we are with, with the RFPs and, and that there's two separate um RFPs right now. One of them is for uh captive management. The other is for, uh, brokerage services. Um, where we sit right now, the RFPs are due by the end of July. Uh, sorry, by the end of January, um, so by February is we're gonna have to narrow down that group to, you know, reasonable number that the executive subcommittee could, uh, could review, have those entities go through and, uh, prepare their final presentations or pitches and that. Timing on that, we're thinking is, uh, you know, February to narrow them down, probably March to have them come in and do their pitches. But the time contracts get signed in and what have you probably talking in April at the absolute earliest, um, I'm estimating it's gonna be at least a 6 month process out from the time that we have that up and running to being able to go out, put the, uh, you know, get those vendors up to speed on everything. Get the product, uh, you know, get the pitch decks and everything ready to go get this pitch to the carriers have, have the carriers understand all the ins and outs and everything that's going on here and be able to, to place the coverage, um, I, I mean, in my opinion, you know, realistically, we're talking more like a, um, a 4th quarter policy. So that's kind of the situation that we're in and you say, well, why isn't 71 possible because like even now as we speak under the current structure, it's, you know, it's a 6 month time frame. The pitch decks and everything are done, are being worked on currently. That's my understanding to pitch this to the carriers in February to go out and have them, the carriers place, uh, you know, uh, end up coming up with their, their pricing and their rating on everything they want to understand the um uh the statement of values, the, the total, uh, you know, total cost of risk, what their position's gonna be, and there's a lot of moving parts here. There are, uh, You know, we may be able to place coverages for certain layers, but most insurance carriers, if, if there's a, let's just say for example, there's a $50 million layer. Most of them don't take 100% of that layer. They might only take 25%. So now we need to place the other 75%, and that might require talking to 234 other carriers. OK, now we have that $150 million dollar layer. Now we need to do another $50 million layer. See how that plays out and it's many times it's not the same. carriers just taking a ladder all the way up, they'll, uh, sorry, they'll take, uh, certain, you know, pieces of this and that, it's just it's all based on their risk model, um, and, you know, and just kind of where they, they are on an overall, uh, you know, what the risk appetite is. Thank you, President Hester, uh, members, just keep in mind that there's another committee, uh, that is scheduled to begin in this room shortly. Um, so I ask that we keep our questions, uh, brief, Representative Brooks coming to you. Thank you Mr. Chair. I'll make it brief. Um, two questions. Do we have, um, anything relative to what the change in statute is going to be needed for the captive children you might be able to. Answer that one. While she's coming up, let me ask the other one. Is there, uh, uh, Bentonville is the only school that we have that has not, that's not included in this data, correct? Because they're, they're the ones who aren't on any program. Yeah, if they're not, if they're not on any program, we don't have the historical data, then you're absolutely correct. It's and this may be, may be a question more for one of the members who, uh, covers Northwest Arkansas. I know they had a tornado. Um, this year that was fairly significant, right? Did that, did that impact? Do we know anything about those losses? I was distracted. I, I was, I, my question was just relative to Bentonville and because they're the ones who aren't on any program, but I know they had a tornado this year, um, so I didn't know what, what we, what we'd known about any losses up there relative to that. Yeah, I, I, I can get it, I can get an answer. I can get an answer to that. Um. But I, you know, a majority of our losses and we saw it in this report we're, we're at the Rogers Public Schools in NWAC. But I will find out about Bentonville. Thank you, Representative, uh, Senator Dismay. For really quick, really quick, Representative, did you have a question for us there? Yeah, Statute, um, any changes in statute, because I'm thinking about the time frame that Kyle was talking about, uh, you know, as, as we think about the beginning of a time frame and having to push something out, uh, you know, 6 months-ish, well, a lot of that thing depends upon what changes may have to take place. Yes, sir. Uh, Jill Thayer, Bureau of Legislative Research, uh, Representative Brooks, there are several changes that will need to be made. Uh, there will be a package of bills that will need to be brought forward and, and, um, discussed. They haven't been, um, brought out yet. Um, the, one of the changes would be to allow the state to own and run a captive, uh, currently that's reserved for private businesses under the law, um, and then determining which entity of the state you all, the general. Assembly will want to take on running this entity. Thank you, Mr. Tha, uh, Senator Dismay, you're recognized. It was really about the baseline. We were kind of just referring to about the savings. I mean, my only, and it was like, well, we'll have to see what they come back at when we, they rebid or they re whatever. I mean, my only concern with that is, I don't, I'm not sure that that's going to be an accurate baseline. I think we've already. Seen some discussion about the fact that we're having this conversation. Because this isn't a science. I mean, the purchase of the insurance is in the shocker to me is that it's not a science, it's a Event. I don't know how else to characterize it, and they are very well aware of what we're talking about doing here and I do believe that when we go to London or if we do go to London, then that will be a part of the conversation and some of these higher, uh, you know, payees that we have will probably take that into account, uh, when they're, when we're buying up insurance and, and so I just, I don't believe that that's going to be an accurate. Reflection of what savings could be because I think we're probably going to have an outlier year because we're about to get maybe away from what's been the normal process. Yeah, I, I think I would just define savings as what we'll do is we're gonna ask for multiple quotes. From the carriers. So in other words, saying if, if it attaches above this dollar threshold, what would the cost be? If it attaches above a higher dollar threshold, meaning the captive retains more, what would the cost be? And looking at that model, you know, looking at, at those scenarios relative to if we had to retain that, that gap layer, um, you know, scenario one versus scenario 2, what do we think on an actual standpoint, that would be, so. In other words, it's not savings from year 1 to year 2 type thing. It's we're having to, we have a bridge that we have to, you know. Get us through to this new model, right? And we're going to go and we're going to get renewals potentially or we're gonna get extensions, one of those two options for what we have right now. And if we go over and get renewals, when we get those renewals, that's they're, they are well aware of what we're doing here and what we're talking about doing, and I firmly believe that that will be reflected. In rates that will be adjusted based on what we're doing. And so you know we talked about with some of the savings is in the outliers, these people that, you know, we're paying more to fulfill what we need in insurance versus fully, and that's what we can take away from, we can get away from, you know, there's people way outside the averages. Those folks that were buying outside the averages are probably going to have a conversation that is different than they've had in the past because the goal is gonna keep going down the same path we've always gone down. And, and so again, that's why I don't, I'm not sure it's going to be apples to apples as far as how we define savings. I don't think this renewal year is. Like I said, we're we're creating a totally different situation that's occurred in the past because we're creating competition, we're just going to be quite frank about it. Which I think is a good thing, OK. All right, uh, President Hester, you're gonna have the final question. You're recognized we're out of time and hey, well, I, I've been. I, I am, I'm currently I've been very happy, very pleased with the work you guys are doing for us. Uh, I feel confident in the direction that we're going, uh, and I know that you've answered this question. It's just going to make me feel better. If you, I'm, I'm asking you to ask all the people bidding, can they perform by July 1? And if not, why? And when they all tell me the same things you said, I'm gonna shut up and Be happy with the next steps. Can you ask that? just ask that question of them and I, I'm good with that. As everybody the same question. Absolutely. We, we, we could certainly do that, um, you know, again, as we know the vendors down and they'll be uh here giving their pitches. That's a legitimate question. OK, thank you. All right, seeing no further questions, gentlemen, thank you for your presentation. You, you're excused. I know members, there'll be additional conversations about this. This is, um, gonna be a, a big topic to discuss. So that will continue and I hope members stay engaged to that, uh, with that, you know other business, we are adjourned.