LIABILITY
POOL
PREMIUM
ASSESSMENT FORMULA
FOR THE
PURMS JOINT SELF-INSURANCE
AGREEMENT
Amended and
restated as of March 30, 1995
Overview of
Assessment Formulas for PURMS Risk Pools
The “Assessment
Formulas” Sections of the PURMS Joint Self-Insurance Agreement (“SIA”) set
forth the formulas for assessing the Members of each Risk Pool for the
Operational Costs the Fund incurs in operating their respective Risk Pools,
including without limitation, Coverage Payments (all Risk Pools), Defense Costs
(Liability Pool), Property Claim Costs (Property Pool), Direct H&W Claims
Costs and Shared H&W Costs (H&W Pool), and the Direct and Shared
Administrative Expenses of all Risk Pools.
The Liability Pool is
governed by two Assessment Formulas, one for General Assessments and one for
Premium Assessments. The two current
formulas for the Liability Pool are:
(a) The
Liability General Assessment Formula (with Annual Assessment Limit) (SIA
§ VIII); and
(b) The
Liability Premium Assessment Formula (with Added-Risk
Pass Through, and without Annual
Assessment Limit) (SIA § IX).
The Liability General
Assessment Formula was first adopted by the Members of the Fund on December 20.
1976, has been amended from time to time, and was unanimously re-adopted on March 30, 1995. The Liability Premium
Assessment Formula (with Added-Risk Pass Through and without Annual Assessment
Limit) was unanimously re-adopted by the Board at its General Meeting on December 9, 1994, effective January 1, 1995.
The Property Pool is
also governed by two Assessment Formulas, one for General Assessments and one
for Premium Assessments. The two current
formulas for the Property Pool are:
(a) The
Property General Assessment Formula (with Annual Assessment Limit) (SIA
§ XII); and
(b) The
Property Premium Assessment Formula (without Annual Assessment Limit) (SIA
§ XIII). The H&W Risk Pool is
currently governed by one Assessment Formula entitled the H&W General
Assessment Formula (SIA § XV).
The Property General
Assessment and the Property Premium Assessment Formulas were unanimously
adopted by the Members of the Fund effective February 27, 1997.
Assessments of
Members of the H&W Pool are governed by a single Assessment Formula called
the H&W General Assessment Formula. (SIA § XV). This Formula covers both
the self-insured portion of the H&W Pool’s Operational Costs as well as the
cost of Stop Loss Insurance. The H&W General Assessment Formula was
unanimously adopted by the Members of the Fund on March 16, 2000, effective April 1, 2000, and was amended and restated
and unanimously re-adopted by the Members as of December 7, 2001.
These Formulas, as amended from time to time pursuant to
§ I, § 5.2, are specifically incorporated into the Interlocal
Agreement and shall be deemed a part of that Agreement as if fully set forth
therein.
LIABILITY POOL PREMIUM ASSESSMENT
FORMULA
1.
Additional Definitions
Liability Premium Assessment Formula. The definitions set forth in
the "Definitions" Section of the SIA are applicable to the
interpretation of the Fund's Assessment Formulas. The following additional definitions shall
also be applicable:
1.1
Added-Risk Pass Through -- shall mean the portion of the Excess Carrier
Premium specifically allocated by the Excess Carrier in its normal underwriting
to one or more particularly identified risks of a Member's operations that are
beyond the types of risks considered by the Excess Carrier in determining its
basic premium.
1.2
Excess Carrier Premium -- shall mean the total premium being charged by
an Excess Carrier for issuance of an Excess Liability Policy.
1.3
Excess Premium Base
Amount -- shall mean the amount
remaining after all Members' Added-Risk Pass Throughs
are subtracted from the Excess Carrier Premium.
2.
Statement of Premium
Assessment Formula. The Premium Assessment Formula shall have the
same three (3) components as the General Assessment Formula (eg. 10% Basic Per Capita; 20% Historical
Claims Experience; and 70% Employee Hours Worked) and Members' Assessment
Shares shall be calculated in the same manner as under the General Assessment
Formula using the same basic information (see Formula for General Assessments,
§ VIII); provided, however, that:
(a) The
Added-Risk Pass Throughs shall be applied in
accordance with ¶ 3 below; and
(b) The
"Employee Hours Worked," as calculated under § VIII, ¶ 5, for any
Member(s) subject to the Added-Risk Pass Through, shall be reduced by the
amount of the Member's Employee Hours Worked that are directly attributable to
the underwriting risk that gave rise to the Added-Risk Pass Through. (For example, if a Member is subject to an
Added-Risk Pass Through because of its operation of a dam, the Employee Hours
Worked attributable to Employees operating the dam shall be subtracted from the
Member's total Employee Hours Worked); and
(c) The
Annual Assessment Limit set forth in § VIII., ¶ 3 shall not be applied.
