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Strategic Planning Workshop
Strategic Planning Workshop
Presented to:
August 2008
Washington StateTransit Insurance Pool
Presented by:Steven P. Kahn, CPCU, ARM | Managing DirectorARM Tech / Aon Global Risk ConsultingPhone: 949-470-4341 Fax: 847-953-1672email: [email protected]
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Contents for Strategic Planning Retreat WorkbookContents for Strategic Planning Retreat Workbook
Workbook Tab Topic Presenter Time Slot
I Introduction Jamie Collier 08:30
II WSTIP History Al Hatten 08:35
III Strategic Planning Process Jeff Ristau 08:50
IV
WSTIP Financial Position
Steven Kahn 0900WSTIP Operating Environment
WSTIP Compared to Others
VStrategic PartnershipsWSTA GEMWSDOT WA ST Risk Manager
Al Hatten 10:00
VI
What’s Next
Steven Kahn
10:15 – BREAK
10:30 – 2:00 pm
Lunch - about Noon
WSTIP Purpose
New Coverages & Services – Breakout Session
Financial Practices
Governance
VII Lunch
VIII Recap Steven Kahn 2:00 pm
IX Next Steps Al Hatten 3:00 pm
X Conclude About 3:30 pm
Section IV – Financial ReviewSection IV – Financial Review
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Financial Data – WSTIPFinancial Data – WSTIP
2001 2002 2003 2004 2005 2006 2007
1 Net assets 3,191,063 4,196,234 5,847,141 7,847,912 11,464,211 12,601,022 14,579,244
2 Member assessments 3,423,317 3,919,475 5,355,373 6,473,135 7,363,622 7,083,163 7,202,734
3 Reinsurance premium expense (523,885) (912,282) (1,680,799) (1,802,508) (1,755,339) (1,709,917) (1,941,798)
4 Net member assessments 2,899,432 3,007,193 3,674,574 4,670,627 5,608,283 5,373,246 5,260,936
5 Losses and LAE 2,020,036 1,996,855 2,549,924 1,949,347 1,188,418 3,955,726 3,146,919
6 Loss and LAE reserves 4,480,724 4,293,737 4,587,561 5,017,695 5,345,022 5,472,993 6,302,212
7 One-Year Reserve Development n/a n/a (712,000) (1,215,000) (1,014,000) (345,000) 442,000
8 Two-Year Reserve Development n/a n/a n/a (1,476,000) (1,791,000) (1,246,000) (342,000)
9 Expenses 863,989 1,200,927 1,138,934 1,261,005 1,501,030 1,333,997 1,686,962
10 Largest SIR 250,000 250,000 500,000 600,000 600,000 1,000,000 1,000,000
Year ►▼ WSTIP
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Ratios – WSTIPRatios – WSTIP
2001 2002 2003 2004 2005 2006 2007
11 Net assets to SIR 13 17 12 13 19 13 15
12 Gross assessments to net assets 1.07 0.93 0.92 0.82 0.64 0.56 0.49
13 Net assessments to net assets 0.91 0.72 0.63 0.60 0.49 0.43 0.36
14 Loss reserves to net assets 1.40 1.02 0.78 0.64 0.47 0.43 0.43
17 Expense ratio 0.25 0.31 0.21 0.19 0.20 0.19 0.23
18 Combined ratio 0.99 1.06 1.00 0.69 0.48 0.98 0.92
Year ►▼ WSTIP
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Measure of solvency Indicates number of unexpected losses needed to
consume net assets= Net assets / largest SIR
Net Assets to SIRNet Assets to SIR
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Measure of net asset adequacyAs ratio increases, the more likely it is that a high
loss year will erode surplus= Gross Assessments / Net Assets
Gross Assessments To Net AssetsGross Assessments To Net Assets
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Measure of net asset adequacyAs ratio increases, the more likely it is that a high
loss year will erode net assets= Net Assessments / Net Assets
Net Assessments To Net AssetsNet Assessments To Net Assets
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Measure of net asset adequacyAs the ratio increases, the more likely it is that
upward development in loss reserves will exhaust net assets
= Loss Reserves / Net Assets
Loss Reserves To Net AssetsLoss Reserves To Net Assets
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Measure of efficiencyLow ratio indicates efficient administration (within
reason)= All Operating Expenses / Net Assessments
Expense RatioExpense Ratio
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Measure of profitability Indicates ability to fund operations from net
assessments= (All Operating Expenses + Retained Losses) /
