1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833 (800) 541-4591 Fax (916) 244-1199

https://www.planjpa.org/

* Reference materials enclosed with staff report.

STRATEGIC PLANNING SESSION AGENDA

Friday, March 1, 2019

9:00 a.m.

Hilton Garden Inn San Francisco Airport North

670 Gateway Blvd South San Francisco, CA 94080

In compliance with the Americans with Disabilities Act, if you need a disability-related modification or accommodation to participate in this meeting, please contact Katie Sullivan at (916) 244-1164 or (916) 244-1199 (fax). Requests must be made as early as possible and at least one full business day before the start of the meeting. Documents and materials relating to an open session agenda item that are provided to the Pooled Liability Assurance Network (PLAN) JPA Board of Directors less than 72 hours prior to a regular meeting will be available for public inspection at 1750 Creekside Oaks Dr., Suite 200, Sacramento, CA 95833.

Page 1. WECLOME AND INTRODUCTIONS

2. PLANNING FOR THE 2019/20 PROGRAM YEAR 3 A. State of the Insurance Market 4 B. Emerging Risks 1. Design Immunity 2. Dangerous Conditions a. Intersections and Crosswalks b. Caltrans Maintenance and Operations Agreements 3. Emerging Industry Exposures for PLAN JPA – Alliant Insurance

Services Recommendation: Staff recommends development of training

programs specific to Design Immunity and Intersection/Crosswalk risk control for the upcoming 2019/20 program year.

5 C. Membership Retention and Growth

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PLAN JPA Strategic Planning Session March 1, 2019

Page 2

* Reference materials attached with staff report.

2. PLANNING FOR THE 2019/20 PROGRAM YEAR (continued) 6 D. Governance 1. Review and Discussion Regarding PLAN JPA Governing Documents a. Memorandum of Coverage and Conflict of Interest Code b. Target Equity Benchmarks c. Dividend Release/Capital Contribution Policy *2. Board and Committee Changes and Vacancies Recommendation: Staff recommends Board direction to develop

Target Equity, Dividend Release, and Capital Contribution policies for review at the April 18, 2019, Executive Committee meeting.

3. STRATEGIC OUTCOME

12 A. Establish 2019/20 Goals & Strategic Objectives Recommendation: Staff recommends the Board give specific direction for

the establishment of 2019/20 program year goals and objectives for presentation and approval at the June 12, 2019, Board of Directors meeting.

4. CLOSING COMMENTS This time is reserved for comments by Board members and/or staff and to identify

matters for future Board business. A. Board of Directors B. Staff

NOTICES:

The next Executive Committee meeting will be held on April 18, 2019, at 10:00 a.m., at San Bruno

City Hall, 567 El Camino Real, San Bruno, CA 94066. The next Board of Directors meeting will be held on June 12, 2019, at 9:30 a.m. Location: TBD

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PLAN JPA STRATEGIC PLANNING SESSION

March 1, 2019

Agenda Item 2.A.

PLANNING FOR THE 2019/20 PROGRAM YEAR SUBJECT: State of the Insurance Market

BACKGROUND AND HISTORY: Seth Cole, Senior Vice President, Alliant Insurance Services, will be present at the meeting to provide an update on the state of the insurance market related to the upcoming PLAN JPA renewals.

RECOMMENDATION: None REFERENCE MATERIALS ATTACHED: None

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PLAN JPA STRATEGIC PLANNING SESSION

March 1, 2019

Agenda Item 2.B.

PLANNING FOR THE 2019/20 PROGRAM YEAR SUBJECT: Emerging Risks

BACKGROUND AND HISTORY: On October 26, 2018, the Executive Committee discussed and approved a Spring 2019 Strategic Planning Session (SPS) to facilitate review of current operational and organizational goals and objectives. Staff was charged with reviewing emerging risks and exposures for discussion by the membership. These include risks specific to PLAN’s specific claims experience, as well as general emerging municipal risks.

