agenda2016/09/29 · consent agenda 1. minutes – august 25, 2016 2. august 2016 administrative...

AGENDA Executive Committee September 29, 2016 Holiday Inn ~ Everett

7:30 am

Breakfast

8:00 am

Member Representative Meetings (find your Representative)

9:00 am

CALL TO ORDER – President Emmett Heath

1. Roll Call of Members and Introduction of Guests

2. Changes in Agenda/Motion to Accept Agenda

Sign-in sheet

CONSENT AGENDA

1. Minutes – August 25, 2016

2. August 2016 Administrative Vouchers/Checks – Total voucher approval of

$216,804.30 including staff payroll and internet/credit card payments.

3. August 2016 Claims Vouchers/Checks – Total voucher approval of

$392,819.31.

Page #

002 006

020

*WP #

ACTION ITEMS

1. Governance Policy – Claim Settlement Procedures 024

DISCUSSION ITEMS

1. 2016 Executive Committee Work Plan

2. Staff Organization Plan - Hatten

3. Non-Transit Liability Governance Policy – Franz

4. State Audit Exit – Ben Foreman

026

PRESENTATION

1. Governmental Entities Mutual, Inc. – Andrew Halsall

SUBCOMMITTEE REPORTS

1. Governance Policy Committee – Verbal Report

2. Nominations and Elections Committee –Verbal Report

3. Board Development Committee – Verbal Report

4. Emerging Risks & Opportunities Committee – Verbal Report

5. Executive Director Succession Committee – Verbal Report

6. Driver Recognition Committee – Verbal Report

12:00 pm

RECAP and ADJOURN – President Emmett Heath

*WP = Work Plan Item # Board Development Committee Meeting – conference call TBD Governance Policy Committee Meeting – conference call TBD Emerging Risks and Opportunities Committee Meeting – 11/10/16 WSTIP Office

Minutes of the

Executive Committee Meeting

August 25, 2016

Teleconference Meeting

Executive Committee Members Present: Staff Present:

Nick Covey, Past President, Link Transit

Ben Foreman, Large Member Rep, Intercity Transit

Emmett Heath, President, Community Transit

Staci Jordan, Medium Member Rep, Island Transit

Rob LaFontaine, Small Member Rep, Twin Transit

Diane O’Regan, Secretary, C-Tran

Paul Shinners, Vice-President, Kitsap Transit

Shonda Shipman, At-Large Member Rep, Whatcom

Transportation Authority

Brenda Barnett, Receptionist (left @ 9:57 am)

Anna Broadhead, Member Services Assistant

Tracey Christianson, Member Services Manager

Ron Franz, General Counsel

Al Hatten, Executive Director

Jerry Spears, Deputy Director

Board Members Present:

Rob Huyck, Pierce Transit (left @ 9:57 am)

Call to Order

President Heath called the meeting to order at 9:02 am. Heath announced there were three additional

items to add to the agenda: Discussion Item 3 – Columbia County Public Transportation, Serious Loss

Review Update, Discussion Item 4 – Notice from Governmental Entities Mutual, Inc. (GEM), and

Executive Session to discuss performance of a public employee. Heath asked Broadhead to complete a

verbal roll call. Verbal roll call was taken and all Executive Committee members were present in addition

to staff and Rob Huyck from Pierce Transit.

Consent Agenda

Minutes – July 28, 2016, July 2016 Administrative Vouchers/Checks, and July 2016 Claims

Vouchers/Checks

Heath asked for a motion to approve the consent agenda. LaFontaine moved to approve the consent

agenda. Covey seconded the motion and the motion passed.

Discussion Items

2016 Executive Committee Work Plan

Hatten said we are wrapping up the Executive Director and General Counsel’s evaluations, salary review

and determination by October 22. Committees are meeting and there are several reports on the agenda

today. We are in compliance with our work plan.

Non-Transit Liability Governance Policy

Heath explained this topic was tabled from the last meeting in Franz’s absence so we could discuss this

face to face. After a short discussion the group decided the topic wasn’t pressing and requested it be

added to the September agenda.

Columbia County Public Transportation Serious Loss Review Update

At the last meeting staff gave an overview of the Fulbright versus Columbia County Public Transportation

serious loss review. There was a lengthy discussion about the lessons learned from this case and staff

have followed up with Columbia County Public Transportation, Heath has sent a letter and Hatten has

sent a letter offering WSTIP support with resources to help with the recommendations. Christianson

reported that she had spoken with Stephanie Guettinger and some of the recommendations have already

been met; they are receptive and appreciative of the assistance being offered.

Notice from Governmental Entities Mutual, Inc. (GEM)

Hatten said he had received a phone call from Andrew Halsall the chief executive officer of GEM to alert

the Pool that we are not in compliance with their Operation 4.12, non-renewal and pricing policy. Our loss

ratio for the past five years is higher than 125% and allows GEM discretionary authority to non-renew or

increase pricing. 2014 was a bad loss year for us, 2015 was better, and 2016 appears to be good so far.

