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Pages 6-31

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From page 6...
... 6 Deciding whether to create and operate a transit pool requires a phased and disciplined approach, with each phase building on the others. This chapter describes these phases and includes links and references to additional information as necessary.
From page 7...
... Management Type Advantages Disadvantages Internal Management (Transit Agency Staff) May save time on training and orientation because the internal applicant may have more knowledge of pool members' needs and services.
From page 8...
... 8 Shared-Risk Insurance Pools for Transit Agencies: A Guide 3.1.3 Pool Management Fees Pool management fees will vary depending on the services provided and the number of pool members. Table 2 presents the maximum levels that can be expected.
From page 9...
... Phases to Create and Operate a Transit Pool 9   • Transparency results from each member being part of the pool's operations: rating, loss control, and claims management. • Choice is the result of a pool's ability to choose its self-insured retentions, coverage limits, and types.
From page 10...
... 10 Shared-Risk Insurance Pools for Transit Agencies: A Guide than the commercial insurance sector's record serving public entities" (National League of Cities 2014)
From page 11...
... Phases to Create and Operate a Transit Pool 11   Flexibility and Coverage Structure The pool's initial coverage structure can transfer excess losses to commercial insurers. Then, as the pool's inherent advantages mature, it can assume more of its risk of loss, reducing its costs and dependence on commercial insurance.
From page 12...
... 12 Shared-Risk Insurance Pools for Transit Agencies: A Guide A pool's early years are the most hazardous. The research team recommends focusing on coverage and losses that do not pay out all at once to counterbalance the startup risks and allow the pool time to build capital and loss reserves.
From page 13...
... Phases to Create and Operate a Transit Pool 13   3.2.1 Data and Information Needs Actuaries must be provided with your state's sovereign immunity/tort liability statutes limiting liability (if any)
From page 14...
... 14 Shared-Risk Insurance Pools for Transit Agencies: A Guide State funding and capitalization requirements (minimum reserve funds) are less stringent for municipal pools, if required at all, than those for private pools.
From page 15...
... Phases to Create and Operate a Transit Pool 15   The advantage of a gap analysis is that it looks beyond the financial measures, which is essential because pools provide more benefits to their members than financial alone. There are fundamental concerns beyond economic issues that should be considered when deciding whether to establish a pool.
From page 16...
... 16 Shared-Risk Insurance Pools for Transit Agencies: A Guide steps in Phase 5. Each pool will need to review the state requirements and schedule its Phase 5 steps to match the requirements for state approval.
From page 17...
... Phases to Create and Operate a Transit Pool 17   Capital Contributions State regulators do not typically require a minimum level of capital contributions from municipal pools to be granted a certificate of authority or a license to operate. However, pool members may be required to contribute capital before the pool issues its policies.
From page 18...
... 18 Shared-Risk Insurance Pools for Transit Agencies: A Guide options: voluntary termination when the member decides not to renew coverage and involuntary termination when the member's risks no longer comply with the pool's underwriting specifications. The organizational documents will need to specify whether paid-in capital or surplus contributions are to be returned and, if so, under what circumstances based on whether termination is involuntary or voluntary.
From page 19...
... Phases to Create and Operate a Transit Pool 19   3.6.1 Scope of the Operations Plan An operations plan should be prepared within 30 to 60 days of the creation of the pool. The operations plan will increase the efficiency of operations, facilitate proper coordination, reduce the risk of loss, aid in organization, give direction to all concerned, keep reasonable control of pool activities, encourage creativity and innovation, and motivate actions in support of the pool's goals and objectives.
From page 20...
... 20 Shared-Risk Insurance Pools for Transit Agencies: A Guide Document Underwriting Policy Documentation should include the coverage the pool will provide (see coverage matrix in Appendix B) and the coverage basis: rate class (bus, minivan, automobile, paratransit, highly flexible on-demand transportation, etc.)
From page 21...
... Phases to Create and Operate a Transit Pool 21   Aggregate. During a coverage period, the reinsurer pays out the total sum of all claims above the pool's aggregate attachment point.
From page 22...
... 22 Shared-Risk Insurance Pools for Transit Agencies: A Guide Identication is the process of identifying and examining the potential sources of loss faced by the pool. Analysis and measurement are the assessment of the potential impact of various exposures on the pool (qualitative and quantitative)
From page 23...
... Phases to Create and Operate a Transit Pool 23   3.7 Phase 7: Establish Pool Operations Pools must be established in a status or condition necessary for accurate execution of their intended purpose as established in the pool's purpose and operations plan. 3.7.1 Select a Target Date to Commence Operations This date will not coincide with all members' commercial coverage termination dates.
From page 24...
... 24 Shared-Risk Insurance Pools for Transit Agencies: A Guide reimbursed for expenses directly attributable to specific claims to allow the pool to seek recovery from reinsurers under reinsurance agreements that include coverage for allocated loss adjustment expenses (ALAE)
From page 25...
... Phases to Create and Operate a Transit Pool 25   3.7.4 Pool Management Agreement The agreement for pool management services must address the following foundational issues: appointment and authority; compensation; term and termination; management responsibilities and limitations; confidentiality; and indemnification. The pool should be willing to indemnify pool management for all functions within the defined scope of activities and services.
From page 26...
... 26 Shared-Risk Insurance Pools for Transit Agencies: A Guide 3.8.1 Purpose and Structure of the Board Selecting the pool's board and setting up its smooth operation is of upmost importance to the pool's long-term financial and operational health. Purpose A board's primary purpose is to ensure the pool meets its goals and formulates policies supporting those goals.
From page 27...
... Phases to Create and Operate a Transit Pool 27   • Monitoring underwriting practices • Servicing coverage documents • Management of claims – Claims supervision and recoveries – Claims investigation and settlement – Claims defense – Claims reserves • Excess/stop-loss commercial insurance placement • Legal and litigation management – Selection of counsel • Corporate secretarial and adjuster performance (in-house or third party) • Actuary selection and management • Rate development • Annual claim reserve reviews Working through pool management and the pool service providers, the board should monitor the essential functions and activities of the pool (state statutes and regulations will also dictate the board's functions and activities)
From page 28...
... 28 Shared-Risk Insurance Pools for Transit Agencies: A Guide 3.9.1 Annual Pool Management Activities Pool management activities that should occur on an annual basis include the following: • Developing rates. • Assessing the legal environment (e.g., a sovereign-immunity-liability limit may apply)
From page 29...
... Phases to Create and Operate a Transit Pool 29   3.9.3 General Ledger (Monthly/Quarterly) Financial statements, regulatory filings, and investment guidance (as permitted by state statute)
From page 30...
... 30 Shared-Risk Insurance Pools for Transit Agencies: A Guide The pool is also a separate legal entity; members must collaborate but not directly interfere with the daily operations of pool management. Pool members, the board, pool management, and the pool service provider(s)
From page 31...
... Phases to Create and Operate a Transit Pool 31   obtain and maintain reinsurance, excess, or stop-loss insurance policies (if applicable)

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