HD58 - Report on the Recommended Liability Insurance for Constitutional Officers and Regional Jails under the VARisk Program


Executive Summary:
Purpose

Mercer Oliver Wyman Actuarial Consulting, Inc. (Mercer) was asked by DRM to provide an allocation of the projected FY 2007 and FY 2008 costs of the Constitutional Officer (VARisk) insurance program to the constitutional officers and regional jails. FY 2007 refers to the period from July 1, 2006 through June 30, 2007. We relied on our annual analysis of the overall funding requirements of the Constitutional Officer insurance program as of June 30, 2005 using data as of March 31, 2005.

Please note that the VARisk program is also referred to as the Constitutional Officers program in this report.

Results - Recommended Premiums

The overall premium figures are from our preliminary June 30, 2005 reserve analysis and reflect the projected ultimate losses associated with claims expected to be reported during FY 2007 along with the FY 2007 program and administrative expenses. Three overall premium figures are allocated for FY 2007 and FY 2008. The first premium figure, termed "Mercer Oliver Wyman's Recommended Funding on a Claims-Made Basis," represents the projected premium necessary to achieve a $0 fund position as of June 30, 2007 and maintain the $0 fund position through June 30, 2008. The second premium figure represents the necessary premium to meet the projected undiscounted losses and expenses as of June 30, 2005. The third premium figure represents the necessary premium to meet the projected discounted losses and expenses as of June 30, 2005. The discounting calculation assumes a 3.0% annual interest rate.

The methodology used to allocate the overall funding amounts to the constitutional offices and regional jails is described in the "Analysis" section of this report. The allocation calculations are detailed in the attached exhibits.

It should be noted that all figures are on a claims-made (as opposed to occurrence) basis and, with the exception ofthe "Mercer Oliver Wyman Recommended Funding", are not adjusted for the overall fund position.