© Copyright Arthur J. Gallagher & Co. 2013

Arthur J. Gallagher Risk Management Services, Inc.

National Public Entity & Scholastic Division

State of KansasState of KansasProperty/Casualty Property/Casualty

Pooling PresentationPooling Presentation

Presented by:Byron Given, Robert McWeeney

Charlie Herr

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Why Arthur J. Gallagher?• Expertise in pools, associations,

and risk purchasing groups –

Gallagher administers over 25% of

the nations pooled programs

• Staff dedicated entirely to

Scholastic Insurance

• Conduct training and speaking

sessions for various Local, State,

National and International

Associations

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AJG Public Entity Team Experience

• AJG’s Public Sector Practice serves more than 3,500 school districts, including 40% of the largest 100 school districts in the nation

• Gallagher is associated with 135+ public entity pools throughout the country (estimated 11,000 individual entities)

• Our Team Operates school pools in IL, MN, VT, IN, IA, PA, SD, WY, MI, OH

Local Service…

…Global Resources

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Sample Claim -Loss FundPayment Structure

*Based on data from current scholastic pools of similar demographics

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$1,000 Maintenance Deductible

SIR

$35,000 Per Occurrence

Property

$1,000,000Per Occurrence

Excess Property

$400,000,000Per Occ.

$10,000,000

Earthquake SublimitPer Occ./Agg.

$10,000,000Flood SublimitPer Occ./Agg.

LOSS FUND$385,000

Property, Business Income,Extra Expense, MobileEquipment, Auto PD

.

-$35,000$350,000

Claim #1 – Bus Runs into School - $3,500,000 claim

Total Cost to School District:

$1,000

Aggregate Stop Loss Protection

Excess of theLoss Fund

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Benefits of Protected Self-Insurance (Pool)

• Retain a portion of the predictable losses

• Transfer a portion of the catastrophic risk

• Broaden your insurance program coverage

• Control your costs in the hard market

• Budget a known maximum cost

• Input in the claims process

• Provide long-term stability

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Spectrum of Insurance

ConventionalInsuranceProgram

SafetyDividendProgram

LargeDeductibleRetro-Plan

SecuredSelf-Insurance(w/ Stop Loss

Protection)

SpecificExcess

Insurance

Reinsurance Captive or

RRG

PureSelf-Insurance

Less Control Greater Control

Insurance Company Controls Program

Insured Controls Program

KS PoolXX

Less Insurance Company Profits

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Estimated Expiring

2013-2014 Total

Expected 2013-2014

Maximum Costs1. Package Policy

(includes Property, General Liability, Automobile Liability and Physical Damage, Garage Liability, Inland Marine, EDP, SBLL and Crime)

$1,212,677 $301,184 $301,184

2. Student Accident Included $60,095 $60,095

3. Excess Property Included $207,060 $207,060

4. Boiler & Machinery Included $34,304 $34,304

5. Excess Liability – Included $80,000 $80,0006. Administration Fee – Arthur J. Gallagher Risk

Management Services, Inc. FeesIncluded $80,000 $80,000

7. Claims Administration Fee Included $20,000 $20,0008. Loss Control Services Fee Included $7,000 $7,000

Total Fixed Costs $1,212,677 $789,643 $789,643

Variable CostEstimated Expiring

2013-2014 Expected Cost

2013-2014 Maximum Cost

Loss Fund – Premium N/A $196,714 $385,000

Total Premium Contribution $1,212,677 $986,357 $1,174,643

Line of Coverage

•Under the Property/Casualty Program the school districts on a fixed costs basis will see a savings of $423,034, or a 35% reduction over expiring, while improving coverages and limits.

