PURMS

[ Log In ]
PROPERTY POOL

PROPERTY POOL

PREMIUM ASSESSMENT FORMULA

FOR THE

PURMS JOINT SELF-INSURANCE AGREEMENT

Amended and Restated as of November 21, 2002

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, and were both amended and restated and unanimously adopted by the Board, effective as of November 21, 2002.

The Assessment of Members of the H&W Pool is 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.

PROPERTY POOL PREMIUM ASSESSMENT FORMULA

1.               Definitions for the Property Pool Premium Assessment Formula.  The definitions set forth in the "Definitions" Section of the SIA (§ II) to the interpretation of the Fund's Assessment Formulas, except as may be modified specifically or by necessary implication by the Definitions set forth below some of which are specific to this Property Premium Assessment Formula Section.

1.1.          Coverage Limit Adjusted Insured Value – shall mean the Risk Adjusted Insured Value of a Property Pool Member’s Insured Property after such Risk Adjusted Insured Value has been reduced by the amount of the Property Coverage Limit, or by the amount of the highest Excess Property Insurance Retention applicable to the Insured Property of such Member, whichever is greater, for purposes of calculating each Member’s allocation under the 90% “Risk Based” Component of the Property Premium Assessment Formula.           

1.2.          Excess Carrier Premium -- shall mean the total premium being charged by an Excess Carrier for issuance of an Excess Property 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.

1.4.          Excess Property Insurance Retention – shall mean the amount of the self-insured retention or deductible imposed under the Excess Property Policy for a Property Loss to a particular Category of Insured Property, or from a Peril in a particular Category of Risk, before the Excess Property Insurance attaches and begins to provide Excess Property Coverage for such Loss. (See § XII, ¶ 2.2.1.)

1.5.          Exempted Category – shall mean either an Exempted Category of Insured Property or an Exempted Category of Risk.

1.6.          Formula Component (or “Component”) -- shall mean the basic elements for determining a Member's Assessment Share under the General and Premium Assessment Formulas.  For the Liability Pool, the Formula Components consist of the Basic Per Capita, Employee Hours Worked, and Historical Claims Experience (see, §§ VIII and IX).  For the Property Pool, the Formula Components consist of the Basic Per Capita, the Relative Insured Value and the Fire Rate Adjusted Relative Insured Value (see §§ XII-XIII).

1.7.          Partially Exempt Insured Property – shall mean Insured Property that has been established as “Partially Exempt Insured Property” pursuant to written notice to the Administrator, as provided in § XII, ¶ 2.5.3(a), which is exempted from Assessment under the 70% “Risk Based” Component of the Property General Assessment Formula for the Specific Risk Based Rate(s) associated with the applicable Exempt Category of Insured Property or Exempt Category of Risk, as provided in § XII, ¶ 2.5.3(b) and 2.3.3(a), and which is excluded from General Property Coverage for Loss resulting to Property in the Exempt Category of Property and/or from the Peril(s) within the associated Exempt Category of Risk, as provided in § XII, ¶ 2.5.3(c) and § X, ¶ 9.4.

1.8.          Property Coverage Limit – shall mean the maximum amount the Fund may be required to pay, including Property Claim Costs, for all Covered Property Claims filed by one or more Members arising from one Property Loss, as provided in § X, ¶ 4, less applicable Assigned or Mandatory Deductibles, and subject to the provisions of § X, ¶ 4.3.1 which provide for Automatic Extended Property Coverage when the applicable Excess Property Insurance Retention exceeds the amount of the Property Coverage Limit.

1.9.          Property Premium Assessment – shall mean a Premium Assessment under the Property Premium Assessment Formula (see § XIII).

1.10.       Risk Adjusted Insured Value – shall mean the number resulting from application of the applicable Blended Risk Based Rate to the Total Insured Value of a Member’s Insured Property, as provided in § XII, ¶ 2.3.3, and the Risk Adjusted Insured Value of each Member’s Insured Property shall be the Value used for purposes of calculating each Property Pool Member’s Assessment Share of the 70% “Risk Based” Component of the Property General Assessment Formula. (See § XII, ¶ 2.3.4).

1.11.       Risk Based Rates – shall mean the property insurance rates, or coverage or classification codes for the various Categories of Insured Property or Categories of Risk, including information regarding the relative relationship of such rates, obtained from the Excess Property Carrier (or otherwise from the property insurance industry, as provided in § XII, ¶¶ 2.3.1 and 2.3.2), used by the Excess Carrier to calculate the premium for the Excess Property Insurance. These are the rates that are used to calculate the relative Risk Adjusted Insured Value of each Member’s Insured Property for purposes of allocating among Property Pool Members the 70% Risk Based Component of the Property General Assessment Formula, and the 90% Risk Based Component of the Property Premium Assessment Formula. (See § XII, ¶ 2.3.4.)

2.               Statement of Property Premium Assessment Formula.  The Property Premium Assessment Formula has two (2) Formula Components that shall be applied as provided in this § XIII. A Member's Assessment Share of any Property Premium Assessment shall be the total of the allocations to a Member under each of the two Formula Components.

The “Basic Per Capita” Component allocates 10% of the total Premium Assessment needed among the Members of the Property Pool equally, as provided in ¶ 2.1 below.