Net Assessments
Combined RatioCombined Ratio
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Net Assets to SIR – WSTIPNet Assets to SIR – WSTIP
0
5
10
15
20
25
2001 2002 2003 2004 2005 2006 2007
15
13
Gross Assessments to Net Assets – WSTIPGross Assessments to Net Assets – WSTIP
0.00
0.30
0.60
0.90
1.20
2001 2002 2003 2004 2005 2006 2007
0.49
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Net Assessments to Net Assets – WSTIPNet Assessments to Net Assets – WSTIP
0.00
0.25
0.50
0.75
1.00
2001 2002 2003 2004 2005 2006 2007
0.36
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Loss Reserves to Net Assets – WSTIPLoss Reserves to Net Assets – WSTIP
0.00
0.25
0.50
0.75
1.00
1.25
1.50
2001 2002 2003 2004 2005 2006 2007
0.43
16
Expense Ratio – WSTIPExpense Ratio – WSTIP
0.00
0.25
0.50
0.75
1.00
2001 2002 2003 2004 2005 2006 2007
0.23
17
Combined Ratio – WSTIPCombined Ratio – WSTIP
0.00
0.30
0.60
0.90
1.20
2001 2002 2003 2004 2005 2006 2007
0.92
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Financial Data – Comparison PoolsFinancial Data – Comparison Pools
A B C D E
1 Net assets 14,579,244 13,974,027 17,795,191 14,189,710 16,512,956 7,414,725
2 Member assessments 7,202,734 13,639,154 26,917,069 15,485,258 11,652,665 1,036,652
3 Reinsurance premium expense (1,941,798) (4,522,337) (4,278,383) (2,752,161) (1,822,517) (165,562)
4 Net member assessments 5,260,936 9,116,817 22,638,686 12,733,097 9,830,148 871,090
5 Losses and LAE 3,146,919 2,896,457 12,881,380 9,533,971 5,800,835 976,264
6 Loss and LAE reserves 6,302,212 8,359,880 20,047,902 13,998,803 19,262,864 2,359,949
7 One-Year Reserve Development 442,000 (589,898) n/a 1,175,087 (5,090,495) 151,450
8 Two-Year Reserve Development (342,000) (1,139,047) n/a 1,879,781 (4,302,597) 918,142
9 Expenses 1,686,962 2,825,234 9,114,703 3,313,177 2,290,702 491,704
10 Largest SIR 1,000,000 500,000 500,000 500,000 575,000 500,000
Pools ►▼ Financial Data
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Ratios – Comparison PoolsRatios – Comparison Pools
A B C D E
11 Net assets to SIR 15 28 36 28 29 15
12 Gross assessments to net assets 0.49 0.98 1.51 1.09 0.71 0.14
13 Net assessments to net assets 0.36 0.65 1.27 0.90 0.60 0.12
14 Loss reserves to net assets 0.43 0.60 1.13 0.99 1.17 0.32
17 Expense ratio 0.23 0.21 0.34 0.21 0.20 0.47
18 Combined ratio 0.92 0.63 0.97 1.01 0.82 1.69
Pools ►▼ Ratios
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Net Assets to SIR – Comparison PoolsNet Assets to SIR – Comparison Pools
15
28
28
29
36
15
0 5 10 15 20 25 30 35 40
E
A
C
D
B
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Gross Assessments toNet Assets – Comparison PoolsGross Assessments toNet Assets – Comparison Pools
0.14
0.71
0.98
1.09
1.51
0.49
0.00 0.40 0.80 1.20 1.60
E
D
A
C
B
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Net Assessments toNet Assets – Comparison PoolsNet Assessments toNet Assets – Comparison Pools
0.12
0.60
0.65
0.90
1.27
0.36
0.00 0.40 0.80 1.20 1.60
E
D
A
C
B
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Loss Reserves toNet Assets – Comparison PoolsLoss Reserves toNet Assets – Comparison Pools
0.32
0.60
0.99
1.13
1.17
0.43
0.00 0.40 0.80 1.20 1.60
E
A
C
B
D
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Expense Ratio – Comparison PoolsExpense Ratio – Comparison Pools
0.20
0.21
0.47
0.34
0.23
0.21
0.00 0.40 0.80
D
A
C
E
B
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Combined Ratio – Comparison PoolsCombined Ratio – Comparison Pools
1.69
0.82
0.97
1.01
0.92
0.63
0.00 0.40 0.80 1.20 1.60 2.00
E
A
D
B
C
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WSTIP Performance on State RatiosWSTIP Performance on State Ratios
State Ratio Guideline Pass/Fail
Equity to SIR Equity at least 5x to 10x SIR 15 Pass
Provision for expected losses to equity
Projected losses less than equity
0.28 Pass
Net reserves to equityNet reserves less than 1.50
x equity 0.43 Pass
Annual change in member equity
Reduction does not exceed 10%
1.16 Pass
Changes in prior year loss reserves
