Insurance

Update on KSBA insurance pools – funds look to end FY 2006 on upbeat note

The latest actuarial projections on KSBA’s self-insured pools for Kentucky school districts represent a combination of successes and new challenges, according to association managers.

The most positive of several findings by the independent actuaries is that KSBA reduced the projected long-term actuarial deficit for the combined liability, property and workers' compensation pools this year by close to $1 million. Actuarial projections are used to estimate the funds needed to cover all possible costs due to past claims that may require payment as far as 20 years in the future.

In fact, the actuaries have projected an FY 2006 operating gain for all funds of $785,000 – the first year-end operating balance in the black in the last seven years.

“I’m optimistic that these numbers show that our new management team and the insurance trustees are turning the corner to strengthen all of our funds,” said KSBA Executive Director Bill Scott. “We’re certainly not where we eventually need to be, but it’s clear to me that the rate setting and loss prevention actions of our insurance team, led by Risk Management Director Myron Thompson, are having the impact we’ve hoped for.

“As the insurance renewal season is about to begin, I wanted to get the facts in front of the decision makers – board members and superintendents – because it’s their program,” he said. “The bottom line is simple. Two things impact our self-insurance funds, just as they do all similar pools: district losses and district participation. When KSBA helps schools and districts reduce their losses, and when districts get their insurance from us, we can continue to make the kind of turnaround we achieved this year,” he said.

The property fund (damage to facilities from fires, floods, tornadoes), which had an operating loss of $97,000 in 2005, is now estimated to have gained $1.2 million in FY 2006. Growth in the property fund was the largest contributor to the previously-mentioned $1 million improvement in the combined pools. The actuarial projected year end balance for the property fund is $1.75 million.

The workers' compensation fund (medical care and lost wages for injured workers), which had an operating gain of less than $88,000 in FY 2005, rebounded with a FY 2006 gain of $860,000. That activity reduced the projected long-term deficit for that self-insured pool from more than $5 million to just over $4.1 million as a FY 2006 year-end fund balance.

The downside of the actuaries’ report came in the liability fund (legal defense and payments in lawsuits over employee or student issues and district vehicle accidents) which is projected to lose $1.3 million for FY 2006. The largest FY 2006 factor on this fund came from fleet insurance. Historically, fleet insurance generates a surplus but district losses were high this past year. The liability fund has seen wide fluctuations in recent years, for example, it recorded an FY 2004 loss of $2.2 million following a $1.6 million gain in FY 2003. The actuarial projection for FY 2006 would have the liability fund year-end balance with a deficit of slightly more than $1 million.

“KSBA has ensured for nearly three decades that Kentucky school districts would have an uninterrupted source for insurance, regardless of what other companies come into or drop out of our state,” Scott said. “Regardless of the insurance market nationwide, buses and buildings have to be insured, workers and students have to be protected, and every school and district has to have help ensuring a safe place for them to work and learn.

“That’s part of our mission, and together with our members, I’m confident we have these programs headed in exactly the right direction.”

# # #

Kentucky School Boards Association

Navigation