1. Design Immunity Craig Wheaton, PLAN JPA Litigation Manager, and Gail Ziegler, Risk Control Manager, York, will present an overview of Design Immunity issues and update the membership on upcoming training for member personnel.

2. Dangerous Conditions

a. Intersections and Crosswalks

Mr. Wheaton and Ms. Ziegler will provide an overview on intersections and crosswalks, dangerous conditions, and recent related claims experience. Staff will provide recommendations for training and education for member personnel.

b. Caltrans Maintenance and Operations Agreements

Jon Paulsen, PLAN JPA General Manager, and Mr. Wheaton will overview Caltrans Maintenance and Operations Agreements and recent related claims experience. Staff will provide recommendations for pursuing contractual updates and member training.

3. Emerging Industry Exposures for PLAN JPA – Alliant Insurance Services

Seth Cole, Senior Vice President, Alliant Insurance Services, will present an overview of emerging municipal risks and exposures.

RECOMMENDATION: Staff seeks direction regarding the development of training programs specific to Design Immunity and Intersection/Crosswalk risk control for the upcoming 2019/20 program year. REFERENCE MATERIALS ATTACHED: None

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PLAN JPA STRATEGIC PLANNING SESSION

March 1, 2019

Agenda Item 2.C.

PLANNING FOR THE 2019/20 PROGRAM YEAR SUBJECT: Membership Retention and Growth

BACKGROUND AND HISTORY: PLAN JPA is comprised of 28 municipal members in the Bay Area. Originally created in 1986 by the Association of Bay Area Governments (ABAG), PLAN was formed as a non-profit public benefit corporation to assist member communities that were struggling to obtain affordable liability insurance. PLAN has since (2018) transitioned to a joint powers insurance authority and is no longer directly affiliated with ABAG. Per the group’s bylaws, the purpose of PLAN JPA is to benefit the citizens of each Member City by establishing a stable, cost-effective self-insurance, risk sharing and risk management program. Previously, membership in PLAN was restricted to municipal entities in the Bay Area. Adoption of the 2018 PLAN JPA Bylaws extended the geography of (prospective) members to the State of California. Jon Paulsen, General Manager of PLAN JPA, will present an overview of key considerations for current member retention and potential expansion of the group. RECOMMENDATION: None REFERENCE MATERIALS ATTACHED: None

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PLAN JPA STRATEGIC PLANNING SESSION

March 1, 2019

Agenda Item 2.D.1-2

PLANNING FOR THE 2019/20 PROGRAM YEAR SUBJECT: Governance

BACKGROUND AND HISTORY:

1. Review and Discussion Regarding PLAN JPA Governing Documents

a. Memorandum of Coverage and Conflict of Interest Code

Members and staff continue to request updates to the PLAN JPA governing documents. Staff is working on several updates for implementation in the upcoming 2019/20 program year. These include, but are not limited to, the following items:

• Clarification on Employment Practices Liability Exclusion • Clarification on Auto Liability, Auto Physical Damage, and Rental Vehicles • Clarification/Addition of Specific Drone Language • Clarification on Inverse Condemnation

Conflict of Interest Code Update: The PLAN JPA Conflict of Interest Code was finalized in June 2018; however, another revision was necessary as the Bylaws permit member employees to serve on Committees even if not serving on the Board of Directors at the time they are serving on a Committee. This was not considered in the initial revision of the COIC, and staff has requested guidance from the Fair Political Practices Commission (FPPC). Staff will distribute to the membership for feedback and comments once the document is received back from the FPPC.

b. Target Equity Benchmarks

In reviewing PLAN JPA’s governing documents, staff was not able to identify a formal Target Equity policy or benchmarks. Such policy is recommended by the California Association of Joint Powers Authorities (CAJPA) and the Association of Governmental Risk Pools (AGRiP), the former being an association that PLAN JPA will be seeking accreditation from in the upcoming 2019/20 program year.

