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HomeMy WebLinkAboutResolution - 2567 - Contract - Coopers & Lybrand - Risk Management & Actuarial Services - 04_23_1987Resolution # 2567 April 23, 1987 Agenda Item #24 DGV:da RESOLUTION BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK: THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to execute for and on behalf of the City of Lubbock a Contract by and between Coopers & Lybrand of Atlanta, Georgia and the City of Lubbock for Risk Management and Actuarial Services, attached herewith, which shall be spread upon the minutes of the Council and as spread upon the minutes of this Council shall constitute and be a part of this Resolution as if fully copied herein in detail. Passed by the City Council this 23rd day of April , 1987. e B.C. Mc NN,MAYOR ATTEST: Ranette Boyd, City Secreta APPROVED AS TO CONTENT: A-e'� I �� -6-e� ,Robert Massengale, As stant 'City Manager for Financial Services APPROVED AS TO FORM: w� Do d G. Vandiver, First Assistant City Attorney ti Resolution # 2567 PROPOSAL TO PROVIDE THE CITY OF LUBBOCK WITH RISK MANAGEMENT/ACTUARIAL SERVICES Coopers & Lybrand March 1987 CO er5 U rand certified public accountants actuarial benefits and compertsa bon consulting division Mr. Gene Eads, CPM Purchasing Manager 1625 13th Street, Room L-04 Lubbock, Texas 79401 Dear Mr. Eads: 1200 Equitable Building Atlanta, Georgia 30043 telephone (404) 6M-1000 1wx(810)751-8204 cables Colybrand March 24, 1987 in principal areas of the world Coopers & Lybrand appreciates this opportunity to present our qualifications and capabilities for providing risk management/actuarial consulting services to the City of Lubbock (City). Coopers & Lybrand is uniquely qualified to assist you on this important project. • Coopers & Lybrand is nationally recognized as a pre- eminent public accounting firm in the delivery of quality auditing, actuarial, tax, insurance, and management consulting services. • Coopers & Lybrand has a large team of casualty actu- arial/risk management professionals possessing vast experience and expertise including first hand experi- ence with governmental entity self-insurance programs. Coopers & Lybrand will assign Frederick O. Kist, FCAS, MAAA, Principal, to the project. Mr. Kist will be responsible for project management including initial meetings, coordinating activities, data analysis and the completion of of the work product. This will assure timely completion of the project. It has been our goal to thoroughly respond to all items in your Request for Proposals. We believe Coopers & Lybrand can provide the depth of experience and knowledge of self-insurance that are best suited for the City. We look forward to demon- strating that to you. If you have any questions regarding this proposal, please call Frederick O. Kist at (404) 658-1000. Approved as to form: a0. P<_aVogal oInIy Approved as to content: Attest: Ranette Boyd, City Secretary Sincerely, &tla� 0/- ACCEPTED: _B. C. _McMinn. Mayor _ INTRODUCTION We are pleased to submit this proposal to provide the City of Lubbock with risk management/actuarial services. This proposal describes our understanding of the project, workplan, qualifications of the firm and engagement personnel, timing and fees. In addition, Appendix A specifies our relevant prior experience and Appendix B contains the proposal team professional biographies. PROJECT UNDERSTANDING The City of Lubbock wishes to retain risk management/ actuarial consulting services to assist in the transition from a pooling program for liability exposures to a self-insurance program. Prior to December 2, 1986 liability coverages were insured through the Texas Municipal League (TML) pooling program. Currently, the City is fully self -insured for the following liability coverages: Public Officials, General Liability, Police Professional, and Automobile Liability. We understand the City has established a temporary reserve mechanism to pay claims in accordance with the coverage previously provided under the TML program. However, the City wants an actuarial study performed to determine the proper level of funding required for the self - insured program. In addition, the City needs a document drafted to set forth the scope of coverage under the program. The coverage document will be used by third party claims adjusters/ administrators and/or legal counsels to determine whether 1 coverage is applicable in loss situations. The coverage document is to be drafted in a form in compliance with State and Federal laws. WORK PLAN As per the request for proposal, our workplan will be divided into two areas: preparation of the coverage document and the actuarial reserving study. Coverage Document In order to prepare a coverage document for the City, we will review the coverages previously purchased from the TXL, determine the overall exposure to loss, and interview various City management personnel. It is our understanding that workers' compensation, airport liability, and property coverages will not be included in the self -insured program. The main exposures/ lines of coverage to be self -insured are Public Officials (wrongful acts), General Liability, Police Professional, and Automobile Liability. If other loss exposures are identified which should be included under the self -insured program, we will design the coverage document accordingly. We will develop a coverage document with our understanding of municipal statutes. In order to ensure compliance with State and Federal laws, we will submit the coverage document to the City Attorney. Comments from the City Attorney will be incorporated into the coverage document. 