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Strategic Planning Workshop: Enhancing Financial Management for Transit Insurance

Join industry experts for a comprehensive workshop focused on strategic planning in transit insurance. Led by Steven P. Kahn, CPCU, ARM, this session will delve into the financial metrics critical for assessing the solvency, profitability, and efficiency of transit insurance pools. Attendees will gain insights into key financial ratios and how they influence decision-making. The workshop will cover financial models, asset adequacy, and innovative strategies for managing risk in the evolving landscape of transit operations.

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Strategic Planning Workshop: Enhancing Financial Management for Transit Insurance

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  1. Strategic Planning Workshop Washington StateTransit Insurance Pool Presented to: Presented by: Steven P. Kahn, CPCU, ARM | Managing DirectorARM Tech / Aon Global Risk ConsultingPhone: 949-470-4341 Fax: 847-953-1672email: steven_kahn@armtech.com August 2008

  2. Contents for Strategic Planning Retreat Workbook

  3. Section IV – Financial Review 2

  4. Financial Data – WSTIP

  5. Ratios – WSTIP

  6. Net Assets to SIR • Measure of solvency • Indicates number of unexpected losses needed to consume net assets • = Net assets / largest SIR

  7. Gross Assessments To Net Assets • Measure of net asset adequacy • As ratio increases, the more likely it is that a high loss year will erode surplus • = Gross Assessments / Net Assets

  8. Net Assessments To Net Assets • Measure of net asset adequacy • As ratio increases, the more likely it is that a high loss year will erode net assets • = Net Assessments / Net Assets

  9. Loss Reserves To Net Assets • Measure of net asset adequacy • As the ratio increases, the more likely it is that upward development in loss reserves will exhaust net assets • = Loss Reserves / Net Assets

  10. Expense Ratio • Measure of efficiency • Low ratio indicates efficient administration (within reason) • = All Operating Expenses / Net Assessments

  11. Combined Ratio • Measure of profitability • Indicates ability to fund operations from net assessments • = (All Operating Expenses + Retained Losses) / Net Assessments

  12. Net Assets to SIR – WSTIP

  13. Gross Assessments to Net Assets – WSTIP

  14. Net Assessments to Net Assets – WSTIP

  15. Loss Reserves to Net Assets – WSTIP

  16. Expense Ratio – WSTIP

  17. Combined Ratio – WSTIP

  18. Financial Data – Comparison Pools

  19. Ratios – Comparison Pools

  20. Net Assets to SIR – Comparison Pools

  21. Gross Assessments toNet Assets – Comparison Pools

  22. Net Assessments toNet Assets – Comparison Pools

  23. Loss Reserves toNet Assets – Comparison Pools

  24. Expense Ratio – Comparison Pools

  25. Combined Ratio – Comparison Pools

  26. WSTIP Performance on State Ratios

  27. WSTIP Financial Model – Data

  28. WSTIP Financial Model – Ratios

  29. Section V – The Future 28

  30. WSTIP Vision • We are the premier providers of high-quality risk and management-related products and services for all facets of the transit industry

  31. WSTIP Mission Our mission is to provide value-added services for our members. We will accomplish this by: • Reducing member’s cost of risk, • Providing comprehensive management services, • Looking at innovative opportunities, and • Encouraging alliances and partnerships

  32. Core Values • We treat everyone fairly and with respect • We value innovation and embrace technology as a partner • We are committed to excellence in service delivery and cost-effective programs • We value our employees • We value integrity and ethical conduct • We value the diversity of our members • We speak with one voice

  33. New Services • Physical test for candidates • Monthly driving record checks • Bus stop quality evaluation and scoring tool • Criminal background checks on drivers and others • Personnel procedures training • Sample job descriptions • Training materials library • Other…

  34. New Coverages • Employee benefits pool • Employee benefits group purchase • Legal services – contractual disputes • Assist non-profit agencies form their own pool • Assist with non-hazard risks • Other…

  35. Section VI – Strategic Partners 34

  36. Growth • New members • New associates • New services • Other states • Other...

  37. Striking a Balance • Rate level • Rate stability • Net asset level • WSTIP retention

  38. Governance • Role of new, small transit entities • Standing committees • Other...

  39. Consider Effect of Change in Operating Environment • Insurance market cycles • Changes in number of size of members • One ore more catastrophic losses • Change in legal environment • Loss of excess insurer (e.g., Kemper and Reliance)

  40. Guidelines for Net Asset Rate Credit Sample guidelines: • Net assets > gross member assessments • Net assets > 1.5 x member assessments • Net assets > 15 x largest SIR • Combined ratio < 1.00, average of last two years • Net assets > losses & ALAE reserve at 80% confidence level

  41. WSTIP Financial Target • Select and maintain financial ratios • Select net assets to SIR ratio • Select gross assessments to net assets ratio • Select loss reserves to net assets ratio

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