Ritesh Sharma, PLAN JPA Finance Manager, will present sample target ratios for consideration and discussion.

c. Dividend Release / Capital Contribution Policy

In conjunction with a Target Equity policy, CAJPA and AGRiP recommend formal dividend and contribution policies. Staff will present sample governing documents for discussion.

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PLAN JPA STRATEGIC PLANNING SESSION

March 1, 2019

Agenda Item 2.D.1-2 Page 2

2. Board and Committee Changes and Vacancies

There have been several changes to member representation on the Board of Directors and other PLAN JPA Committees. Staff will review the current vacancies with membership in anticipation of nominations and elections at the June 12, 2019 Board meeting.

RECOMMENDATION: Staff seeks direction from the membership to develop Target Equity, Dividend Release, and Capital Contribution policies for review at the April 18, 2019, Executive Committee meeting. REFERENCE MATERIALS ATTACHED:

• Sample Target Net Position Policy • Officer and Committee Member Listing 2018/19

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Pooled Liability Assurance Network Joint Powers Authority (PLAN JPA) Target Net Position Policy Statement

A. PURPOSE

The purpose of this policy statement is to give guidance to the Board of Directors in making annual funding, dividend and assessment decisions for the PLAN JPA programs. By adoption of this policy statement, the Board of Directors acknowledges the long-term financial strength of the PLAN JPA programs is of utmost importance. The Board of Directors acknowledges there is a high degree of uncertainty in the annual actuarial estimates due to the possibility of occasional catastrophic claims and inconsistent or inaccurate case reserving; therefore, the Board of Directors desires to fund the PLAN JPA programs in a cautious and prudent manner and return equity to its members in an equally cautious and prudent manner. It is the policy of PLAN JPA to conservatively fund its programs to maintain sufficient assets to pay all losses and avoid substantial fluctuations to contributions.

II. DEFINITIONS • “Claims Paid to Date” is the amount actually paid on reported claims at the date

of valuation. • “Confidence Level” is a statistical term used to express the degree to which an

actuarial projection (usually “Ultimate Net Loss” or “IBNR”) will be an accurate prediction of the dollar losses ultimately paid for a given program year or combination of years. The higher a “Confidence Level” the greater certainty the actuary has that losses will not exceed the dollar value used to attain that “Confidence Level”.

• “Net Position” is the amount of funds remaining, after deducting all

administrative and excess insurance costs, available to pay claims in excess of actuarial expected losses discounted for investment income at the actuarially determined “Expected” “Confidence Level”.

• “Expected Liabilities” is the total of all “Outstanding Reserves”, “IBNR”, and

Unallocated Losses Adjustment Expense “ULAE”, discounted, at the “expected” confidence level, which by industry standard translates roughly to the 50% to 56% “Confidence Level” as determined by the independent actuary.

• “Incurred But Not Reported (IBNR)” is the estimate of the funds needed to pay

for covered losses that have occurred but have not yet been reported to the member and/or PLAN JPA. “IBNR” includes (a) known and unknown loss events that are expected to be claims; and (b) expected future development on claims already reported.

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• “Net Contribution” includes the total contributions from members less the excess insurance cost.

• “Net Present Value” is the discounting of future cash flows to current values by

taking into account the time-value of money.

• “Self Insured Retention” is the maximum amount of exposure to a single loss retained by PLAN JPA.

• “Outstanding Reserves” are the sum total of unpaid case reserves in the “Self

Insured Retention” as provided by the loss run report. • “Ultimate Net Loss” is the sum of “Claims Paid to Date”, “Outstanding Reserves”

and “IBNR”, all within PLAN JPA’s “Self Insured Retention”. It is the estimate of the total value of all claims that will ultimately be made against members for which PLAN JPA is responsible.