2 Actuarial Study We will perform an actuarial reserving/funding study for the self -insured program. It is our understanding that the City has accumulated some data related to historical loss and exposure information. We will use such information to the extent possible in our study and supplement it with insurance industry data as necessary. It seems all previous coverages with the Texas Municipal League were insured on an occurrence basis, with the exception of Public Officials Liability, which was on a claims -made basis. It is our understanding that the City expects a normal range of losses each year; however, an occasional large or catastrophic loss might occur which can cause sizeable fluctua- tion in yearly losses. Further, the City is particularly inte- rested in building up a "bank" or reserve to protect against the catastrophic claim potential. Our report will include analyses in the following areas: o Projection of ultimate loss; o Cash flow projection; o Determination of margin for adverse development; and o Credits for investment income. QUALIFICATIONS OF THE FIRM AND ENGAGEMENT PERSONNEL Coopers & Lybrand is one of the world's largest accounting firms - a position which has been achieved by provid- 3 ing a full range of services to both audit and non -audit clients. In the U.S. we now have 97 offices with 1,060 partners and over 11,000 total staff. Worldwide we have offices in 518 cities in 98 countries, with more than 2,600 partners and 34,000 staff. Coopers & Lybrand has long been regarded as a leading firm in the area of insurance auditing and consulting. Casualty actuarial/risk management consulting services are provided through personnel in seven regional offices. We are the second largest provider of casualty actuarial services nationwide, employing 34 members of the Casualty Actuarial Society, six of whom are located in our Atlanta office. We have extensive experience working on self-insurance projects for political subdivisions and commercial concerns. Information on references and other relevant experience is included in Appendix A. For this project Coopers & Lybrand will subcontract with Advanced Risk Management Techniques (ARM Tech) to develop the coverage document. ARM Tech is an independent risk manage- ment and employee benefits consulting firm with its main office located in Laguna Hills, California. They are one of the largest independent risk management consulting firms in the country, specializing in providing consulting services to municipalities. The firm conducts risk management studies only for the purchasers of risk management and related services, not for insurance companies or insurance agents. This ensures completely objective consulting advice to clients. 4 The professionals who will complete the engagement are: o Frederick O. Kist, FCAS, MAAA, Principal, Casualty Actuarial and Risk Management Consulting o Terry J. Biscoglia, FCAS, MAAA, Senior Consultant, Casualty Actuarial and Risk Management Consulting o Michael M. Kaddatz, CPCU, ARM, Principal, Advanced Risk Management Techniques Mr. Kist's fourteen years experience includes seven years with CNA Insurance Companies which included responsibility for underwriting and pricing insurance programs for large national accounts. Over his seven years of experience in consulting he has provided services for many insured and self - insured programs. Mr. Kist is a Fellow of the Casualty Actuarial Society and a member of the American Academy of Actuaries. Mr. Kist will be responsible for quality control/peer review and overall project management. Mr. Biscoglia has over ten years experience providing risk management/casualty actuarial consulting services. His experience includes evaluating costs of specific risk management programs for public entities, numerous associations, and corpora- tions. Mr. Biscoglia is a Fellow of the Casualty Actuarial Society and a Member of the American Academy of Actuaries. Mr. Biscoglia will have primary responsibility for the actuarial study portion of the engagement. 