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Home My WebLink AboutFCS-16-169 - Waterloo Region Municipalities Insurance Pool-Annual Report REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: November 7, 2016 SUBMITTED BY: D. Chapman, Deputy CAO – Finance and Corporate Services, 519-741-2200 ext. 7347 PREPARED BY: D. Chapman, Deputy CAO – Finance and Corporate Services, 519-741-2200 ext. 7347 WARD(S) INVOLVED: All DATE OF REPORT: October 26, 2016 REPORT NO.: FCS-16-169 SUBJECT: Waterloo Region Municipalities Insurance Pool – Annual Report ___________________________________________________________________________ RECOMMENDATION: For Information BACKGROUND: May 31, 2016 marked the end of the eighteenth year of operations for the Waterloo Region Municipalities Insurance Pool (WRMIP). The annual report for the 2015/2016 year is attached as information. REPORT: On June 1, 1998 all eight municipalities within Waterloo Region formed the Waterloo Region Municipalities Insurance Pool (WRMIP). This collaborative and innovative risk financing venture has been highly effective and continues to fulfill all expectations with regard to the benefits projected at inception – both financially and operationally. The attached annual report provides information on the financial position and operations of the WRMIP for the year ended May 31, 2016. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: The information in this report supports the achievement of the city’s strategic vision through the delivery of core service. *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. IF1 - 1 FINANCIAL IMPLICATIONS: None at this time. COMMUNITY ENGAGEMENT: INFORM – This report has been posted to the City’s website with the agenda in advance of the council / committee meeting. ACKNOWLEDGED BY: D. Chapman, Deputy CAO - Finance & Corporate Services IF1 - 2 Waterloo Region Municipalities Insurance Pool 200 King St. West, P.O. Box 1118, Kitchener, ON N2G 4G7 Phone: (519) 741-2961 Fax: (519)741-2960 2016 STATUS REPORT INTRODUCTION: th May 31, 2016 marked the end of the eighteenth (18) year of operation for the Waterloo Region Municipalities Insurance Pool (WRMIP). Staff is pleased to report that the WRMIP continues to exceed all expectations with regard to the benefits projected at inception – both financially and operationally. FINANCIAL STRENGTH OF THE WRMIP: Attached are the WRMIP’s Audited Financial Statements for the year ending May 31, 2016. The $2.7 million Pool currently has an unappropriated surplus of approximately . The two main strategic issues for maintaining a strong surplus are: Stability and Financial Strength of the WRMIP – allows the Pool to consider the best risk 1. financing options available in the future and reduces the possibility of a retro-assessment levy against Pool members. 2.Stability of Budget – allows the municipalities to strategically manage potential future insurance market price fluctuations. WRMIP’S 2016/17 OPERATING BUDGET: On May 27, 2016, the Advisory Board passed the WRMIP’s Operating Budget of $5,494,713 for the year June 1, 2016 to May 31, 2017. As it is anticipated that the Pool will earn approximately $335,000 in investment income, the net expenditure will be $5,159,713. This represents a 0.16% increase in the budget for the year 2016/17. It is anticipated that in the year 2016/17 the Pool will have a balanced budget and should not have to draw from surplus unless incurred claims exceed the pre-funded level of $2,390,877. The following is a summary of operations: Item Amount Pre-funded Losses $2,390,877 Administrative Expenses $724,333 Insurance Premium $2,379,503 Total Operating Budget $5,494,713 Investment Income- $335,000 Net Operating Budget$5,159,713 2016/17 Levy $5,159,713 WRMIP’S LEVY DISTRIBUTION: AXXIMA, the Actuaries for the WRMIP, have allocated costs across the municipalities on an current exposures actuarially determined basis, utilizing considerations for (physical assets, claim frequency and claim severity vehicles, services and employees), . These changes are reflected in the levies assessed. The Advisory Board annually reviews and approves this levy allocation methodology. IF1 - 3 Page 2 The 2016/17 annual levy for your municipality is presented in the following chart. For comparison purposes the previous 2015/16 levy has also been noted below along with the percentage change. ________________________________________________________________________ Previous New 2015/16 Levy: 2016/17 Levy: % Change City of Kitchener $1,324,846 $1,347,125 1.7% ________________________________________________________________________ INSURANCE RENEWAL: AXXIMA’s mandate is to ensure that the WRMIP’s insurance program remains current, competitive and the best overall program available. In the late fall of 2015 WRMIP met with AXXIMA to discuss our insurance renewal strategy for 2016/17 and the merits of leveraging the ongoing relationship with the Frank Cowan Company, which has to date been a fair and efficient insurance partner with the WRMIP. It was decided that if AXXIMA was able to obtain a favorable rate indication from Cowan for the WRMIP’s renewal prior to yearend, that AXXIMA would continue to negotiate renewal terms for 2016/17 with Cowan in lieu of obtaining quotes from the insurance marketplace which has limited interest in municipal insurance. This favorable rate indication was obtained from Cowan and as such AXXIMA did not approach other markets. For the 2016/17 insurance renewal AXXIMA was successful in negotiating a substantial premium reduction of 7% over the expiring term from Cowan prior to the addition of new property and vehicle assets. This result is the largest premium decrease the WRMIP has received in the last 15 years. Cowan has also provided a three year flat rate guarantee on future renewals on the property and automobile insurance coverage areas if the WRMIP stays with them. Going forward AXXIMA will continue to ensure that WRMIP obtains competitive pricing on all of the insurance coverage that it purchases. CONCLUSION: On June 1, 1998 all eight municipalities in Waterloo Region joined the Waterloo Region Municipalities Insurance Pool. This innovative risk-financing venture continues to be a highly effective method by which the municipalities have enjoyed: Pro-active risk management services and strategic control of claims. Stability in insurance pricing. (History: the combined premiums paid by the municipalities in 1997/98 (Pre-Pool) was $4,128,448. Now 19 years later the premium levy assessed by the WRMIP in 2016/17 is $5,159,713 which is only a 25% increase over that original amount. This levy also includes the premium for the Pollution Liability policy purchased in 2010.) $351,526 The ability to earn investment income on the pre-funded claim reserve. (2015/16: ) The pre-funded claim reserve that is not required to pay claims remains in the municipalities’ $2,706,708 surplus. (WRMIP`s Unappropriated Surplus as of May 31, 2016 is with your $1,066,337$1,000,000 municipality’s share being. Further, a dividend was issued back to the member municipalities back in 2001.) Respectfully submitted, R. Craig Smith, C.I.P., R.F. Risk Manager IF1 - 4 IF1 - 5 IF1 - 6 KPMG LLP 115 King Street South 2nd Floor Waterloo ON N2J 5A3 Canada Tel 519-747-8800 Fax 519-747-8830 INDEPENDENT AUDITORS' REPORT To the Subscribers and Board of Advisors of the Waterloo Region Municipalities Insurance Pool We have audited the accompanying financial statements of Waterloo Region Municipalities Insurance Pool, which comprise the statement of financial position as at May 31, 2016, the statements of income and unappropriated surplus, changes in net financial assets, and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Waterloo Region Municipalities Insurance Pool as at May 31, 2016, and its results of operations and cash flows for the year then ended in accordance with Canadian public sector accounting standards. Chartered Professional Accountants, Licensed Public Accountants October 21, 2016 Waterloo, Canada KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (éKPMG Internationalè), a Swiss entity. KPMG Canada provides services to KPMG LLP. IF1 - 7 IF1 - 8 IF1 - 9 IF1 - 10 IF1 - 11 IF1 - 12 IF1 - 13 IF1 - 14 IF1 - 15 IF1 - 16