MINUTES OF THE VLCT PROPERTY AND CASUALTY INTERMUNICIPAL FUND, INC. BOARD OF DIRECTORS SPECIAL MEETING
VCT OFFICES, MONTPELIER VERMONT and
FRIDAY, SEPTEMBER 30, 2022
Directors Present: Carl Rogers, Aaron Frank, Jared Cadwell, Rob Gaiotti, Stuart Hurd (remote), Patrick Moreland (remote), Bryan Young, Bruce Urie, Erik Wells and Judy Frazier
Staff Present: Joe Damiata, Fred Satink, Phil Woodward, Ted Brady, Kelley Avery, Peggy Gates, Kelly Kindestin, Kelly Knotek, Jill George (remote) and Sue Ward (remote)
Others Present: Steve DiCenso (Milliman)
President Rogers called the meeting to order at 9:31 a.m.
Upon motion (Frank/Urie) duly adopted, the board voted unanimously to approve the agenda.
Upon motion (Urie/Hurd) duly adopted, the board voted unanimously to approve the minutes of the special meeting held August 10, 2022.
Mr. Damiata provided a brief organizational update to the board. Mr. Damiata called attention to the following items in particular:
- An updated memo from Jessi Hill was provided in the meeting regarding staff changes.
- Staff have been involved in demos for a new Risk Management Information System called Origami and are so far impressed with what they have seen. Staff will likely make an update to the board at its December meeting on whether or not to move forward with this system or stay with the incumbent, Ventiv.
- Staff are currently working on implementing the new Association Management System, and the target date to go live is sometime prior to Town Meeting Day next year.
- PACIF renewals were sent out on September 19, but some members have experienced issues with the Ventiv portal. Staff are working with members and accepting paper copies when necessary.
- Mr. Damiata encouraged all board members to attend next week’s Town Fair in Killington, particularly to participate in the Annual Meetings and other scheduled events.
Seth Abbene reviewed the Q2 Financial Report. Net position decreased by 9.8% from year-end 2021, largely due to unrealized losses in the investment portfolio. Revenues for the current fund year are up $245,320 compared to the same time last year, primarily due to slightly increased contributions from modest property and liability rate increases. General and administrative expenses are 15.3% higher than this time last year due to PACIF providing VLCT with funding to support diversity, equity and inclusion work and technology enhancements.
Upon motion (Cadwell/Young) duly adopted, the board voted unanimously to accept the Q2 Financial Report as presented.
Jill George reviewed the Q2 Claims Report. Claims frequency was up largely due to increased COVID claims reported under workers’ compensation; however costs were down compared to the quarter and all-year averages. Property and casualty claims frequency and costs were down overall compared to the averages.
Upon motion (Frank/Urie), duly adopted, the board voted unanimously to accept the Q2 Claims Report.
Mr. Damiata reviewed the proposed new PACIF Member Assessment Policy. This policy is now required in accordance with AGRiP Recognition requirements. The proposed policy aligns with assessment-related language in the PACIF Bylaws, and has been reviewed by PACIF general counsel, Phil Woodward.
Upon motion (Cadwell/Urie), duly adopted, the board voted unanimously to adopt the PACIF Member Assessment Policy as presented.
Fred Satink briefly reviewed the completed AGRiP Recognition Application. Once approved by the board, the application will be submitted to AGRiP, then AGRiP will contact President Carl Rogers to confirm the board’s approval. Staff is asking for approval of the application and to authorize President Rogers to confirm the board’s approval of the application.
Upon motion (Frank/Cadwell), duly adopted, the board voted unanimously to approve he AGRiP Recognition Application and authorized Carl Rogers to verify board action on the application.
Bryan Young presented the Report of the Joint Investment Committee (JIC). The committee met on September 16 with Dan Smereck of Strategic Asset Alliance (SAA) and Jason Bilodeau and Jim Kaniclides of Insight. Consolidated investment returns through Q2 of this year were -11.11% net of fees, underperforming the benchmark by 7 basis points. Although no changes were recommended to the portfolio, Dan Smereck did recommend a change to the PACIF Investment Policy to better align the amount of risk assets as a percentage of surplus. As such, SAA recommended increasing the maximum amount of risk assets as a percentage of the portfolio to 30% in the Investment Policy to allow for some additional latitude in the risk asset investment strategy. The JIC approved this change at their meeting and staff concurs with this change and is seeking the board’s approval.
Upon motion (Cadwell/Hurd), duly adopted, the board voted unanimously to accept the Report of the Joint Investment Committee.
Upon motion (Urie/Hurd), duly adopted, the board voted unanimously to approve and adopt the revised PACIF Investment Policy as presented.
