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Report To: General Government Committee
Date of Meeting: October 17, 2016
Report Number: FND-015-16 Resolution:
File Number: By-law Number:
Report Subject: 2016/2017 Insurance Program
Recommendations:
1.That Report FND-015-16 be received;
2.That the general insurance placement, in conjunction with the other member
municipalities of the Durham Municipal Insurance Pool, with the Frank Cowan Company
for an integrated pooling arrangement that includes integrated insurance coverages and
common self-retention deductible levels for the period July 1, 2016 to June 30, 2017, at
an approximate cost to Clarington of $943,554 be confirmed; and
3.That Clarington’s share of the $1.7 million surplus funds, amounting to $223,550 be
utilized for risk management and claims prevention projects as identified.
Municipality of Clarington
Report FND-015-16 Page 2
Report Overview
2016/2017 has been another successful year for the Durham Municipal Insurance Pool and
Clarington has benefitted strongly through a very minor 0.6% premium increase.
This report is primarily an update to Council on the status of the DMIP and current initiatives
being undertaken.
1. Background
1.1 The purpose of this report is to provide an update to the General Government Committee
regarding the status of the Municipality’s insurance program.
1.2 This report also includes a review and update of the Durham Municipal Insurance Pool,
which is now entering its sixteenth year of successful operations.
1.3 Clarington is a founding member of the Durham Municipal Insurance Pool which was
established to achieve financial savings by co-operatively purchasing insurance
coverages with local and pool level deductibles and by implementing common risk
management practices. The pool protects participating municipalities from increasing
insurance premium costs through an alternative risk-financing program with a higher
single deductible and collectively self-insuring claims within that deductible. Clarington
has held the position of Chair of the Board of the Durham Municipal Insurance Pool since
its inception.
1.4 The Durham Municipal Insurance Pool was launched in July 2000 with the participation of
the Town of Ajax, Town of Whiby, Municipality of Clarington, Township of Brock,
Township of Scugog, Township of Uxbridge and the Region of Durham.
1.5 Member municipalities are provided with coverage in the areas of general liability, errors
and omissions, auto liability and property insurance. The Durham Municipal Insurance
Pool provides municipal specific resources such as loss prevention programs, site audits
and training.
2. 2016/2017 Insurance Contract Renewal
2.1. Within the terms of the subscriber’s agreement, the Durham Municipal Insurance Pool
members agree to make a contribution sufficient enough to pay administration costs,
expenses (including actuarial and audit), premiums and a claim funding amount that is
supported by full actuarial projections and analyses.
Municipality of Clarington
Report FND-015-16 Page 3
2.2. The Durham Municipal Insurance Pool has been able to position itself to minimize the
impact of increases in insurance premiums paid to insurance companies related to
property, casualty and liability coverages.
2.3. Annually, the Durham Municipal Insurance Pool allocates the cost of the program to its
members in the form of member contributions. It is their objective that annual
contributions are sufficient to cover the total cost of the insurance premium, the payments
for all self-insured claims, the administration costs and the risk management costs
(including actuarial and audit services) for each year. The actuaries for the DMIP have
allocated costs across the municipalities on an actuarially determined basis, utilizing
considerations for current exposures, claim frequency and claim severity. The Board of
Directors approves this levy allocation methodology every three years. Clarington’s
allocation for 2016/2017 is 12.8%.
2.4. When the cost of purchasing the insurance coverages for 2016/2017 is combined with the
amount of funds that must be set aside for self-insured claims and the investment income
anticipated for the 2016/2017 period, the total increase will be 0.6%.
2.5. The Board of Directors of the Durham Municipal Insurance Pool (of which Clarington sits
as Chair), has placed coverage with the Frank Cowan Company for an integrated pooling
arrangement.
3. Benefits of an Insurance Pool
3.1 The main components of the structure of the Durham Municipal Insurance Pool
arrangements are summarized as follows:
Each municipality retains their respective current deductibles ranging from $5,000 to
$100,000 (Clarington’s deductibles are primarily $25,000);
The pool self-insures losses between these local deductibles and a per claim limit of
$500,000 (on a group basis) for integrated coverages;
Under this structure, local municipalities are responsible for funding losses from $0 to
their individual deductible amounts;
Between these local municipal deductibles and the pooled retention limit of $500,000, the
seven members share the cost on a collective basis; and
Municipality of Clarington
Report FND-015-16 Page 4
Excess of a $500,000 per claim loss, the members purchase insurance from municipal
insurers for protection on a collective basis against catastrophic claim losses.
3.2 During its sixteen years of existence, this innovative risk financing venture continues to
be a highly effective method by which the municipalities have enjoyed:
Broader insurance coverage;
Control over the costs of insurance claims below the $500,000 deductible;
Pro-active, comprehensive and coordinated risk management services to reduce property
and liability exposures;
Increased investment income on the retained portion of the pre-funded claims loss
reserve; and
Accumulated savings from reduced premium costs.
4. Durham Municipal Insurance Pool Surplus Distribution
4.1 The Durham Municipal Insurance Pool continues to be financially stable. Any surplus for
the Pool that is generated due to investment income and better than expected claims
experience is to ensure that the Pool has sufficient resources for unexpected or adverse
development of claims.
