PO Box J Prague Oklahoma 74864 405.567.2611 Fax 405. 567.3307

www.agrip.org

2222 W. Main (Highway 62)

Dividend Distributions

Compilation as of June 14, 2005

Request as included in May 17, 2005 “AGRiP News” email: “sample dividend distribution plans based on other than percent of original contribution”.

Initial inquiries made by David Paulk, Director of Risk Management and Insurance for the Association of County Commissioners of Georgia and Myron Thompson, Director of Risk Management for the Kentucky School Boards Insurance Trust.

Responses

1. Dave Brooks, County Risk Sharing Authority (OH) Page 1

2. Chris Carey, Virginia Association of Counties Group Self-Insurance Association Page 1

3. Nance Kreutzman, Transit Mutual Insurance Corporation of Wisconsin Page 1

4. Gina Dean, CSAC Excess Insurance Authority (CA) Page 8

5. Alan Thornton, New Jersey School Boards Association Insurance Group Page 9

6. Articles from Texas Municipal League Intergovernmental Risk Pool’s newsletter Page 10

7. Larry Bush, Intergovernmental Risk Management Agency (IL) Page 11

8. Bill Kurtz, Middlesex County Municipal Joint Insurance Fund (NJ) Page 11

9. Craig Nelson, Nebraska Intergovernmental Risk Management Association Page 11

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1. Dave Brooks, County Risk Sharing Authority (OH), Administrator, May 18, 2005.

Regarding the distribution of dividends, it is based on % of contributions.

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2. Chris Carey, Virginia Association of Counties Group Self-Insurance Association, Assistant Administrator, May 18, 2005.

Our dividend distribution formula is a weighted average of the % of premium in a given fund year by member and the % of claims in a given fund year by member. Any member with a loss ratio in excess of 100% for a given fund year is not eligible for a dividend out of the fund year’s equity. Premium is weighted 80% and claims are weighted 20%.

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3. Nance Kreutzman, Transit Mutual Insurance Corporation of Wisconsin, Executive Director, May 24, 2005.

PHYSICAL DAMAGE - PREMIUM ALLOCATION FORMULA

Effective 010105

The allocation formula described below applies only to the premium for the basic physical damage insurance coverage. This formula does not apply to the premiums for liability and excess or reinsurance insurance.

I. DEFINITIONS

A. Subject Years The five year period's data used to calculate the reward and penalty statistics.

B. Vehicle Value The value of a vehicle, as reported by the member to TMi, which represents the maximum value for which the vehicle is insured.

C. Reportable Accident Any event resulting in present or future property damage, monetary loss or the potential for monetary loss, no matter how slight, and includes all claims resulting from the event.

D. Claim - A report for one individual or party of their actual or potential loss.

E. Accidents/100,000 miles Divide the miles operated by 100,000 and then divide that number into the total number of "reportable accidents".

F. Property's Financial Performance Divide the total amount of payouts and reserves by the amount of premium paid in, with each claim capped at a maximum of $25,000.

II. FORMULA STRUCTURE

A. The premium allocation formula is based on each property's performance on the following three factors:

1. Vehicle Value,

2. Accidents/100,000 miles,

3. The property's financial performance.

(Items 2 and 3 are reward and penalty factors.)

B. The official sources for the data used to calculate the above factors are as follows:

Factor Official Date Source

Vehicle Value - Values reported by the transit systems directly to TMi

Accidents/100,000 miles TMi's loss data base

Property's Financial TMi's loss data base

All statistics are calculated on a calendar year basis with a cutoff of no earlier than June 30th of the current year for data to be included in the five subject years.

C. The subject years are determined as follows:

Premium for Subject Years

2005, 2006, 2007, 2008, 2009 None (Premium to be based exclusively on vehicle

value for these years, without reward and penalty factors.)

2010 2005, 2006, 2007, 2008, 2009

2011 2006, 2007, 2008, 2009, 2010

2012 and beyond continuing as above.