Prior year loss reserves increase less than 25%
1.15 Pass
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WSTIP Financial Model – DataWSTIP Financial Model – Data
2007 2008 2013
1 Net assets 14,579,244 14,413,902 14,165,714
2 Member assessments 7,202,734 7,974,056 10,598,669
3 Reinsurance premium expense (1,941,798) (1,893,118) (2,169,245)
4 Net member assessments 5,260,936 6,080,938 8,429,424
5 Losses and LAE 3,146,919 3,236,107 6,264,331
6 Loss and LAE reserves 6,302,212 8,455,394 14,825,767
7 One-Year Reserve Development 0
8 Two-Year Reserve Development 0
9 Expenses 1,686,962 2,266,979 2,034,327
10 Largest SIR 1,000,000 1,000,000 1,000,000
Year ►▼ Financial Data
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WSTIP Financial Model – RatiosWSTIP Financial Model – Ratios
2007 2008 2013
11 Net assets to SIR 15 14 14
12 Gross assessments to net assets 0.49 0.55 0.75
13 Net assessments to net assets 0.36 0.42 0.60
14 Loss reserves to net assets 0.43 0.59 1.05
17 Expense ratio 0.23 0.28 0.19
18 Combined ratio 0.92 0.90 0.98
Year ►▼ Ratios
Section V – The FutureSection V – The Future
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We are the premier providers of high-quality risk and management-related products and services for all facets of the transit industry
WSTIP VisionWSTIP Vision
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Our mission is to provide value-added services for our members. We will accomplish this by:
1. Reducing member’s cost of risk,
2. Providing comprehensive management services,
3. Looking at innovative opportunities, and
4. Encouraging alliances and partnerships
WSTIP MissionWSTIP Mission
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We treat everyone fairly and with respectWe value innovation and embrace technology as a
partnerWe are committed to excellence in service delivery
and cost-effective programsWe value our employeesWe value integrity and ethical conductWe value the diversity of our membersWe speak with one voice
Core ValuesCore Values
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New ServicesNew Services
Physical test for candidatesMonthly driving record checksBus stop quality evaluation and scoring toolCriminal background checks on drivers and othersPersonnel procedures trainingSample job descriptionsTraining materials libraryOther…
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New CoveragesNew Coverages
Employee benefits poolEmployee benefits group purchaseLegal services – contractual disputesAssist non-profit agencies form their own poolAssist with non-hazard risksOther…
Section VI – Strategic PartnersSection VI – Strategic Partners
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GrowthGrowth
New membersNew associatesNew servicesOther statesOther...
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Striking a BalanceStriking a Balance
Rate levelRate stabilityNet asset levelWSTIP retention
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GovernanceGovernance
Role of new, small transit entitiesStanding committeesOther...
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Consider Effect of Change in Operating EnvironmentConsider Effect of Change in Operating Environment
Insurance market cyclesChanges in number of size of membersOne ore more catastrophic lossesChange in legal environmentLoss of excess insurer (e.g., Kemper and Reliance)
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Guidelines for Net Asset Rate CreditGuidelines for Net Asset Rate Credit
Sample guidelines:
1. Net assets > gross member assessments
2. Net assets > 1.5 x member assessments
3. Net assets > 15 x largest SIR
4. Combined ratio < 1.00, average of last two years
5. Net assets > losses & ALAE reserve at 80% confidence level
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WSTIP Financial TargetWSTIP Financial Target
Select and maintain financial ratiosSelect net assets to SIR ratioSelect gross assessments to net assets ratioSelect loss reserves to net assets ratio