President Rogers presented the Report of the Nominating Committee as Committee Chair Jackie Higgins was unable to attend this meeting. A finalized version of this report was supplied at the meeting. The committee met on September 21st and recommends the board approve terms expiring at year-end for Dave Atherton, Rob Gaiotti and Patrick Moreland. Stu Hurd has decided not to run for another term and the Committee recommended board Alternate, Judy Frazier to fill his seat at year end. The committee also recommended the board appoint Kathleen Ramsay as the 2nd Alternate on the board.
Upon motion (Frank/Gaiotti), duly adopted, the board voted unanimously to accept the Report of the Nominating Committee.
Upon motion (Cadwell/Hurd), duly adopted, the board voted unanimously to appoint Kathleen Ramsay as 2nd Alternate to the board.
Mr. Damiata briefly reviewed a draft of the 2023 PACIF Budget. Staff does not anticipate significant changes to this preliminary budget when the final version is presented in December. The budget is roughly 10.8% higher than last year due to increases in administrative expenses and reinsurance costs. Administrative expenses are up due to a new position included in the budget for 2023, inflationary salary and benefit increases for staff, and costs for implementation of the new Association Management System. A discussion ensued among board members and staff about a couple of items included in the budget. Overall, the board showed support for the preliminary budget as presented.
Steve DiCenso from Milliman presented the draft Reserve and Funding Analyses. Overall, Milliman reduced the reserve central estimate to just over $37.5 million, largely due to lower than expected loss development in prior years. Regarding funding, management recommended rates that would raise just over $25.5 million at the 65% safety margin. The overall recommended change in gross-net rates results in a proposed a decrease of 1.4%, which includes a rate decrease to workers’ compensation of 2% and a rate increase to property/casualty of .9%. Staff proposed increasing the safety margin from 60%, which was used last year, to 65% due to the state of the economy, proposed assumption of additional per occurrence risk in property, and negative impact of investments of the Fund’s net position over the course of the year. After some discussion, the board noted their preference to return to the 60% confidence level in an effort to reduce the financial burden to members in times of increasingly high costs and inflationary concerns. Staff agreed to these changes and will work with Milliman to revise the exhibits.
Upon motion (Cadwell/Hurd), duly adopted, the board voted unanimously to accept the draft actuarial Reserve and Funding Analysis with the understanding the report will be revised to reflect funding at the 60% confidence level.
Fred Satink was prepared to present the rates at the 65% confidence level for this meeting. With the board’s decision to have staff return to a 60% confidence level, Mr. Satink will revise and adjust the rates back down to the 60% confidence level. However, due to timing and the necessity of filing deadlines with the Department of Financial Regulation prior to the next board meeting, staff will require the board’s approval on the rates at this level without seeing them in final form prior to filing. The board agreed to authorize staff to adjust the rates down and file by the required deadline.
Upon motion (Cadwell/Hurd), duly adopted, the board voted unanimously to approve rates at the 60% confidence level and authorized staff to file with the Department of Financial Regulation.
Fred Satink reviewed staff’s recommended reinsurance structure for 2023, which includes renewing with all of the incumbent reinsurers with the same structure, with the exception of the second layer of liability coverage. Mr. Satink received new information yesterday from Guy Carpenter that would add an additional reinsurer to the second layer without impacting costs. The second layer in liability will be shared between Markel, NLC Mutual and a new carrier, Great American Insurance Company (GAIC). GAIC has also expressed interest in the second layer of property coverage as well, but that quote has not been finalized. Staff is looking for authorization from the board to bind the reinsurance coverage as presented, to include the change to the second layer of liability.
Upon motion (Frank/Urie), duly adopted, the board voted unanimously to authorize staff to bind the reinsurance coverage as presented and amended to include the changes to the second layer of excess liability to be shared between Markel, NLC Mutual, and Great American.
Kelly Knotek reviewed the proposed coverage changes for 2023, which consists largely of updated language, dates and further clarification of definitions, extensions, and exclusions. A new endorsement was also discussed that proposes to provide physical damage pollution coverage for certain emergency services portable equipment.
Upon motion (Urie/Young), duly adopted, the board voted unanimously to approve the coverage changes and the new endorsement as presented for the 2023 renewal.
Mr. Damiata reviewed staff’s recommendations for the 2022 contribution credit. Staff is recommending a return of $1.5 million to members in 2022 (pulling from fund years 2003, 2010, 2012, and 2016) in the form of contribution credit (on 2023 invoices), and for an additional $200,000 to fund the PACIF Grant Program.
Upon motion (Hurd/Wells), duly adopted, the board voted unanimously to approve a distribution of $1.5 million to members in the form of contribution credits and to allocate an additional $200,000 of net position to fund the PACIF Grant Program.
Upon motion (Cadwell/Hurd), duly adopted, the board voted unanimously to enter into Executive Session to discuss potential litigation (12:04 p.m.).
Upon motion (Gaiotti/Cadwell), duly adopted, the board voted unanimously to leave Executive Session and return to General Session (12:37 p.m.).
Upon motion (Young/Cadwell), duly adopted, the board voted unanimously to adjourn the meeting. (12:38.p.m.).