D. The weights to be given to each allocation factor in determining the amount of premium for each individual property are as follows:

2010 & after

% premium allocated by vehicle values 65%

% premium allocated by the accidents/100,000 miles. 15%

% premium allocated by a property's financial performance 20%

E. The effect of the reward and penalty factors will, however, be capped as follows:

Upper limit 2.00

Lower limit 0.25

The upper limit is the maximum penalty that a property would receive based upon its poor performance.

The lower limit is the maximum reward that a property would receive based on its good performance.

III. ALLOCATION PROCEDURE

A. Assemble and calculate data for subject years for each property, i.e.:

Total of Premium

Year 1 Year 2 Year 3 Year 4 Year 5 5 Years Year

Vehicle Values X X X X X X X

# of Reportable Acc. X X X X X X

Premium Paid X X X X X X

Claims Paid and Reserved X X X X X X

Accident Rate X X X X X X

Financial Perf. X X X X X X

B. Calculate average accident rate and financial performance for the entire group.

C. Calculate each property's variance from the average for accident and financial performance.

D. Allocate base premium based on annual allocation percentage (i.e., 65% 15% 20%).

E. Adjust the accident and financial performance parts of the premium by the variances as calculated under section III C.

F. Compare the premiums determined under section III D to section III E and adjust, if necessary, to stay within the caps defined in section II E.

G. Repeat section III E to make the individual premiums to be charged equal.

IV. REFUNDS

A. Interest is credited to the year in which it is earned.

B. Beginning with the premium allocation for 2005:

1. A subaccount would be created on TMi's financial records for each member. That account would contain the individual member's share of excess premiums for a minimum of the previous five (5) year period. IE: In 2010, excess premiums for 2005 through 2009.

2. Annually adjustments would be made to that account to reflect the changes that occur in the various years' excess premiums.

3. Each member's premium, beginning with the premium for 2010, would be funded at X% from their account. This would be accomplished by issuing a credit to the member for X% of the current year's premium to be offset against an invoice for the full premium for the current year.

4. X% will be set by the TMi Board of Directors annually and will continue to be reviewed annually and adjusted by majority vote of the members.

C. The procedure for the return of excess premium/surplus and exit penalties for member withdrawal, per Article III, Sections 2 and 4, of the Bylaws, shall be according to the following definitions and table:

Definitions:

1. 50% premium penalty: a penalty of 50% of the member's current year premium shall be assessed.

2. Directly allocable administrative costs: those administrative costs directly allocable to a member, due to that member's withdrawal, shall be assessed the member each year until such time as all years that the member participated in are completely closed and all premium/surplus has been returned.

3. Current year premium rebate: a rebate of part or all of the member's current year premium.

4. Forfeit member share of surplus: the member shall forfeit their entire current balance of excess premium/surplus and all future allocations of excess premium/surplus.

5. Premium/surplus payout: the payout of the member's allocated share of any excess premiums/surplus for those years that the member participated in, where an excess premium/surplus was available, shall be as follows:

a. Funds available for premium/surplus payout include only those funds for claim years that are completely closed for TMi, and have been closed on TMi books for at least 1 full calendar year. (Ex: Claim year 2005 is completely closed for TMi in 2010. 2005 funds become available for payout beginning 01-01-2011.)

b. Premium/surplus payout begins one (1) full year after the calendar year in which the member withdraws.(Ex: Member gives notice to withdraw 09-01-2005. Coverage ceases prior to or on 12-31-2005. Payout begins after 01-01-2007.)

c. For open claim years in which the member participated, the member's allocated share of any excess premium/surplus, and/or required loss reserves, including known losses and incurred but not reported losses, shall be debited or credited to the member until such time as all years that the member participated in are completely closed.

d. Should a closed year, reopen, resulting in a paid loss, any member, (present or former) who participated in TMi at the time the loss was incurred, shall be assessed their share of the loss. This assessment will be charged against the member's remaining balance, or if no balance remains, the assessment shall be billed to the member.

** Any member, who withdraws and then returns to TMi prior to payout completion, will immediately stop receiving further payouts. From the point of return, any remaining balance will be applied according to the table and the member's then current status.

Table:

#1. Exit during the initial 5 yr. period of membership, including any new 5 year period of membership.

#2. Exit with less than 1 yr. notice and the continued operation of the system.

#3. Exit with 1 yr. or more notice and the continued operation of the system.