• “Incurred Losses” is the sum of “Claims Paid to Date” and “Outstanding

Reserves” with the PLAN JPA’s layer. • Unallocated Loss Adjustment Expense “ULAE” are expenses that are not

attributed to the processing of a specific claim. III. RATIOS

“Net Contribution” to “Net Position” ratio: This ratio is a measure of how “Net Position” is leveraged against possible pricing inaccuracies. A low ratio is desirable.

“Expected Liabilities” to “Net Position” ratio: This ratio is a measure of flexibility the pool has to absorb development of expected losses. A low ratio is desirable. “Net Position” to “Self Insured Retention” ratio: This ratio is a measure of the maximum amount that “Net Position” could decline due to a single loss. A high ratio is desirable. Operating ratio: (Net Incurred Losses + Non-Loss Expenses – Investment Income) (Net Contributions)

This ratio is a measure of the inflows versus the outflows in each year. This ratio measures financial stability and solvency. An operating ratio of less than 100% is desirable. Reserve Development: Incurred Losses (current) – Incurred Losses (prior) Net Position

9999

This is a measure of the change in aggregate incurred losses from one valuation period to the prior valuation(s). Generally, the one-year and two-year reserve development to “Net Position” threshold should be less than 20%. Change in Net Position:

Net Position (current year) – Net Position (prior year) Net Position (prior year) This ratio measures if a decline in equity in excess of 10% warrants an increase in annual contribution or an assessment.

Target Ratios Liability Property Net Contribution to Net Position

2:1 2:1

Expected Liabilities to Net Position

3:1 3:1

Net Position to SIR

5:1 5:1

Operating Ratio

≤ 100% ≤ 100%

Reserve Development

≤ +-20% ≤ +- 20%

Change in Net Position

≥ -10% ≥ -10%

IV. ANNUAL ACTUARIAL STUDY. PLAN JPA will conduct an annual actuarial analysis to assist the Board of Directors in making funding decisions.

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Officer and Committee Member Listing – FY 2018/19 (as of March 2019)

Chair: Marc Zafferano

Vice-Chair: Kathleen Kane Treasurer: Ann Ritzma Secretary: Jon Paulsen

Executive Committee Marc Zafferano (Chair) – San Bruno Kathleen Kane (Vice-Chair, Claims Chair) – Burlingame Robert Schultz, (Acting Claims Chair) – Los Gatos Ann Ritzma (Finance Chair) – Foster City George Rodericks (Risk Management Chair) – Atherton Kevin Bryant (At Large) – Woodside VACANCY (Actuarial Chair) – VACANCY (At Large) – VACANCY (At Large) – Risk Management Committee George Rodericks (Chair) – Atherton Julie Carter – Dublin David Benoun – Newark Jeremy Dennis – Portola Valley Actuarial Committee VACANCY (Chair) – Colleen Tribby – Dublin Edmund Suen – Foster City Cindy Safe – Woodside Lorenzo Hines – Pacifica Pak Lin – Colma

Claims Committee Kathleen Kane (Chair) – Burlingame Marc Zafferano – San Bruno John Mullins – Hillsborough Scott Corey – Suisun City Robert Schultz – Los Gatos Rebecca Mendenhall – San Carlos Brenda Olwin – East Palo Alto Finance Committee Ann Ritzma (Chair) – Foster City Rebecca Mendenhall – San Carlos Mary Furey – Saratoga

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PLAN JPA STRATEGIC PLANNING SESSION

March 1, 2019

Agenda Item 3.A.

STRATEGIC OUTCOME SUBJECT: Establish 2019/20 Goals & Strategic Objectives

BACKGROUND AND HISTORY: Topics including claims trends, financial position, risk control services, training and educational programs, emerging risks, and governance will be covered during the course of the Strategic Planning meetings. This time is reserved for discussion of priorities, tactical implementation, and allocation of resources during the coming 2019/20 program year (or further). RECOMMENDATION: Staff seeks direction from the membership for the establishment of 2019/20 program year goals and objectives for presentation and approval at the June 12, 2019, Board of Directors meeting. REFERENCE MATERIALS ATTACHED:

None

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