VLCT Property and Casualty Intermunicipal Fund (PACIF), Inc.
Board of Directors Meeting
Friday, October 11, 2019
VLCT Offices, Montpelier, Vermont
Directors Present: Carl Rogers, Joshua Powers, Brendan Whittaker, Neal Fox (9:41 a.m.), Dave Atherton, Aaron Frank, Stuart Hurd (by phone 10:00 a.m.), Patrick Moreland, Jerry Storey (by phone), Bruce Urie and Erik Wells
Staff Present: Joe Damiata, Maura Carroll, Jeremiah Breer, Fred Satink, Kelley Avery and Jill George
President Rogers called the meeting to order at 9:32 a.m.
Upon motion (Urie/Frank) duly adopted, the board voted unanimously to approve the agenda.
Dave Atherton noted the September 27 meeting minutes should be corrected to show his attendance.
Upon motion (Powers/Whittaker) duly adopted, the board voted to approve the minutes of the September 27, 2019 meeting as amended. Jerry Storey abstained.
Joe Damiata provided the following updates and staff reports:
- Town Fair appeared to be a success, with positive feedback from members.
- Some recent internal staff trainings/meetings.
- VLCT has hired Jen Overton to fill the role of receptionist and Executive Assistant.
- A postcard-like mailing is set to go out to PACIF members to advise them of the favorable 2020 renewal rates, noting they are subject to DFR approval.
Jeremiah Breer reviewed the financial statements through June 30, 2019. Net position is up significantly, largely due to decreases in prior year reserves and strong investment performance. Revenues are slightly lower (2%) than last year at this time, and general and administrative expenses are down as well.
Upon motion (Powers/Urie), duly adopted, the board voted unanimously accept the second quarter financial report.
Jill George reviewed the second quarter claims report. Claims frequency across all lines was flat overall compared to the prior quarter. Workers’ compensation claims costs are higher, due to 3 severe claims. General liability claims were below trend, while property and auto claims were roughly on trend for the quarter.
Upon motion (Fox/Urie), duly adopted, the board voted unanimously accept the second quarter claims report.
Mr. Breer provided a brief summary of the Joint Investment Committee meeting held September 13. An actuarial analysis of PACIF’s expenditure patterns revealed that they were relatively close to PACIF’s average fixed income duration. As a result, our investment advisors did not recommend any changes to either the asset allocation strategy or the PACIF Trust’s Investment Policy. Investment returns came in just over 8% for the first half of 2019.
Upon motion (Powers/Hurd), duly adopted, the board voted unanimously to accept the Joint Investment Committee report.
Mr. Damiata briefly reviewed the Executive Summary of Milliman’s June 30, 2019 Loss Reserve, 2020 Funding and Contribution Credit Analysis. The report recommends an overall rate reduction of 3.6%, with a 5.4% decrease for workers’ compensation and a 1.7% reduction for property and casualty on a gross-net basis. This will raise roughly $25 million at a 60% safety margin for 2020.
Upon motion (Urie/Powers), duly adopted, the board voted unanimously to accept the actuary’s June 30, 2019 Loss Reserve, 2020 Funding and Contribution Credit Analysis.
Fred Satink reviewed the proposed 2020 PACIF Rate Summary. He noted that the revised actuarial report includes more than $300K of increased property reinsurance costs, that were in excess of original cost estimates. On a gross-gross basis, workers’ compensation rates will drop by 4% overall, property and casualty rates will drop by 6.35% and overall rates will drop by 5.2% and will seek to generate the contribution amount recommended by the actuary or slightly above. Individual member costs will vary based on member experience and exposures.
Upon motion (Fox/Powers), duly adopted, the board voted unanimously to approve the 2020 PACIF Rates as proposed.
Mr. Satink reviewed the proposed changes to the reinsurance structure for 2020. To minimize reinsurance premium expenses, staff proposed changing both the property and workers’ compensation retention levels from $500K to $750K. Mr. Satink also detailed the revised reinsurance layers and attachment points for both workers’ compensation and property coverage and some of the coverage limitations proposed by the excess layer property reinsurer. Staff also recommended increasing the extortion limit to $50,000 for cyber liability, which is incorporated into the renewal quote.
Upon motion (Fox/Powers), duly adopted, the board voted unanimously to approve the 2020 PACIF reinsurance renewals as proposed.
Mr. Satink discussed the 2020 PACIF coverage changes. Since the September 27 meeting of the board where the coverage changes were outlined, Mr. Satink noted one additional change which affects the definition of guaranteed replacement cost (GRC). In this change, for any repair or replacement costs over $4.5 million, the most PACIF (or its reinsurer) will pay is the difference between 130% of the building value limit shown on the property schedule and the $4.5 million.
Upon motion (Fox/Powers), duly adopted, the board voted unanimously to approve the 2020 PACIF coverage changes as proposed.
Mr. Satink reviewed the proposed changes to the PACIF Underwriting Policy which were discussed at the September 27 meeting. These changes included:
Adding “Communications Districts” to the list of entities ineligible for PACIF membership;
Changing the threshold at which a member is eligible to receive a Workers’ Compensation (WC) Size Contribution Discount.
Upon motion (Whittaker/Hurd), duly adopted, the board voted unanimously to approve the proposed changes to the PACIF Underwriting Policy.
Mr. Damiata reviewed the proposed contribution credit to PACIF members for 2020. As detailed in the report by Milliman, staff is recommending $1,500,000 in contribution credits, and an additional $200,000 to fund the PACIF Grant Program for 2020.
Upon motion (Urie/Storey), duly adopted, the board voted unanimously to approve the distribution of $1,500,000 to PACIF members in the form contribution credits and to allocate an additional $200,000 to fund the PACIF Grant Program for the 2020 fund year.
Mr. Satink explained that our current 2016 AGRiP Recognition expires at the end of this year, and PACIF must re-apply to maintain its recognition. With the updated application now completed, it is ready for submission, but requires Board approval.
Upon motion (Powers/Fox), duly adopted, the board voted unanimously to approve the AGRiP Advisory Standards Application and authorized the Board President to certify the application to AGRiP.
Joe Damiata briefly discussed the status of the PACIF Strategic Plan. Staff proposes modifying the plan so that is covers a broader period of three to five years. President Rogers proposed that this issue and process might be discussed at the December meeting of the Board. Director Powers also proposed forming a Strategic Planning Committee of three or four board members and key staff to work on the plan and then report back to the board. Board members and staff concurred on this approach and agreed to revisit the issue at the December meeting.
Upon motion (Storey/Urie), duly adopted, the Board unanimously voted to enter executive session to discuss a personnel issue, in accordance with 1 VSA §313(a)(3) (11:15 am).
Upon motion (Powers/Whittaker), duly adopted, the Board unanimously voted to exit executive session (11:45am).
Director Whittaker asked staff to provide an update on a recent claim in the Town of Norwich and a discussion ensued.
The meeting was adjourned at 11:55 a.m.