#4. Exit due to total cessation of service.

This is defined as zero miles or zero dollar budget, or no operating assistance application submission to WISDoT.

#5. Exit under #'s 1, 2, 3, or 4 and later return to membership.

#1 #2 #3 #4

< 1yr.Notice 1 Yr. Notice Exit, then

Payout Provisions Init. 5 yr. Contin. Serv. Contin. Serv. Cease Serv. Return

50% current year premium penalty: No Yes No No Follow Table Exit #

Direct allocable admin. costs: Yes Yes No No Follow Table Exit #

Current year premium rebate: No No No No Follow Table Exit #

Forfeit member share of surplus: Yes No No No Follow Table Exit #

Premium/surplus payout: No Yes Yes Yes See **

AUTO LIABILITY - PREMIUM ALLOCATION FORMULA

Revised 06-17-98, 11-12-97, 06-21-95, 11-09-94, 06-05-90, 121087, Effective 010186

The allocation formula described below applies only to the premium for the basic liability insurance. Sections I thru IV apply to miles operated within the State of Wisconsin. Section V applies to miles operated outside of the State of Wisconsin. This formula does not apply to the premiums for physical damage and excess insurance.

I. DEFINITIONS

A. Subject Years The three year period's data used to calculate the reward and penalty statistics.

B. Miles Operated The number of miles a transit system operates, both revenue and other.

C. Reportable Accident Any event resulting in present or future liability, monetary loss or the potential for monetary loss, no matter how slight, and includes all claims resulting from the event.

D. Claim - A report for one individual or party of their actual or potential loss.

E. Accidents/100,000 miles Divide the miles operated by 100,000 and then divide that number into the total number of "reportable accidents".

F. Property's Financial Performance Divide the total amount of payouts and reserves by the amount of premium paid in, with each claim capped at a maximum of $25,000.

II. FORMULA STRUCTURE

A. The premium allocation formula is based on each property's performance on the following three factors:

1. Miles operated,

2. Accidents/100,000 miles,

3. The property's financial performance.

(Items 2 and 3 are reward and penalty factors.)

B. The official sources for the data used to calculate the above factors are as follows:

Factor Official Date Source

Miles Operated- Miles reported by the transit systems directly to TMi

Accidents/100,000 miles TMi's loss data base

Property's Financial TMi's loss data base

All statistics are calculated on a calendar year basis with a cutoff of no earlier than June 30th of the current year for data to be included in the three subject years.

C. The subject years are determined as follows:

Premium for Subject Years

1986 1982, 1983, 1984

1987 1983, 1984, 1985

1988 1984, 1985, 1986

1989 and beyond continuing as above.

D. The weights to be given to each allocation factor in determining the amount of premium for each individual property are as follows:

1994 & prior 1995 & after

% premium allocated by miles operated 70% 65%

% premium allocated by the accidents/100,000 miles 15% 15%

% premium allocated by a property’s financial performance 15% 20%

E. The effect of the reward and penalty factors will, however, be capped as follows:

Upper limit 2.00

Lower limit 0.25

The upper limit is the maximum penalty that a property would receive based upon its poor performance.

The lower limit is the maximum reward that a property would receive based on its good performance.

III. ALLOCATION PROCEDURE

A. Assemble and calculate data for subject years for each property; i.e.:

Total of Premium

Year 1 Year 2 Year 3 3 Years Year

Miles Operated X X X X X

# of Reportable Acc X X X X

Premium Paid X X X X

Claims Paid and Reserved X X X X

Accident Rate X X X X

Financial Perf. X X X X

B. Calculate average accident rate and financial performance for the entire group.

C. Calculate each property's variance from the average for accident and financial performance.

D. Allocate base premium based on annual allocation percentage (i.e., 65% 15% 20%).

E. Adjust the accident and financial performance parts of the premium by the variances as calculated under section III C.

F. Compare the premiums determined under section III D to section III E and adjust, if necessary, to stay within the caps defined in section II E.

G. Repeat section III E to make the individual premiums to be charged equal.

IV. REFUNDS

A. Interest is credited to the year in which it is earned.

B. Beginning with the premium allocation for 1992: