MINUTES OF THE VLCT PROPERTY AND CASUALTY INTERMUNICIPAL FUND, INC. BOARD OF DIRECTORS MEETING
VIA ZOOM and at the VLCT OFFICE in MONTPELIER, VT
FRIDAY, JUNE 3, 2022
Directors Present: Carl Rogers, Jackie Higgins, Aaron Frank, Dave Atherton (10:40), Jared Cadwell, Stuart Hurd, Bryan Young, Bruce Urie, Erik Wells and Rob Gaiotti
Staff Present: Ted Brady, Joe Damiata, Fred Satink, Seth Abbene, Phil Woodward, Jill George, Peggy Gates, Jim Burke and Kelley Avery
President Rogers called the meeting to order at 9:37 a.m.
Upon motion (Young/Cadwell) duly adopted, the board voted unanimously to approve the agenda.
Upon motion (Cadwell/Hurd) duly adopted, the board voted unanimously to approve the minutes of the April 1, 2022 meeting.
Joe Damiata provided a brief organizational update to the board including the following items:
- The replacement hired for the Loss Control Admin position withdrew their acceptance the day before they were due to start. Staff is again advertising for this position.
- Joe Damiata, Bryan Young and Dave Atherton attended the NLC Trustees conference in Pittsburgh in May.
- VLCT staff are close to a decision on a new Agency Management System (AMS). The hope is to have the new system up and running by the end of the year.
- PACIF staff hopes to have an RFP for a new Risk Management Information System completed and sent to prospective vendors by June 10th.
- The Department of Financial Regulation will be conducting a five-year examination of PACIF this year, which Seth Abbene will be leading.
Jill George presented the report of the first quarter claims. Worker’s compensation claims frequency was up compared to the Q1 and all-quarter averages, while property/casualty frequency was down compared to the Q1 average and up slightly compared to the all-quarter average. Average costs for both categories were slightly higher compared to the Q1 and all-quarter averages.
Upon motion (Higgins/Wells), duly adopted, the board voted unanimously to accept the Q1 Claims Report as presented.
Seth Abbene reviewed the financial statements through the first quarter. Net position is down 5.4% from year-end, primarily due to investment losses. Revenues are up slightly through the first quarter, or 1.1% above budget, largely due to increased property values and the PC rate increases. Current year general and administrative expenses are up about 8.1% compared to last year, mostly due to increases in direct and indirect costs from VLCT. However, these costs are still 9.9% under budget through the quarter simply due to timing of budgeted items.
Upon motion (Frank/Higgins), duly adopted, the board voted unanimously to accept the Financial Statements for the first quarter as presented.
Fred Satink provided a brief overview of the annual Stewardship Report from Guy Carpenter. The report reviewed the scope of services the broker provides for VLCT PACIF and key service functions and personnel. Some of these include: the provision of reinsurer quarterly ratings, BCAR modeling, catastrophe analysis (property), billing, contract language review, marketing strategy, etc. Staff confirmed the Guy Carpenter continues to serve the Trust well.
Joe Damiata reviewed Guy Carpenter’s annual BCAR (Best Capital Adequacy Ratio) Scenarios Analysis and its relation to PACIF’s Net Position Target Policy. The BCAR analysis uses data from the 2021 audited financials and investments to assess PACIF’s financial strength. In addition, modeling was performed using several risk scenarios to stress test PACIF’s financial strength. The base BCAR and stressed tested results were all within the “strongest” financial strength category.
Mr. Damiata and Mr. Satink reviewed the Reinsurance Broker Service Agreement. Guy Carpenter is requesting a 4% increase in costs from 7/1/22 through 6/30/23. Both Mr. Damiata and Mr. Satink confirmed they believed this to be a fair increase as it is the first time the firm has asked for an increase since PACIF contracted with them in 2014. Staff is extremely pleased with the level of service the firm provides and is requesting the board approve this cost increase and one-year contract extension.
Upon motion (Hurd/Higgins) duly adopted, the board voted unanimously to approve the one-year contract extension for Guy Carpenter brokerage services from 7/1/2022 to 6/30/2023 and authorized Joe Damiata to sign.
Seth Abbene reviewed the PACIF Ten-Year Financial Analysis. This report is updated each year to provide historical financial data on financial statements, claims development data and financial ratios. The report is produced to gain a better understanding of PACIF’s financial position and to identify any potential existing or developing problems with the Trust’s financial health. Based on various categories such as capacity/leverage, profitability/operating position, liquidity and reserve adequacy, the report yields a “thumbs-up” or “thumbs-down” result of the corresponding ratios. According to the results of the ten-year analysis, PACIF maintains a very healthy and strong financial position.