The “Risked Based” Component allocates 90% of the total Premium Assessment among Members based on the percentage that each Member’s Coverage Limit Adjusted Insured Value bears to the total of the Coverage Limit Adjusted Insured Values of all Members (as provide in ¶ 2.2 below).

Except as provided in ¶ 2.2.2 below (and § I, ¶ 13.5.1 of the Interlocal Agreement), the Insured Values of all of a Member's Insured Property, as listed for such Member in the Schedule of Values at the time of the Assessment, shall be the Insured Values that are used as the basis for calculating a Member’s allocation of the 90% “Risk Based” Component of the Property Premium Assessment Formula, regardless of the amounts of the Member's Assigned and/or Mandatory Deductibles applicable to such Insured Property. (See, § XII,  ¶¶ 2.3.1 – 2.3.3.)

2.1.          Basic Per Capita” Component at 10%. Ten percent (10%) of the amount of the Property Premium Assessment to be levied will be allocated equally among all Members of the Property Pool.    

Example of “Basic Per Capita” Component Calculation:  Assume a Property Premium Assessment amount of $778,098.  10% times that amount yields $77,810, which will be divided in equal shares among all Property Pool Members.  Assume the Property Pool is composed of 13 Members.  $77,810 (10% of the Property Premium Assessment amount) divided by a hypothetical 13 total Property Pool Members yields an allocation of $5,985.

2.2.          “Risk Based” Component at 90%.  Ninety percent (90%) of the Property Premium Assessment will be allocated among Members based on the percentage each Member's Coverage Limit Adjusted Insured Value bears to the total of the Coverage Limit Adjusted Insured Values of all Insured Property of all Property Pool Members at the time of the Assessment.

2.2.1.     Determination of the Risk Adjusted Insured Value for the Insured Property of Each Member. For purposes of applying the 90% Risk Based Component of the Property Premium Assessment Formula, the Risk Adjusted Insured Value of each Member’s Insured Property shall be determined in accordance with § XII, ¶ 2.3.3 of the Property General Assessment Formula.

2.2.2.     Reduction of Each Members' Risk Adjusted Insured Value by Amount of Property Coverage Limit, or Highest Applicable Excess Property Insurance Retention, Whichever is Greater, to Establish Each Member’s “Coverage Limit Adjusted Insured Value”. For purposes of applying the 90% Risk Based Component of the Property Premium Assessment Formula, the Risk Adjusted Insured Value for each Member shall be reduced by the amount of the Property Coverage Limit, or by the amount of the highest Excess Property Insurance Retention applicable such Member, whichever number is greater, prior to calculation of each Member’s allocation of the 90% Risk Based Component of the Property Premium Assessment Formula in accordance with ¶ 2.2.3 below.

2.2.3.     Calculation of a Member’s Allocation Under 90% Risk Based Component. Each Member’s Coverage Limit Adjusted Insured Value shall be compared to the total of the Coverage Limit Adjusted Insured Values for all Members of the Property Pool, and the resulting ratio multiplied times 90% of the Premium Assessment amount needed by the Property Pool shall be such Member’s allocation under the Risk Based Component of the Property Premium Assessment Formula.

2.3.          Other Rules for Application of Property Premium Assessment Formula.

2.3.1.     Property Deductible Credit.  The Property Deductible Credit set forth in § XII, ¶ 3 of the Property General Assessment Formula shall not be applied.

2.3.2.     Annual Assessment Limit.  The Annual Assessment Limit set forth in § XII,  ¶ 4 shall not be applied.

2.3.3.     Exemption for Members with Total Insured Values Less Than the Amount of the Property Coverage Limit.  Any Member of the Property Pool that, at the time of the Property Premium Assessment, has Insured Property with a total Insured Value that is less than the amount of the Property Coverage Limit shall not pay any Assessment Share of such Property Premium Assessment (see also § I, ¶ 13.5.2).

2.3.4.     Partially Exempt Insured Property, Including “Mothballed Equipment. Insured Property that qualifies as Partially Exempt Insured Property under § XII, ¶ 2.3.5 of the Property General Assessment Formula shall not be exempted from application of the Specific Risk Based Rate(s) associated with the Exempted Categories in calculating a Member’s allocation under the 90% “Risk Based” Component of the Property Premium Assessment Formula; provided, however, if it can be demonstrated that the premium for the Excess Property Policy was reduced by, or a credit was given to the Property Pool in, a specified amount as a direct result of a Member’s Insured Property being or becoming Partially Exempt Insured Property, then such Member shall be entitled to a reduction in its Assessment Share under the Property Premium Assessment Formula, or reimbursement by the Property Pool, in the amount saved on the Excess Premium.

3.               Additional Premium Required by Property Excess Carrier for Newly Acquired Property, etc.  If at any time during the coverage period of the Primary Property Excess Insurance a Member adds property to be covered thereunder (whether Newly Acquired Property, Leased Property, Assumed Liability, or otherwise), and as a direct result, the Property Excess Carrier charges an additional premium, the Member adding the property shall pay the same.

4.               Former Members.  The Property Premium Assessment Formula shall not be applicable to Former Members for Excess Property Coverage in effect after the effective date of Withdrawal.

5.               New Members.  A New Member shall be obligated to pay its Assessment Share of any Property Premium Assessment levied after the effective date of its Membership, and in addition, shall pay the amount of any charge by the Excess Property Carrier as a condition of adding such New Member as an Insured under the Excess Property Policy.