1.
Added-Risk Pass Through. The
Added-Risk Pass Through, as applied in conjunction with the Premium Assessment
Formula, is designed to "pass through" to a Member as part of its
Premium Assessment Share any portions of the Excess Carrier Premium that an
Excess Carrier has specifically allocated to that Member as part of the Excess
Carrier's normal underwriting practices for the risks posed by the operations
of that Member that are in addition to or different from the risks considered
by the Carrier in determining its basic premium. While the most likely cause for an Added-Risk
Pass Through may be a Member's ownership of a dam, the Added-Risk Pass Through
is intended to apply any time an Excess Carrier has made a specific allocation
of its Excess Carrier Premium to a Member, regardless of the nature of the
risk.
The Added-Risk Pass
Through applies to all insurance purchased by the Fund or by the Members
through the Fund, including the Fund's Primary Excess Coverage (per § I., ¶ 14.1) any Supplemental Coverages acquired by the Fund (per § I., ¶ 14.3), and any Subgroup Policies.
If the Excess Carrier makes no such specific allocations to particular
Members, then there is no basis for applying the Added-Risk Pass Through, and
therefore, there would be no deductions from the Excess Carrier Premium before
the Premium Assessment Formula is applied.
For example, if the Fund switches from an Excess Carrier that makes such
allocations as would support application of the Added-Risk Pass Through to an
Excess Carrier that does not, then the Added-Risk Pass Through would cease to
apply.
Finally, in the event
an Excess Carrier fails to provide the Fund with the information necessary to
calculate the Members' Added-Risk Pass Throughs in
sufficient time for the Fund to use it in making its Premium Assessments for
the upcoming year, the Fund shall use the current year's Added-Risk Pass
Through amounts in determining each Member's Premium Assessment Share for the
upcoming year; provided, however, that if such information becomes available to
the Fund prior to the time for determining Members' Premium Assessment Shares
for the subsequent year, the Fund shall make the appropriate retroactive
adjustments to the Premium Assessment Shares the Members actually paid by
individually assessing any Member that underpaid and providing for a refund to
those Members that overpaid.
2.
Application of Premium
Assessment Formula with Added-Risk Pass Through. First,
the total of all Members' Added-Risk Pass Throughs
shall be subtracted from the Excess Carrier Premium, resulting in an amount
called the Excess Premium Base Amount.
Second, the Premium Assessment Formula, applied with the adjustments
provided for in ¶ 2 above, shall be applied to the Excess Premium Base
Amount. Third, the Assessment Share of
the Excess Premium Base Amount for each Member that has been allocated an
Added-Risk Pass Through will be increased by the amount of its Added-Risk Pass
Through to determine such Members' total Premium Assessment Share; the Premium
Assessment Shares of those Members without Added-Risk Pass Throughs
shall be equal to their Assessment Shares of the Excess Premium Base Amount.
Example: Using
the same basic numbers that were used in the examples for Member A in
connection with the General Assessment formula set forth in § VIII, ¶ 2, assume
an Excess Carrier Premium of $700,000 and an Added-Risk Pass Through to Member
A of $20,000, and further assume no other Members were subject to an Added-Risk
Pass Through. The Excess Carrier
Premium, less the total of Added-Risk Pass Throughs,
yields an Excess Premium Base Amount of $680,000 ($700,000 - $20,000). Member A's Assessment Share of the Excess
Premium Base Amount would be calculated as follows: (a) Basic Per Capita = $6,800 (10% x $680,000
¸
13 Fund Members); (b) Historical Claims
Experience = $46,240 (20% x $680,000 x 34%); and (c) Employee Hours Worked =
$33,320 (70% x $680,000 x 7%). Member
A's Assessment Share of the Excess Premium Base Amount, therefore, is $86,360
($6,800 + $46,240 + $33,320). Adding
back Member A's $20,000 Added-Risk Pass Through yields a total Premium
Assessment Share for Member A of $106,360.