5 Mr. Kaddatz has fifteen years experience in the insurance industry, the last nine as an independent consultant to governmental entities. In 1986, Mr. Kaddatz was a frequent speaker at governmental risk financing events sponsored by PRIMA, NIMLO, NACO and MFOA. He is past National Director of the Society of Risk Management Consultants and in 1985 completed a term as National Chairman of the Society of CPCU's Please refer to the attached resumes of the persons involved for more detail. TIMING AND FEE STRUCTURE We are prepared to begin this project at the City's earliest convenience. The first step in our analysis will be to meet with appropriate personnel to gather loss/exposure informa- tion and general operational information. We anticipate complet- ing the assignment approximately four to six weeks after the initial data gathering process, provided there are no problems with the data. Coopers & Lybrand will handle all billing arrangements under the engagement. Coopers & Lybrand and ARM Tech are compensated on a fee for services performed basis, and our charges for a project are based on professional time actually spent, billing rates of staff assigned to the project, and out- of-pocket expenses (travel expenses, postage, phone, etc.). Our maximum fee to prepare the coverage document and complete the actuarial study will be $10,000. Out-of-pocket expenses (travel 6 expenses, postage, phone, etc.) are billed in addition to the professional fees. We anticipate out-of-pocket -expenses of approximately $1,500. 7 APPENDIX A RELEVANT EXPERIENCE Mr. Jay O. Icrtt, Director Broward Cxamty Risk Management Division 115 South Andrews Avenue Goven rental Center Suite 210 Ft. Lauderdale, Florida 33301 (305) 357-7200 Mr. Donald C. Dunlap Assistant Finance Director City of Miami 65 S.W. lst Street Miami, Florida 33131 (305) 579-6058 Mr. David M. F% ddleston Director of Finance City of Delray Beach 100 N.W. lst Avenue Delray Beach, Florida 33444 (305) 278-2841 Ms. Kathy B. Tines Office of Risk Management Lake County, Florida 315 West Main Street Tavares, Florida 32778-3887 (904) 343-9805 Mr. Curtis Grogan Director of Insurance North Carolina State Board of Education 114 West Edenton Street Roan 345 Raleigh, North Carolina 27611 (919) 733-3745 Mt. William Springer Risk Manager City of Cheyerne Wycming Association for Risk Management Cheyenne, Wyoming (307) 637-6305 Work Description Coopers & Lybrand has performed a funding study for Broward County, Florida for self -insured liability coverage including Auto Liability, General Liability, Mass Transit Liability and Workers' CmVensation. Coopers & Lybrand performed a loss reserve analysis for the City's self-insurance program including General Liability, Auto Liability, Workers' Compensation, and Police Professional Liability. Coopers & Lybrand performed funding studies for self -insured -retentions under the City's ply and liability insurance program. Coopers & Lybrand performed a funding study for the CounYty's liability self-insurance program. Coopers & Lybrand and ARK Tech performed a management study of the Board's property insurance program. Participating Members included apprtely 120 state school districts. This project was am pl.eted in 1986. AR4 Tech ccupleted a pooling feasibility study for this group of Wycmft g public entities and assisted with program implementation. Zhe program became effective July 1, 1986. Uiis group is entirely self - funded without liability insurance and did not seek outside financing. Ms. Sharon Yang ARM Tech assisted the association Alaska Association of Boards with the design and implementaticn Juneau,97)Alaska of a program to provide property ( to school districts in Alaska. 'This included development of rates, policy forms, proforma financial statement, claims adjust- ing methods and other issues. We worked with the Association to form a "captive" insurance cogDany located in Vermont as the vehicle for operating the pooling program. This included preparation of all materials necessary to become a licensed insurer in Vermont. Ms. Cheryl Delio Risk Management Coordinator Office of the Los Angeles County Superinctendent of Schools Downey, California (213) 922-6111 Ms. Margot D. Massey State of Texas Transportation Planning Division Austin, Texas ARM Tech assisted with the feasibil- ity study and implementation of a property and liability pooling program for this group of 46 school districts in Southern California. Annual premiums are about $11 million. ARM Tech has provided ongoing assistance to this group ewer the last several years. Coopers & Lybrand has provided actuarial support. They also developed ccaputer software to provide loss reports to program members. Coopers & Lybrand and ARM Tech are currently working with the planning division in reoc�ndin3 risk financing alternatives for the non- urbanized,/elderly and i�arx3icapped transportation industry. Mr. Rom Guilfoile ARM Tech performed a risk management Risk & IIrplcyee Benefits Manager and employee benefit study for this City of Saint Paul, Minnesota firm in 1983 and has continued to (612) 292-7017 provide oonsulting assistance to the present time. Mr. Tim Hanson ARM Tech performed a risk management Finance Director and employee benefit study for this City of Visalia, California California City. This study (209) 625-6309 resulted in the City self -insuring their liability exposure. Mr. Bob Gordan ARM Tech performed a risk management Director, Support Services Dept. audit including a self-insurance City of Colorado Springs analysis of liability and workers' Colorado Springs, Colorado oo mnsaticn exposures. This (303) 578-6181 resulted in the self-insuranoe of the City's liability program. w Mr. Donald West Risk Manager City of Palo Alto Authority for California Excess Liability Palo Alto, California (415) 329-2294 Wayne Sherwood Executive Director Council of Large Public Authorities Boston, MX (617) 742-0820 Coopers & Lybrand and ARM Tech assisted this group of California cities design and implant a cities liability pooling program. This included developing loss projec- tions, policy forms, interlocal agreements and other aspects of the program. This pool provides coverage limits of $10 million to its members with no outside financing. AM Tech and Coopers & Lybrand are presently completing an assigrment Housing to determine the feasibility of forming a liability insurance cmVany under the Risk Retention law and a property insurance ccgany for 30 large housing authorities. This includes analysis of funding and budgetary requirenents, contractual services requirements, and assist- ance with coverages, retention levels, and reinsurance require- ments. Mr. James Beckwith Chief -Public Transit Section Wisconsin Department of Transportation Madison, Wisconsin (608) 267-7350 ARM Tech worked with the Wisconsin Municipal Transit Insurance Cmmnis- sion to establish a pooling program for public transit systems in Wisconsin. Actuarial work on this project was ccmpleted by Coopers & !Lybrand. ARM Tech assisted this group frcm a mutual insurance cmTpW licensed in the State of Wisconsin. This included developing policy forms, rating plans, proforma financial state zits and other material required to obtain approval from the Wisconsin Deparbnenit of Insurance. Mr. Bab Gordon Director, Support Services Dept. City of Colorado Springs Colorado Springs, Colorado (303) 578-6181 ARM Tech performed a risk management audit including a self-insurance analysis of liability and workers' cagmnsation exposures. This resulted in the self-insurance of the City's liability program. Coopers & Lybrand and ARM Tech are active nationwide with self -insuranr funding projects for associations and pools, cities, counties, 'arid states. Following is a list of such entities servioed by Coopers & Lybrand, ARM Tech or both Firms jointly. AC KN-Joint Powers Insurance Authority Associations and Pools Michigan State Automobile Association of Bay Area Gavenments North Coast Schools Insurance Grp Authoriy for California City Excess Liability BCP Workers' Compensation Agency BLP Schools' Self -Insurance Authority California Contract Cities Association California Municipal Insurance Authority CSAC -Excess Insurance Authority Centinela-South Bay Schools Insur- ance Authority Central San Joaquin Valley Risk MananagemexYt Authority Coachella Valley Joint F wers Coin mity College/College Superintendent Desert Schools Self-Insurancie Program for Employees ?rx%penc%nt Cities Risk Management Authority Kings County Self -insured Schools Marin County Risk Management Authority North Valley Schools Insurance Group Northern Orange County Self -Funded Workers' Cmg3easation Agency Peace Officers Researti-.h Association. of California Public schools Insurance Authority Redwood Eripire Municipal Insurance Fund Redwood Empire Schools Insurance Group Regional Liability Excess Fund San Bernardino O m aunity College Districts San Bernardion County School Districts San Mateo County Schools Insurance Grow Santa Clara Schools Insurance Group Schools Linked for Insurance Management . Self -Insured Risk Management Authority Self -Insurance Program of Imperial County Solaro County Schools Insurance Group Southern California Joint Powers Insurance Authority Texas Municipal League Merced County Schools Insurance Group Ventura County Associatiaah of Goverrmerts Matrcplan Ventura County Schools Self -Funding Authority West San Gabriel Valley Schools Self-Inmranae Authority Western Riverside Schools Self - Insurance Program for Employees Wisconconsin DOT Wisconsin Municipal Transit Insurance Comunission Yolo County Public Agency IMA Citf es Aurora, Colorado Long Beach, California Austin, Texas Los Alamos, New Mexico Beloit, Wisomisin Iauisville, Kenbic}cy Beaverton, Oregon Mesa, Arizona Cleveland, Chio Fort Hueneme, California Corvallis, Oregon Redding, California Culver City, California Renton, Washington Dallas, Texas Roseville California Delray Beach, Florida Santa Ana, California Fullerton, California Simi Valley, California Henderson, Nevada St. Paul, Minnesota Hm olulu, Hawaii Tucson, Arizona Industry, Califbn- a Janesville, Wisomwin Valdez, Alaska Visalia, California ' Juneau, Alaska West Covina, California L gpoc, California Whittier, California Crnmties Alameda, California Santa Cruz, California Amador, California Butte, California Shasta, California Siskiyou, California Calaveras, California Solano, California Del Norte, California Fresno, California H mboldt, California Inyo, California Jackscn, California Kern, California King, Washington Kings, California Lake, California Ines Alamos, New Mexico Madera, California Karin, California Medocino, California Merced, California Mom, California Monterey, California Napa, California Nevada, California Orange, California Pinellas, Florida Placer, California San Bernardino, California San Joaquin, California San Luis Obispo, California Santa Barbara, California Ooamties tcmtinued) Tehama, California Tulare, California Yuba., California states Alaska Arizona California Hawaii Idaho y s • � �. s: FREDERICK O. KIST Frederick O. Kist is a Principal and responsible for the Casualty Actuarial/Risk Mananagement Group of Coopers & Lybrand's Southeastern Actuarial, Benefits and Compensation Consulting Practice. Mr. Kist is responsible for providing casualty actuarial consulting to governmental entities, large self -insured commercial concerns, association -endorsed insurance programs, and property/casualty insurance companies. His fourteen years of experience include seven years of consulting in the Southeast and seven years with the CNA insurance companies. During his career Mr. Kist has had the opportunity to work on a wide variety of assignments. The following provides a brief summary of the nature of these projects: o Loss and Loss Expense Reserve Analysis Medical Professional Liability Lawyers Professional Liability Workers' Compensation General Liability Personal Lines o Product Pricing and Evaluation - Medical Professional Liability - Lawyers Professional Liability - OL&T Liability - Personal Lines o Evaluation of Self -Insurance Programs Municipality Programs Large Commercial Programs o Evaluation of Reinsurance Treaties Reinsurance Program of Primary Company Assumed Reinsurance by Reinsurer o Evaluation of Association -Endorsed Programs Reasonableness of Rate Structure Feasibility of Sponsoring a Program Establishing an Insurance Company o Determination of Self -Insured Hospital Trust Fund Balances Mr. Kist has provided instruction in the preparation and understanding of the property/casualty annual statement in various nationally recognized educational programs. He has served on the Casualty Actuarial Society's Examination Committee and published a review in the CAS 1982 Call Paper Program. Mr. Kist is a Fellow of the Casualty Actuarial Society and member of the American Academy of Actuaries. He holds a BA in Mathematics from Northwestern University. TERRY J. BISCOGLIA Mr. Biscoglia is a Senior Actuarial Consultant with Coopers & Lybrand's Southeastern Actuarial, Benefits and Compensation Consulting Practice. Mr. Biscoglia has ten years experience in the field of actuarial consulting. He provides casualty actua- rial consulting services for property/casualty insurance com- panies, self -insured commercial programs and association -endorsed insurance operations. During his career Mr. Biscoglia has worked on a variety of technical assignments. A representative list of the nature of these assignments is as follows: o Loss and Loss Expense Reserve Analysis - Medical Professional Liability - Workers' Compensation - General Liability - Products Liability - Personal Lines o Insurance Company Ratemaking - Medical Professional Liability - Lawyers Professional Liability - General Liability - Products Liability - Personal Lines o Evaluation of Self -Insurance Programs Commercial Programs Municipality Programs o Valuation of Property/Casualty Insurance Companies o Development of Pricing and Experience Rating Programs for Insurance Companies and Self -Insured Entities o Self -Insurance Feasibility Studies for Professional Associations o Actuarial Valuations of Non -insurance Commercial Entities o Pro -forma Financial Projections of Insurance Operations Mr. Biscoglia is a Fellow of the Casualty Actuarial Society and a member of the American Academy of Actuaries. He holds a BBA degree in Actuarial Science from Georgia State University and was. the recipient of a National Merit. scholarship and a scholarship from the Atlanta Actuarial Club. MICHAEL M. KADDATZ, CPCU, ARM Mr. Michael M. Kaddatz is a Partner for Advanced Risk Management Techniques. He is a consultant to businesses, public agencies and associations on risk management, property/casualty insurance, self-insurance, cash -flow, risk pooling and other risk treatment programs. From 1977 to 1982 Mr. Kaddatz was a Principal Consul- tant for Warren, McVeigh & Griffin, Inc. There he provided a full range of risk management services similar to services now provided by Advanced Risk Management Techniques. Mr. Kaddatz was an Insurance Analyst for Southern California Edison from 1975 to 1977 where he administered owner - controlled property/casualty insurance program for construction projects. He was also responsible for a casualty insurance portfolio including nuclear and marine programs. Mr. Kaddatz also reviewed contracts and negotiated insurance -related contrac- tual provisions with vendors. Mr. Kaddatz was a Regional Casualty Underwriter for Wausau Insurance Company from 1972 to 1975 where he underwrote liability, crime and workers' compensation insurance for large commercial accounts. He specialized in retrospective and other loss -responsive rating plans. Mr. Kaddatz holds the CPCU Designation from the American Institute for Property and Casualty Underwriters; and ARM Designation from the American Insurance Institute. Mr. Kaddatz received a BS degree in Business Admini- stration and Economics from the University of Wisconsin and has graduate studies in Finance from California State University.