4.2 Upon consultation with the DMIP’s actuaries and based on DMIP’s financially stable and
fiscally sound results, the following resolution has been unanimously approved the DMIP
Board of Directors directing the payment of a $1,700,000 dividend to the Pool members.
“The Board of Directors of the Durham Municipal Insurance Pool (DMIP) agree to
distribute $1.7 million in surplus funds to the founding subscribers as stated in the
executed Subscribers Agreement as follows:
DMIP Member Amount ($)
Ajax 248,030
Brock 57,970
Clarington 223,550
Durham 746,470
Scugog 78,540
Uxbridge 72,250
Whitby 273,190
Total 1,700,000
Municipality of Clarington
Report FND-015-16 Page 5
The Board of Directors further agrees to recommend that each members’ share be re-
invested into their local Insurance and Risk Management Reserve Fund to provide for
future program costs related to their insurance and risk management requirements.”
4.3 The 2016/2017 renewal for DMIP has been proven successful strategically and
financially. Continued positive claims experience and stable investment income resulted
in DMIP’s ability to return its second dividend within the last 3 years.
4.4 Clarington’s share of the Durham Municipal Insurance Pool surplus distribution in the
amount of $223,550 was deposited into Self Insured Losses Reserve, to be used for risk
management initiatives. In consultation with Department Heads, funds have been
allocated for continued road safety audit work, sidewalk repair, roadside shoulder repair
to comply with minimum standards, cyber security training, an IT strategic plan to aid in
business continuity, facility repairs and playground inspector certifications.
5 Automobile Insurance Reform in Ontario
5.1 Attached is the Regional Municipality of Durham’s report 2016-COW-17 (marked
Attachment #1), on Automobile Insurance Reform in Ontario, for information. Every
driver should be aware of the changes to their coverage that came into effect June 1,
2016.
6 Status of Insurance Claims
6.1 Each department in the Municipality has a role to play in risk management practices to
reduce claims, as well as claims handling practices to reduce exposure when claims are
received. Ongoing training occurs, both as components of annual departmental training
programs, as well as specific risk management or claims handling seminars co-ordinated
or hosted through the finance department.
6.2 Clarington has incurred 514 claims over the past ten years that have resulted in
approximately $3.8 million in net payments to date. Currently, there are approximately 51
outstanding claims with an estimated financial impact of $3.1 million. As referenced
above, Clarington pays the deductible and the balance of the costs are covered through
the DMIP and the Frank Cowan Company. This forms part of the annual municipal
insurance budget.
6.3 The bulk of the claims relate to slips, trips and falls on municipal sidewalks and motor
vehicle accidents.
Municipality of Clarington
Report FND-015-16 Page 6
7 Risk Management
7.1 As Council is aware, the Frank Cowan Company presented the Municipality of Clarington
with the inaugural $10,000 Excellence in Municipal Risk Management Award at the
Federation of Canadian Municipalities Sustainable Communities Conference Award
Ceremony on February 1, 2015. This is an example of the dedication of the municipal
staff towards risk management initiatives and reflects a cross-departmental effort to
improve business practices.
7.2 Clarington is participating in the AVL/GPS Protocols project through the DMIP and a
independent external resource. This is now a standard defence tool in legal proceedings.
By collecting information from municipal equipment such as speed, location and the
status of plows or spreaders, a municipality can provide evidence that it properly
maintained the road to a minimum standard and met expected patrol service level
requirements.
7.3 Clarington’s practices are being reviewed with respect to our use of AVL/GPS including
what data is collected and how that data is stored and recommendations will be provided
relating to the adequacy and appropriateness of information being gathered for insurance
defense purposes.
7.4 Cyper risk continues to be a concern among DMIP member municipalities. Municipalities
rely on technology and the safe processing and storage of data to conduct business on a
daily basis. Ensuring the security of data information is becoming an increasingly difficult
task, especially considering changing regulations. A failure in technology or data breach
can have significant consequences. Clarington is working towards the necessary
requirements to obtain cyber liability coverage.
8 Concurrence – not applicable
9 Conclusion
9.1 Risk pooling is a long-term management strategy. It is not a “quick fix” for insurance
pricing problems. The full benefits of participation in a risk pool are not fully realized for
several years. The Durham Municipal Insurance Pool has not been in existence for a
sufficient period of time that these benefits are being realized on an annual basis. The
DMIP has been in place for 16 years and is an outstanding achievement in alternative
service delivery.
9.2 For the 2016/2017 year, the Durham Municipal Insurance Pool has been successful in
obtaining a favourable insurance placement with minimal cost increases and expanded
coverages. Participation in the Durham Municipal Insurance Pool has provided a
Municipality of Clarington
Report FND-015-16 Page 7
successful mechanism both to control insurance costs as well as promote risk
management practices to reduce claims and protect against lawsuits. Therefore,
Clarington proceeded with the insurance placement in conjunction with the Durham
Municipal Insurance Pool with the Frank Cowan Company, pursuant to our subscribers’
agreement.
10 Strategic Plan Application
The recommendations contained in this report conform to the Strategic Plan.
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.
Attachment #1 Regional Municipality of Durham report 2016-COW -17