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CITY OF SAN LEANDRO MEMORANDUM DATE: September 27, 2006 TO: Finance Committee VIA: John Jermanis, City Manager FROM: Jesse Baloca, Finance Dire& SUBJECT: Liability Self-Insurance Program Review As directed by the City Council, the City contracted with ARM Tech, to conduct an independent review of the City's liability self-insurance program. ARM Tech specializes in consulting and evaluating govemment risk management programs and was primarily tasked with the review of the City's overall claims handling process and the City's financial structure. Please refer to the attached proj ect scope. The course of the project included interviews with City staff, George Hills (claims administrator), and Meyers Nave and a sampling review of approximately 50 liability claims and their related documents. Claims Handline The Review was rated against industry best practices and was given a claims handling rating of 90% for George Hill and 94% for the work conducted by in-house staff. Notable areas for improvement include I) reporting lag time from City departments to the Finance Department, 2) litigation management, and 3) file documentation, organization, and claims infomlation system usage. The Report also highlights current staff resources are sufficient for addressing liability risk management issues, provided that the claims frequency remains stable. Financial Structure The Review reports that the City's liability risk financing progranl is overall structured soundly. The liability programs $1 million self-insurance retention was judged to be a comfortable limit for the City's ability to retain risk and that the additional pooled protection provided by the California Joint Powers Risk Management Authority's of $40 million is appropriate and prudent. The overall coverage is judged to be in line with other Calif0111ia cities. The City's current practice with establishing reserves that cover all outstanding liabilities (current claims outstanding and an actmllial estimate for liabilities incurred but not yet reported) was confirmed as an appropriate best practice for the City. Currently, the City maintains a reserve balance of $8.2 million with an 80% probability that the City could self-insure all its claims. The Liability Self-Insurance Review report is provided and will be highlighted at the October 4, 2006 Finance Committee meeting. Attachments