Upon motion (Urie/Young) duly adopted, the board voted unanimously to accept the Ten-Year Financial Analysis as presented.
Joe Damiata shared a copy of the Enterprise Risk Management (ERM) Inventory process with the board and invited staff to review their respective categories of responsibility. Staff undertakes this risk review process and updates it on an annual basis to score the organization in various risk categories such as IT systems, legal, claims, underwriting, operational, market risks, etc.to identify potential weaknesses or areas for improvement. As part of this review, Jim Burke (VLCT’s IT Director) reviewed VLCT’s information technology and cyber security systems, controls and processes with the Board.
Mr. Damiata provided a high-level overview of PACIF’s updated Strategic and Business Plans. PACIF’s first Strategic Plan was developed in 2016, and in 2020 the Strategic Planning Committee was formed consisting of VLCT staff and PACIF Board members. The committee met in April this year and updated both plans. A fifth goal of “Maintaining Financial Strength” was added to the Strategic Plan this year. The other four goals remained unchanged; however, sub-items were updated and where appropriate noted their alignment with goals from VLCT’s Strategic Plan. The Business Plan was also updated to reflect the current action items that correspond to the PACIF Strategic Plan goals.
Upon motion (Cadwell/Gaiotti), duly adopted, the board voted unanimously to accept PACIF’s updated Strategic Plan and Business Plan as presented.
Mr. Damiata reviewed board policies with the board. The board Finance Policy and Claims Settlement Authority Policy have both been updated to reflect current practices and staffing changes. In addition, staff has developed a new board Conflict of Interest Policy which mirrors the VLCT Board policy. Although the board has signed Conflict of Interest Statements annually, staff could find no record of a corresponding PACIF board policy, so one was drafted for adoption. Finally, staff proposed discontinuing the old Check Writing Policy as it is out of date and written as an internal procedure only.
Upon motion (Frank/Higgins) duly adopted, the board voted unanimously to approve the revised Finance Policy and Claims Settlement Policy, the new Conflict of Interest Policy and to discontinue the Check Writing Policy.
Seth Abbene reviewed the updated Milliman Contract/Engagement Letter. Milliman is asking for a 5% increase in their annual fee for the new contract year. Staff feels this is a fair increase for the quality of actuarial services they provide. Staff recommends the board approve the increase and authorize the board President to sign and appoint Stephen DiCenso from Milliman as the actuary for VLCT PACIF.
Upon motion (Frank/Higgins), duly adopted, the board voted unanimously to approve the 2022 Milliman Engagement Letter, authorized the President to sign and appointed Stephen DiCenso as the actuary for VLCT PACIF.
Regarding the recent board vacancy with Neal Fox’s resignation, the board has the option of filling the vacancy with one of the current board alternates or with one of the applicants from the nominations supplied in the board packet. Stu Hurd nominated Rob Gaiotti to fill the vacant director position, and this was seconded by Aaron Frank.
Upon motion (Hurd/Frank) duly adopted, the board voted unanimously to elect Rob Gaiotti to the vacant director position.
Mr. Gaiotti’s promotion to director now leaves an alternate vacancy. Aaron Frank nominated applicant Corey Parent of St. Albans Town, and this was seconded by Jared Cadwell.
Upon motion (Frank/Cadwell), duly adopted, the board voted unanimously to appoint Corey Parent, St. Albans Town, as board alternate.
President Rogers discussed the appointment of the Nominating Committee. He appointed himself, Jackie Higgins, and Bryan Young to serve on this committee. A future meeting date will be determined prior to the annual meeting to review nominations and renewing terms.
Stuart Hurd noted his term expires at the end of this year and he will not be seeking another term, so there will be an additional board vacancy to consider.
The board and staff briefly reviewed the meeting schedule and determined there is no need for the June 24th scheduled meeting.
Upon motion (Cadwell/Higgins), duly adopted, the board voted unanimously to cancel the June 24th meeting.
In other business, the board discussed the local investment sub-committee formed out of the Joint Investment Committee which will specifically meet to review the potential of adding Vermont, local-based investments to the portfolio. This subcommittee consisted of Aaron Frank from PACIF, Bill Shepeluk from VERB and Jessie Baker from VLCT. Aaron Frank has requested there be more representation from PACIF on this subcommittee, so President Rogers suggested appointing Bryan Young and Patrick Moreland to serve on this committee as well.
Upon motion (Cadwell/Gaiotti), duly adopted, the board voted unanimously to approve the President’s appointment of Bryan Young and Patrick Moreland to the Investment Sub-Committee.
Upon motion (Cadwell/Higgins), duly adopted, the board voted unanimously to adjourn the meeting (12:06 p.m.).