BOARD OF SELECTMEN
Special Meeting Minutes
Town Office Building March 8, 2010
Selectmen’s Conference Room 12:00 P.M.
First Selectman Mailhos called the meeting to order at 12:00 P.M. with the following in attendance: Selectman Blessington, representatives, Kristin Gugliemo and Tony Gugliemo from Penny Hanley & Howley and Residents. Selectman Millix arrived at 12:20 P.M.
A. MIRMA discussion with Insurance Company
Mr. Gugliemo gave a brief description on how MIRMA was started. It was started to give competitive rates to Municipalities as it seemed CIRMA was favoring larger Towns by giving them better rates. Patrick Hemmingway, who was originally involved in CIRMA got a Board of Directors set up to form MIRMA, to offer competition, and better rates to the smaller Towns. Penny Hanley & Howley was the first firm to carry MIRMA in 2002, but then other Insurance Companies began to offer MIRMA, who has since enlisted over 50 Towns.
Mr. Gugliemo said that PHH got inkling that MIRMA was having trouble, but CIRMA has had problems over the years as well. Kristin Gugliemo said that each year she goes out for bid for Municipal insurance and has always tried to get rates from CIRMA and MIRMA, but CIRMA’s rates are not always as good, or a lot of times they don’t want to quote insurance for the smaller Towns. She also said that as of July 1, 2009, the MIRMA program is a non-assessable program going forward. The assessments are reinsured over the top. The reassurance of it goes over a 60% loss. She will be able to get quotes from CIRMA, as long as they are willing to quote.
Jim Poole asked what drove them to the reassessment. Kristin Gugliemo said that they didn’t have enough to pay their losses. John Patton said the assessment had to be done because of prior losses. Mr. Poole asked how it got overlooked that they weren’t reassessing it should have been on the books for MIRMA, and is surprised that the State insurance agency didn’t put it in place. It has been a known number for quite a while. Mr. Patton said that legislation allows them to go up to a certain number of years to get to a point where you have to reassess. The insurance company had monitored it and made sure it was compliant, but once the assumptions and projections changed, they made MIRMA send out a letter back in 2006 that there were problems. About a year ago a lot of the projected
losses became much larger than expected.
Selectman Blessington said 2 years after it was founded, MIRMA was $2.25 million in the hole and in 2005 there was talk about shutting MIRMA down, and instead Legislature gave them 10 years to get better. Now they are $9.7 million down. MIRMA was supposed to get better, but got worse. There is assessment listed in the contract. How did we get $10 million in the hole? Mr. Patton said that is because of how the case reserves had changed. They base their models on whatever our case reserves are.
Mr. Poole asked how they came up with the premium, and also we are in a deficit situation now; is there a top end, on profitability if the economy gets better with MIRMA, if we go over 15 or 20% will there be a rebate that goes back to the Town? Mr. Patton said that they used a pool to come up with the premium and the losses should be 45% of what their losses are, and the premium needs to be higher than the losses. If there is a surplus and Towns meet the minimum, they will get a rebate or credit.
Selectman Blessington asked if there are workman’s comp cases from 2002 that are still open. Mr. Patton said that there are a few open cases. Some could end up being paid in a lump sum rather than a payout per week. Mr. Gugliemo said that the worker’s comp law is very structured; so many losses could end up getting settled being paid up front. Mr. Patton said that some pay per period cases have tails, where as time passes, the payments will get smaller and smaller.
Selectman Blessington asked how the individual town’s assessment is being determined? Mr. Patton gave an explanation of the three tiers, which is how the losses are determined. He gave an example of 2002/2003 where the projected losses which were greater than 65%. MIRMA took the projected and take the discounts plus 25% of the premium, if there is not enough to cover all of the losses, then they go to tier II, which is everyone else – go through the same process. If there still isn’t enough in tier II, it will go to the third tier. Take whatever the losses are and divide by the premium. There is no limit of what anyone could be assessed. Mr. Gugliemo clarified that it is the same with CIRMA as well as MIRMA.
Mr. Gugliemo said that there is not a lot of competition in Municipal coverage. CIRMA only insures Connecticut municipalities. Other insurance companies have come in to compete, but end up bailing out. CIRMA knows that the other companies will end up bailing out, so they under price the product to force the competition out. When MIRMA was created, they were hoping to create full time choices for the insurance to create competition. There are currently 65 Towns in the Regional District involved in MIRMA.
Mr. Patton said if he knew then what he knows now, he probably would have never pursued if we didn’t have any capital. Mr. Gugliemo said that this couldn’t have a worse time to have this happen.
The discussion went on that the Town still needs to pay the money to MIRMA. First Selectman Mailhos said that she has talked to some other Towns and they are saying not to pay it yet, as we only have gotten that one letter, we need more of an explanation. Although if nobody pays, the people affected will end up suing the Towns, and could end up costing more money in the long run.
First Selectman Mailhos asked for a level of detail of how everything is broken out and the assessments. The actual invoices should have been sent out, but they need to wait until legislation passes. Mr. Gugliemo said to wait on it for a little while. First Selectman Mailhos asked if MIRMA will be holding another meeting. She said it might be beneficial for the Towns assessed and interest might be high. Selectman Blessington asked Kristin Gugliemo if we will be seeking a bid from CIRMA this year. She said yes, as well as Travelers, and Arganot. Mr. Gugliemo said that they have had very little success with CIRMA when going out to bid. Willington is not the only Town that they will not bid to. Mr. Gugliemo said it is a good idea to get another meeting scheduled and they will invite the other
insurance companies as well as the Insurance Commissioner.
Mr. Poole said that he is disappointed in the Comprehensive Annual Financial Report. If this issue has been around and we have had an assessment opportunity since 2006, and MIRMA has been running in the red, it is not stated in the auditor’s report. If you look on page 50, of each year, it states that there no issues or problems. He would have thought that our Business Manager would have known that there were issues lurking and someone should have brought it forward. Or the annual report in June 2009 should have noted something in there. We have been through three cycles and no one has picked this up. It is troubling to him. What else is lurking out there for potential hits? It is just something to be aware of.
First Selectman Mailhos asked if it is possible that our assessment could be more? Mr. Patton said that the $120,000 should be a final assessment, and should not get any bigger unless there is an explosion of losses. The flip side is there could be some money coming back.
The meeting was adjourned the meeting at 1:09PM.
Respectfully submitted,
Robin Campbell
Robin Campbell
Administrative Assistant
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