View
476
Download
0
Category
Tags:
Preview:
DESCRIPTION
Citation preview
© 2013 Towers Watson. All rights reserved.
Actuarial Report as of September 30, 2012
A Presentation to the City of San Angeloby Jason Martin, FCAS, MAAAMarch 2013
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
Limitations on Analysis
These results are intended for the internal use of the City of San Angelo.
Judgments about the findings contained in this presentation should be made only after reviewing our report titled “Actuarial Analysis of Self-Insured Programs as of September 30, 2012” in its entirety.
It should be noted that due to the inherent uncertainty in the projection of future events, actual losses could vary, perhaps materially, from the estimates contained herein.
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
2
Table of Contents
Self-insured Program Background
Actuarial Report Objectives/Scope
Actuarial Report Findings
Variability of Estimates
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
3
City of San Angelo Self-Insurance Program Background
Self-insurance program inception:
January 1, 1988 for Workers Compensation (WC)
October 1, 1987 for Automobile and Liability
Current self-insured retentions/deductibles:
Coverage Self-Insured Retentions/Deductibles
Workers Compensation $500,000
General Liability & Auto Liability Unlimited - No Excess Insurance*
Law Enforcement & Public Officials $500,000
Property $25,000 Vehicles/Equipment$10,000 Other Property
* Subject to Texas Tort Claims Act limits of $250,000/$500,000 Bodily Injury and $100,000 Property Damage
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
4
City of San Angelo Actuarial Report
Objective/Scope of Actuarial Report
Unpaid loss and allocated loss adjustment expense (ALAE) as of 9/30/2012
Forecasted loss and ALAE for 10/1/2012 to 9/30/2013
Surplus analysis of self-insured funds
Analysis performed for each self-insured coverage
Estimates reflect self-insured retentions/deductibles
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
5
Actuarial Terminology
Loss and ALAE Components of a Claim
Paid Amounts
— Actual amounts paid to date
Case Reserves
— Current estimates of future payments on known claims
Incurred But Not Reported (IBNR)
— Unpaid amounts for claims incurred but not yet reported
— Additional development on case reserves for known claims
— Actuarially determined amount
Ultimate Loss & ALAE = Paid Amount + Case Reserves + IBNR
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
6
Unpaid Loss & ALAE
Unpaid Loss & ALAE as of September 30, 2012
Unpaid Estimates ($000s)Self-Insured Coverage Undiscounted Discounted
Workers Compensation $1,501 $1,454
Liability & PropertyAutomobile $312 $310General Liability 515 511Property 4 4Total $832 $825
Total $2,332 $2,279
Note: Discounted estimates based on 0.6% annual rate of return as requested by the City
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
7
Reconciliation of Unpaid Estimates
Current Estimates Reconciled to Prior Estimates(Amounts in $000s)
Reconciliation Workers Compensation
Property & Liability Total
Prior Unpaid Estimate as of 9/30/2011 $1,302 $474 $1,775
+ New Losses from 10/1/2011 to 9/30/2012 615 503 1,118
+ Ultimate Loss Estimate Change 171 (10) 161
- Payments from 10/1/2011 to 9/30/2012 587 136 722
= New Unpaid Estimate as of 9/30/2012 $1,501 $832 $2,332
Change in Unpaid Estimate $199 $358 $557
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
8
Forecasted Loss & ALAE
Forecast for October 1, 2012 to September 30, 2013
Forecasts ($000s)Self-Insured Coverage Undiscounted Discounted
Workers Compensation $629 $615
Liability & PropertyAutomobile $135 $134General Liability 327 322Property 67 67Total $529 $523
Total $1,158 $1,138
Note: Discounted estimates based on 0.6% annual rate of return as requested by the City
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
9
Estimates at Higher Confidence Levels
Discounted Estimates with Risk Margins as of September 30, 2012(Amounts in $000s)
Discounted EstimatesSelf-Insured Coverage at 75% CL at 90% CL
Workers CompensationUnpaid Loss & ALAE as of September 30, 2012 $1,657 $1,879Forecast Loss & ALAE for 10/1/2012-2013 701 796Total Loss & ALAE $2,358 $2,675
Total Risk Margin $289 $606
Liability & PropertyUnpaid Loss & ALAE as of September 30, 2012 $940 $1,208Forecast Loss & ALAE for 10/1/2012-2013 596 766Total Loss & ALAE $1,537 $1,973
Total Risk Margin $189 $626
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
10
Surplus Analysis
Workers Compensation & Property/Liability Funds as of September 30, 2012
(Amounts in $000s)
Workers Property/Compensation Liability Benchmark
Fund Fund Ratios
Surplus EstimateFund Assets at 9/30/2012 $1,603 $2,024Unpaid Estimates - Discounted $1,454 $825Estimated Surplus $150 $1,199
Surplus RatiosUnpaid Estimate / Surplus 9.71 0.69 < 3.0Loss Forecast / Surplus 4.20 0.44 < 3.0Surplus / Maximum $500K Retention 0.30 2.40 5.0 to 20.0
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
11
Workers Compensation - Loss Cost (Per $100 of Payroll)
Increasing trend since 2003
Significant variability in loss costs by year 2007 & 2010 due to impact of large losses
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
12
General Liability - Loss Cost (Per $1000 of Expenditures)
Loss cost variability primarily due to impact of large losses Large losses in 2002, 2003, 2006, 2007, 2012
2013 based on long-term average of loss costs trended to current levels
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
13
Auto Liability - Loss Cost (Per Vehicle)
Loss cost variability primarily due to impact of large losses $279,000 loss in 2012; 45% of losses from 3 claims in 2007 and 2010
2013 based on long-term average of loss costs trended to current levels
towerswatson.com© 2013 Towers Watson. All rights reserved. Proprietary and Confidential. For Towers Watson and Towers Watson client use only.
14
Variability of Estimates
Variability of estimates is expected due to: Low number of claims
Impact of large losses
“Long-tailed” lines of business
Difficult to predict with certainty the course and outcome of future events Influenced by external factors
— Jury verdicts, legislative changes, public attitude, inflation, changes in medical conditions
Influenced by internal factors— Case reserving accuracy, claim settlement speed, retention level, risk/quality control
Potential variability of the City’s Unpaid Estimate at 9/30/2012
One additional $500,000 claim could increase:— Workers Compensation unpaid loss estimate of $1.5 million by 33%
— Liability & Property unpaid loss estimate of $0.83 million by 60%
Recommended