AN ACT EXTENDING THE EFFECTIVE DATE FOR CERTAIN INTERLOCAL RISK MANAGEMENT POOLS.

AN ACT EXTENDING THE EFFECTIVE DATE FOR CERTAIN INTERLOCAL RISK MANAGEMENT POOLS.

This bill postpones, by five years, the dates by which certain interlocal risk management pools must comply with contingency reserve requirements specified in law.

By law, a workers' compensation or excess risk pool must maintain at least $ 100,000 for contingencies for each fiscal year it operates, but the pool does not need to have more than $ 500,000 total. A public liability, automobile, and property risk pool must maintain at least $ 500,000 for contingencies for its first fiscal year of operation and increase it by 5% of total member contributions for each subsequent year until the contributions-to-fund ratio is no more than three to one.

The bill allows an interlocal risk management pool, at its option, to postpone complying with these contingency reserve requirements until July 1, 2015 under certain conditions. Current law lets it postpone until July 1, 2010.

A pool that wants to postpone compliance with the contingency reserve requirements must, as of July 1, 2005, have (1) been organized for less than 10 years and (2) established a contingency reserve of (a) $ 100,000 for each fiscal year of operation, if the pool is for workers' compensation or excess risk pool, or (b) $ 500,000 for the first fiscal year of operation, increased by 5% of total member contributions for each subsequent year, if the pool is for public liability, automobile, and property risk.

Beginning July 1, 2015, instead of 2010, the bill requires a workers' compensation or excess risk pool that postponed compliance to maintain at least $ 100,000 for contingencies for each fiscal year it operates, but the pool does not have to have more than $ 500,000 total.

Beginning July 1, 2015, instead of 2010, the bill requires a public liability, automobile, and property risk pool that postponed compliance to maintain a fund of at least:

1. as of June 30, 2016, instead of 2011, $ 100,000 plus 1% of total member contributions for the prior year;

2. as of June 30, 2017, instead of 2012, $ 200,000 plus 2% of total member contributions for the prior year;

3. as of June 30, 2018, instead of 2013, $ 300,000 plus 3% of total member contributions for the prior year;

4. as of June 30, 2019, instead of 2014, $ 400,000 plus 4% of total member contributions for the prior year; and

5. as of June 30, 2020, instead of 2015, $ 500,000 plus 5% of total member contributions for the prior year.

As of July 1, 2020, instead of 2015, the bill reinstates the former law for all pools. Thus, a workers' compensation or excess risk pool must maintain at least $ 100,000 for contingencies for each fiscal year it operates, but the pool does not need to have more than $ 500,000 total. A public liability, automobile, and property risk pool must maintain at least $ 500,000 for contingencies for its first fiscal year of operation and increase it by 5% of total member contributions for each subsequent year until the contributions-to-fund ratio is no more than three to one.

The law permits two or more municipalities to form an interlocal risk management agency to pool risks and jointly purchase insurance for (1) public liability, automobile, and property; (2) workers' compensation; and (3) excess risk. By law, each pool operating under the law's requirements must submit reports to the insurance commissioner as he requires.

The law applies certain insurance statutes to interlocal risk management pools, including, among others, financial examinations the insurance department conducts, financial reporting requirements, and the receivership process if the pool is insolvent or a hazard to policyholders or creditors.

A contingency reserve is unassigned money held above and beyond other pool liability reserves. Members advance the funds to the pool. An advance is repaid only when a repayment does not reduce the fund below its required minimum.

Yea

Nay

(03/12/2009)