UTSA Financing Risk Management

UTSAFinancing Risk Management

John DeLaHunt, MBA, ARM

UTSA Risk & Life Safety Manager

April 22, 2009

1Business Affairs: Your Partner for Successful Solutions

Often—

FR

EQ

UE

NC

Y—

Rare

Minor———SEVERITY———Major

Risk Mapping

Paper Cuts

Bird Attacks

Warfare

Auto Fatality

MANAGE AVOID

TOLERATE TRANSFER

Business Affairs: Your Partner for Successful Solutions2

Integrated Risk Management:A Three Legged Stool

1. Loss Prevention2. Loss Control3. Risk Finance

- and -

4. Business Continuity


Cost Capacity

Naked Low Low

Self-Insurance Low Moderate

Risk Pooling Moderate Moderate

Commercial High High

Risk Finance Strategies


Policies in Place for People

• Workers Compensation (WCI) *• Unemployment Compensation (UCI) *• Directors & Officers (D&O) *• Commercial Crime *

2008 Premiums $326,632

2009 Premiums (estimated) $374,456

* Offered through UT System to all UT institutions (“System Coverage”)


Policies in Place for Property

• Real Property (CPPP)*• Vehicles (liability, physical damage, etc)*• Scheduled equipment*• Fine Arts*• Mobile equipment

* Offered through UT System to all UT institutions (“System Coverage”)

2008 Premiums $235,366



Policies in Place for Events

• Supplemental Excess General Liability– Festivals (Texas Folklife, Asian)

• Tenant User Liability Insurance Program– Joint Sponsored events

• Sports Camp Insurance• CoA Design/Build Accident Policy

2008 Premiums $35,540



UTSA Insurance Premiums

2008 2009(estimated)

People(WCI, UCI, D&O, Crime)

$326,632 $374,456

Property(CPPP, Auto, Mobile Equipment, Equipment)

$235,366 $339,532

Liability(Festivals, TULIP, Camps, D/B)

$35,540 $35,540

Total $558,848 $713,987


UTSA Cost of Risk


CPPP Fire/AOP Structure

Loss Financingup

$1BNo Coverage

$1B

$5MCommercial Insurance

$5M

$250k

50% institution

w/loss

(5 yr amortization)

50% all other institutions

(5 yr amortization)

$250k

$0Deductible – institution w/loss


CPPP Wind & Flood StructureLoss Financing

Up$150M

No Coverage

$150M$50M

Commercial Insurance

$50M

$250k

40% Debt Svc Institution w/loss (20-30 yr amort.)

60% Debt ServiceAll other institutions(deferred capitalization on property fund, 20-30 yrs)

$250k$0

Deductible (institution w/loss)


UTSA Fire/AOP Cash Flows

$0Year 0

-$250

Year 2Year 1 Year 4Year 3 Year 5

Following Catastrophic Property Loss (thousands of dollars)

-$475

-$25

UTSA suffers the loss

Any sister institution suffers the loss

-$25 -$25 -$25 -$25

-$475 -$475 -$475 -$475


Unfunded DeductiblesCPPP - Fire/AOP and W&F

• Exposure– Property loss >$250k

• Deductible if UTSA suffers the loss– $250k per occurrence, both programs

• Fire/AOP Replenishment over 5 years– $475k per year if UTSA suffers the loss

– ~$25k per year if another campus suffers the loss

• W&F Debt Service over 20-30 years– $20M if UTSA suffers the loss

– ~$1.5M if another campus suffers the loss13

Business Affairs: Your Partner for Successful Solutions

Unfunded DeductiblesEmployment Practices

• Exposures– Wrongful Termination– Harassment/Retribution– Denial of Tenure– Civil rights actions– Other federal causes

• Deductibles– $100,000 individual per occurrence– $300,000 institution per occurrence


Unfunded RetentionTort Liability

• Exposures– Premises defect– Tangible personal property– Motor-driven equipment

• Limit of Liability – fully retained– $250,000 individual, per occurrence– $500,000 limit to individuals, per occurrence– $100,000 property damage– $600,000 total


Unfunded Exposures SummaryProblem Insurance Exposure

Property Loss to UTSA - Fire/AOP

CPPP$250k Deductible$475k Fund Replenishment for 5 yrs

Property Loss to UTSA - Wind and Flood

CPPP$250k Deductible20-30 yrs debt service on $20M

Property Loss in system - Fire/AOP

CPPP ~$25k Fund Replenishment for 5 yrs

Property Loss in system - Wind and Flood

CPPP20-30 yrs debt service on ~$1.5M Deferred Capitalization

Employment Practices D&O$100k individual$300k institution

Tort Liability$250k Per person$500k Per occurrence$100k Property Damage


UTSA Scheduled Equipment Coverage


Ideas

• Build catastrophic property loss reserve– Immediately fund $725K to avoid disruptions

for one budget cycle – Fully fund $2.625M to avoid all disruption due

to property loss

• Premium and reserve sharing analysis


Ideas

• Build liability reserve– Tort liability: $600k cap– D&O deductible: $100k/$300k– Immediately: $600k (assumes 1 loss per year)

• Premium and reserve sharing analysis


Ideas

• Build hybrid equipment protection program– Insure high-value, unique, exposed assets– Insure fee-funded assets– Immediately: ↑ insurance coverage– Immediately: $50k loss retention pool– Target: $100k premium cost– Target: $300k loss retention pool

• Premium and retention sharing


Ideas

• Combine retention pools– Short term target: $725K– Long term target: $3M

• Add retention pool to insurance budgets• Centralize management of risk retention (losses)

and risk transfer (insurance)


UTSAFinancing Risk Management

John DeLaHunt, MBA, ARM

UTSA Risk & Life Safety Manager

April 22, 2009


Documents

UTSA Financing Risk Management