Sample All District Pricing Example (Iowa School Pool; 7 members) – Property/Casualty

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Sample Small District Pricing – Property/Casualty

Fixed Costs2012-2013 Expiring

2013-2014 Maximum Cost

Proposed

2013-2014 Expected Cost

Program Self-Insured Package Premium (includes Property, General Liability, Garage Liability, Auto Liability and Physical Damage, Inland Marine, EDP, SBLL and Crime

$32,235 $9,000 $9,000

Student Accident 1,500 1,159 1,159

Excess Property N/A 3,556 3,556

Boiler & Machinery Included 711 711

Excess Liability 5,000 1,543 1,543

Gallagher/Local Agent Fee Included 3,500 3,500

Claims Administration Fee Included 1,120 1,120

Loss Control Services Fee Included 1,000 1,000

Total Fixed Costs $38,735 $21,589 $21,589

% of Increase/Decrease -44% -44%

Variable Costs2012-2013 Expiring

2013-2014 Maximum Cost

Proposed

2013-2014 Expected Cost

Program Loss Fund – Premium N/A $9,000 $4,500

Total Premium Contributions on a Maximum Cost Basis $38,735 $30,589 $26,089

% of Increase/Decrease -21% -33%

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Sample Large District Pricing– Property/Casualty

Fixed Costs2012-2013 Expiring

2013-2014 Maximum Cost

Proposed

2013-2014 Expected Cost

Program Self-Insured Package Premium (includes Property, General Liability, Garage Liability, Auto Liability and Physical Damage, Inland Marine, EDP, SBLL and Crime

$323,619 $96,000 $96,000

Student Accident 8,119 19,774 19,774

Excess Property N/A 57,097 57,097

Boiler & Machinery Included 10,061 10,061

Excess Liability 56,874 26,324 26,324

Gallagher/Local Agent Fee Included 19,743 19,743

Claims Administration Fee Included 4,167 4,167

Loss Control Services Fee Included 1,000 1,000

Total Fixed Costs $388,612 $234,166 $234,166

% of Increase/Decrease -40% -40%

Variable Costs2012-2013 Expiring

2013-2014 Maximum Cost

Proposed

2013-2014 Expected Cost

Program Loss Fund – Premium N/A $122,663 $51,397

Total Premium Contributions on a Maximum Cost Basis $388,612 $356,829 $285,563

% of Increase/Decrease -8% -27%

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KERMP District Savings – Property/Casualty

District EXPECT COST SAVE/EXPR MAX COST SAVE/EXPR

District 1 -46.48% -36.04%

District 2 -37.75% -27.92%

District 3 -45.49% -27.38%

District 4 -56.16% -49.53%

District 5 -49.98% -32.01%

District 6 -32.97% -22.57%

District 7 -27.92% -20.28%

District 8 -31.19% -17.74%

District 9 -34.26% -15.47%

District 10 -55.72% -42.92%

Average-38.73% -25.85%

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What the First Dollars Markets are going to Say (EMC/WSI)…

• “Too many meetings and too much of a time commitment.”

• “The pool has the ability to be assessed.”

• “The price you see is NOT the price you will pay!”

• “These pools make use of the E&S Markets. The carriers used are not AM Best Rated.”

• “To get the program started the insurance companies will undercut

premiums in the first year. The carriers will jack up the premiums/rates in

year two of the program.”

• “If you decide to leave the Pool, you have to take your Claims with you.”

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• July 2015: Creation of design study for Western Kansas Scholastic Program

• September - November 2015: Pooling design study is displayed for School Districts throughout Western Kansas and

applications are administered to prospective School Districts

• September - November 2015: Phone calls to discuss the applications and information gathering process

• October 30, 2015: All applications are due to Gallagher for charter member prospective school districts

• December 31, 2015: Quotations from Gallagher’s market partners expected

• January, 2016: Proposal Meetings with prospective districts

• February 2016: Prospective members present the program option to your respective school boards

• March 4, 2016: Kansas Department of Insurance Presentation

• March 4, 2016: Kansas Attorney General and Kansas State Department of Education Applications due

• June 1, 2016: Approval Decision Deadline for various State entities due per KS State Statue 12.2618

• July 1, 2016 – Program Inception Date!▪ Please see the packet of information on how to obtain the required information that we will need to

quote the insurance.

Kansas Pooling Sample Timeline