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HomeMy WebLinkAboutFND-004-17Finance Department Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: General Government Committee Date of Meeting: March 27, 2017 Report Number: FND-004-17 Resolution: GG-169-17 File Number: By-law Number: Report Subject: City of Oshawa Application to Join the Durham Municipal Insurance Pool (DMIP) Recommendations: 1.That Report FND-004-17 be received; and 2.That the Municipality of Clarington approve the City of Oshawa’s application to join the Durham Municipal Insurance Pool (DMIP) effective July 1, 2017. Municipality of Clarington Report FND-004-17 Page 2 Report Overview This report addresses the request by the City of Oshawa to join the Durham Municipal Insurance Pool (DMIP). 80% of the Councils’ of the Durham Municipal Insurance Pool members must approve the acceptance of the City of Oshawa into the Pool to proceed in accordance with the Subscribers Agreement. This report recommends approval of the request. 1. Background 1.1 The DMIP was established to cooperatively self-insure or pool the cost of insurance claims and to purchase insurance coverages under one common policy from the insurance market. The initial participating municipalities included the Towns of Ajax and Whitby, the Municipality of Clarington, the Townships of Scugog, Uxbridge and Brock and the Region of Durham. 1.2 On November 28, 2016, the Council of the City of Oshawa formally approved the City of Oshawa’s application to join the DMIP and more specifically passed a resolution authorizing and directing the Mayor and City Clerk to execute the DMIP Subscribers Agreement in a form acceptable to the City Solicitor to proceed with joining the DMIP for corporate insurance coverage commencing July 1, 2017 for a minimum three (3) years initial commitment, subject to 80% of the Councils’ of the DMIP approving the acceptance of the City of Oshawa into the Pool. 1.3 The Subscribers Agreement is a comprehensive legal document which sets forth provisions relating to the formal structure of the Insurance Pool Board of Directors, funding arrangements and financial reporting, subscribers rights and obligations, operation of the fund and addition and deletion of members. 1.4 Section 5.02 of the founding members Subscribers Agreement anticipated additional applicants to the DMIP and outlined the following requirements to determine the acceptance of additional Municipalities into the DMIP: “5.02 The Board of Directors may accept additional qualified Municipalities to become parties to this Agreement and thereby become Subscribers in accordance with the following provisions: (a) Any municipality contained within the Regional Municipality of Durham at the effective date of this Agreement may apply to become a Subscriber provided that: Municipality of Clarington Report FND-004-17 Page 3 i. such Municipality submits a written application in acceptable form and remits the application together with such application fee as may be prescribed by the Board of Directors from time to time; ii. such Municipality provides the historical claims information, data and other relevant information that the Board of Directors, the Actuary and the insurers/reinsurers deem necessary or appropriate to properly assess participation qualifications; iii. such Municipality co-operates with the Board of Directors in providing such information and documentation as it may require; (b) The Board of Directors will review the application to become a Subscriber and will make a recommendation to the Councils of the participating Subscribers. A Municipality’s application will be accepted if 80% of the Councils agree, subject always to the following: i. Receipt of duly executed Form of Subscription from such Municipality in the form specified; ii. Receipt of a copy of the resolution of Council authorizing Subscription to the Fund; and iii. Receipt of any fees required to be paid by such Municipality.” 1.5 Pending agreement by 80% of the DMIP members’ Council’s, the City of Oshawa will be required to sign the Form of Subscription within the existing Subscribers Agreement along with a Memorandum of Agreement that outlines the specific terms of the gradual and well planned transition to successfully bring the City of Oshawa into the DMIP. 2. DMIP Due Diligence to Approve City of Oshawa’s Request 2.1 The participating member municipalities of DMIP engaged the services of an insurance actuary to assist with the evaluation of the risks and benefits of having the City of Oshawa join DMIP. Municipality of Clarington Report FND-004-17 Page 4 2.2 The due diligence effort evaluated the impacts to the DMIP should the City of Oshawa join the DMIP and considered the City of Oshawa’s claim history and risk and insurance programs. 2.3 DMIP and the actuary identified the following benefits to the existing DMIP P ool Members with the addition of the City of Oshawa to the DMIP:  With the growth of the Pool to include an additional member, the risks in the Pool layer are now spread over a greater number of Pool members. The increased claim counts in the Pool will tend to improve the credibility and predictability of the claim estimates. In other words, with more members in the Pool, there is a greater ability to shoulder one bad year from one member with good results of the other members and has the potential to lower the annual payments by the municipalities of the DMIP.  The fixed costs associated with the operations and administration are also allocated over a larger number of Pool Board members resulting in a decrease in the administrative costs to each Pool Board member.  The inclusion of the City of Oshawa also bolsters DMIP’s ability to earn additional investment income on the pre-funded claim reserve as there are increased funds with which to work.  Pools are an excellent example of collaboration among local gove rnments and including Oshawa is an example of this collaboration, a founding principal of the pooling concept. Pools provide service to members, promote public entity collaboration and help demonstrate how local governments and the Region can improve serv ice to the public through long-range planning and collaboration. 2.4 The actuarial analysis and further review by DMIP indicated that the City of Oshawa risks are generally consistent with the current pool members and that there are no compelling reasons not to allow the City of Oshawa to join the DMIP. 2.5 DMIP has assured the member municipalities that the current level of service provided by the DMIP from an administrative and claims handling perspective will not be impacted by the inclusion of Oshawa into the Pool, as the analysis undertaken incorporates necessary servicing capacity. 2.6 The proposed transition of Oshawa into the DMIP as well as the Memorandum of Agreement they are required to execute, clearly protects the existing DMIP surplus for the benefit of the founding subscribers only and will not be accessed by Oshawa. Municipality of Clarington Report FND-004-17 Page 5 2.7 The only significant risk exposure unique to Oshawa is the airport. The City of Oshawa carries a separate policy for this so the coverage and exposures will remain outside the DMIP. 2.8 In light of the due diligence that was undertaken to review the risk management, loss control, and claims management approach in the City of Oshawa, the identified benefits and minimal risks it is recommended the Municipality of Clarington Council accept the City of Oshawa’s application to join the DMIP effective July 1, 2017. 3. Next Steps 3.1 The City of Oshawa will be required to sign the Form of Subscription within the existing Subscribers Agreement and the Memorandum of Agreement in the f orm provided no later than March 31, 2017 to formalize their participation in the DMIP for the July 1, 2017 annual renewal, subject to 80% of local Councils of the participating DMIP Municipalities approving City of Oshawa’s application to join the DMIP. 3.2 A decision by the existing DMIP Member Municipalities on the City of Oshawa’s application to join the DMIP will provide the DMIP Board of Directors with the direction necessary to finalize the general insurance placement for the period July 1, 2017 to July 1, 2018 for the DMIP. 4. Concurrence Not Applicable 5. Conclusion 5.1 The risk and insurance due diligence review undertaken by the DMIP Board of Directors and its actuary supports the recommendation to accept the City of Oshawa’s application to join the DMIP. 5.2 As a result of the completion of the extensive due diligence analysis, this report is being brought forward to Council formally seeking Council’s endorsement of the decision to accept the City of Oshawa’s application to join the DMIP. Municipality of Clarington Report FND-004-17 Page 6 6. Strategic Plan Application Not applicable. Submitted by: Reviewed by: Nancy Taylor, BBA, CPA, CA, Curry Clifford, MPA, CMO Director of Finance/Treasurer Interim CAO Staff Contact: Nancy Taylor, Director of Finance/Treasurer, 905-623-3379 ext 2602 or ntaylor@clarington.net There are no interested parties to be notified of Council's decision. NT/hjl