Okaloosa County BOCC — May 20, 2014 — CAFR_13 — reading text

claims and judgments by any one person and any one incident to $200,000 and $300,000, respectively. The County self-insures public liability claims for automobile, general and professional liability. A third party administrator manages claims. Currently, the County retains the risk for the first $100,000 ($50,000 for automobile liability, $5,000 for hired automobile physical damage) of each claim or incident. In 2013, the County elected not to renew a Stop Loss Aggregate insurance policy which covered losses over $2,200,000 ($50,000 for automobile liability, $1,000 for physical damage. The Sheriff maintains a commercial insurance policy for public liability and bears no risk of loss under this type of coverage. Property Insurance The County self-insures the risk of physical loss to its real property, business property and equipment. The County retains the risk of the first $50,000 of physical damage to County property. In the case of a named storm, the self-insurance retention changes to a 3% deductible on each structure with a minimum deductible of $100,000 on all damaged structures for a capped deductible of $5,000,000 per storm. Excess insurance is purchased to cover the physical damage exposure over the self-insured retention amount. Workers’ Compensation The County contracts with a Third Party Administrator to have its workers’ compensation claims processed. The County retains risk for all claims up to $350,000 per incident. Excess insurance is purchased to cover losses up to a statutory limit for workers’ compensation and $1,000,000 for employers’ liability. The County retains no liability for claims that have been settled by purchase of annuity contracts. The Sheriff participates in the Florida Sheriff’s Association Workers’ Compensation Program. It is a fully insured, guaranteed cost program with a deductible trust fund and insurance with a commercial carrier. The Sheriff retains no risk. Employee Medical Benefits The Board of County Commissioners and all other elected officials of Okaloosa County, except the Sheriff, use a fully insured commercial insurance plan to fund employee medical benefits. The Board of County Commissioners or elected official pays the premiums for the employees while the individual pays for dependent and retiree coverage. The County bears no risk of loss under this type of coverage. The Sheriff utilizes a self-funded health plan to provide comprehensive medical benefits to the employees, retirees and their dependents. It is funded by contributions from the Sheriff’s Office and employees. In compliance with Florida Statute, Section 112.08, an actuarial review of the Plan demonstrates that the current rate structure of the Plan plus the current net assets available for benefits appears adequate to support current outstanding claims as well as those projected claims and expenses for the next plan year. Excess insurance is purchased from a commercial carrier to provide a specific claim and aggregate limits coverage. Specific claim coverage benefits the covered individual by providing unlimited coverage to begin when a specific claim exceeds $95,000 plus an 80  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 16 - RISK MANAGEMENT - CONTINUED A. Method of Risk Management - Continued Employee Medical Benefits - Continued additional corridor of $125,000. Aggregate limits coverage limits the Sheriff’s total risk exposure. This coverage provides the Sheriff with an additional $1,000,000 in coverage for the coverage year when total claims paid less the total paid under the specific claim excess coverage exceeds 125% of the expected claims for the current plan year. The Sheriff uses an internal service fund to account for risks from medical benefit claims. Claim expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. At September 30, 2013, the amount of these liabilities was $658,809. This liability has been determined based on an actuarial evaluation of all claims reported and all claims incurred but not reported (IBNR) as of September 30, 2013. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. Reconciliation of Claims Liablities for Medical Benefits As of As of Okaloosa County Sheriff September 30, 2013 September 30, 2012 Unpaid claims and adjustment expenses at beginning of year $ 1,152,782 $ 654,793 Incurred claims and claim adjustment expenses A) Provision for insured events of current fiscal year 3,402,850 4,583,682 B) Increases (decreases) in provision for insured events of prior fiscal years - - Total incurred claims and claim adjustment expenses 4,555,632 5,238,475 Payments A) Claims and claim adjustment expenses attributable to insured events of current fiscal year 3,896,823 4,085,693 B) Claims and claim adjustment expenses attributable to insured events of prior fiscal year - - Total payments 3,896,823 4,085,693 Unpaid claims and claim adjustment at end of year $ 658,809 $ 1,152,782 Special Risk Policies The Board of County Commissioners purchases commercial crime coverage against theft of money and securities with a $25,000 deductible. All of the other elected officials, except the Sheriff, are covered under the policy. Florida Statute requires certain classes of employees (law enforcement) be provided with a special death and disability benefit. The Board of 81  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 16 - RISK MANAGEMENT - CONTINUED A. Method of Risk Management Special Risk Policies - Continued County Commissioners purchases a commercial policy. The County bears no risk of loss under this type of coverage. The Sheriff insures this exposure separately. B. Claim Liabilities for Retained Risk Claim liabilities for workers’ compensation, general liabilities (including errors and omissions), and auto liability (both bodily injury and property damage) have been determined based on an actuarial evaluation of all claims reported and all claims incurred but not reported (IBNR) as of September 30, 2013. Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amount of payouts and other economic and social factors. The actuarial estimation of ultimate losses does not include any future recoveries from the Florida Special Disability Fund, subrogation or third party liens, etc. except to the degree they are implicitly included in the trending process of estimating ultimate losses. The ultimate loss calculation does take into consideration specific excess reinsurance recoverable. Claims liabilities recognized in the Self Insurance Fund of the Board of County Commissioners at September 30, 2013 were as follows: Current Long-term Total Workers' compensation $ 1,133,245 $ 1,414,985 $ 2,548,230 General liability 691,516 1,192,005 1,883,521 Auto liability 15,284 6,792 22,076 Property 41,176 - 41,176 Total claims liability recognized $ 1,881,221 $ 2,613,782 $ 4,495,003 C. Funding of Claims Liabilities The Self Insurance Fund charges the other funds of the Board and other participating elected officials for the cost of claim liabilities based on actuarially projected budget requirements for expected yearly cash payouts. This funding method results in a deficit fund balance that will be charged back to the other funds over a reasonable period of time so that service fund revenues and expenses will be approximately equal. 82  Okaloosa County, Florida NOTES TO FINANCIAL STATEMENTS Fiscal Year Ended September 30, 2013 NOTE 16 - RISK MANAGEMENT - CONTINUED D. Reconciliation of Claims Liabilities As of September 30, 2013 As of September 30, 2012 Workers' Workers' Compensation Liability Property Total Compensation Liability Property Total Unpaid claims and adjustment expenses at beginning of year $ 2,975,931 $ 1,020,210 $ 8,500 $ 4,004,641 $ 2,852,811 $ 729,115 $ - $ 3,581,926 Incurred claims and claim adjustment expenses A) Provision for insured events of current fiscal year 762,011 1,411,577 71,707 2,245,295 1,071,551 668,214 8,500 1,748,265 B) Increases (decreases) in provision for insured events of prior fiscal years (331,257) (221,086) 54,636