Halsall will recommend a price increase to the GEM board. We will be working with actuary (Kevin Wick)

and broker (Brian White) to look at alternatives. Franz said it looks like we have been put on notice, how

much notice would GEM give should they decide to non-renew, will it be enough time to develop

alternatives through alternative markets. Hatten said it would be unprecedented but they may raise rates.

Shinners asked what would happen to our capital investment if we non-renew. Staff is working on options

and will have more to report in September. Halsall will also be in attendance at our September meeting.

Staff Reports

Executive Staff Report

Hatten is having preliminary discussions regarding a potential captive transit protected cell within GEM

(captive within a captive scenario), two of the GEM reinsurers do not want to cover transit; we have no

plans of changing our quota share arrangement. Hatten said the WCRP vs Clark County case regarding

whether Pools are insurance companies or not looks like the case will likely settle before the decision

comes out of the Supreme Court. We are working on setting up a meeting with the Thurston County

Treasurer regarding the Pool’s investment strategy and may look at going from our current passive

investment strategy to a more active strategy similar to possibly being able to generate more interest

income per year. If you have questions give Hatten a call.

Christianson said staff have been out doing field visits and teaching reasonable suspicion for Drug and

Alcohol if you would like to schedule a training, please let her know. If you have questions, please don’t

hesitate to contact Christianson.

Spears said the audit was wrapping up. The auditor thought our GASB 68 number was off by $30,000,

but we worked through this with our CPA and our numbers were correct. We have requested your

estimated 2017 miles and employee counts, if you haven’t responded please do so. The Underground

Storage Tank (UST) policy renews on September 25th we will conditionally bind coverage, it will be an

action item for the September Board meeting. If you have questions regarding the Executive Staff

Report, contact Hatten, Christianson, or Spears.

Sub-Committee Reports

Governance Policy Committee

No report. Next meeting August 25.

Nominations and Elections Committee

No report.

Board Development Committee

Shipman reported that the Board Development Committee is working on revising the member guest

program and will forward it to the Governance Policy Committee for review. They are also working topics

for the September Member Representative Meetings which will include a quiz and round table time. For

more information, feel free to contact any Board Development Committee member.

Emerging Risks and Opportunities Committee

The Emerging Risks and Opportunities Committee met on August 11, reviewed the request for

information regarding simulators, talked about the Washington State Department of Transportation

Masterplan, discussed difficult passengers (repeat offenders) and public information requests (repeat

offenders) and possible actions to stop the behavior. Also discussed was future training programs, and

the insurability of drivers and how to determine insurability. For more information, contact Jordan or any

Emerging Risks and Opportunities Committee member.

Executive Director Succession Committee

Heath said no change from the prior meeting.

Driver Recognition Committee

Foreman said the committee had not met and asked Christianson for an update. Christianson reported

we now know who is participating and have processed the first four or five requests. We have requested

everyone return their data by September 12.

Recap/Review

Heath stated there was no need to recap unless anyone had questions. There were no questions.

The Executive Committee took a quick break at 9:50 am and resumed at 9:57 am.

Executive Session

The Executive Committee went into Executive Session at 9:57 am pursuant to RCW 42.30.110 for not to

exceed 10 minutes; they extended the session and came out of session at 12:16 pm. They requested

staff to schedule an additional meeting for 12:00 pm for further discussions.

Adjournment

The meeting adjourned at 10:16 am and planned to resume at 12:00 pm.

Call to Order

President Heath called the meeting back to order at 12:00 pm and asked Broadhead to complete a verbal

roll call. Verbal roll call was taken and all Executive Committee members were present in addition to

staff. Heath asked Executive Staff to leave the room, but asked Franz to remain.

Executive Session

The Executive Committee went into Executive Session at 12:03 pm pursuant to RCW 42.30.110 for not to

exceed 15 minutes; they extended the session and came out of session at 12:36 pm.

Heath moved that the Executive Committee recommend to the Board of Directors at their

September meeting to extend an offer to Jerry Spears to employ him as the Executive Director at

not less than $140,000 effective January 1, 2018. O’Regan seconded the motion and it passed

unanimously.

Adjournment

The meeting adjourned at 12:41 pm.

Submitted this 29th day of September 2016.

Approved: ________________________________

Diane O’Regan, Secretary

August 2016 Administration Voucher Approval August 1st to August 31st 2016 vouchers audited and certified by the auditing officer as required by RCW 42.24.080,

and those expense reimbursement claims certified as required by RCW 42.24.090, have been recorded on a listing which has been e-mailed to the Executive Committee members on September 22, 2016. ACTION: I, __________________________, as of this date, ________________________, 2016 Move that the following checks be approved for payment: Vouchers: Check Numbers 26461 through 26526 in the amount of $60,045.77. Internet transfers of $50,110.38 for the 08/15/2016 payroll; $47,798.57 for the 08/31/2016 payroll; and $9,411.02 for Staff Benefits for 08/2016. Internet and ACH payments for staff credit cards, travel/expense reimbursements and professional/misc. services total $49,438.56. Total voucher approval requested, including August 2016 staff payroll and Internet and ACH payments is $216,804.30. The motion was seconded by _________________________________and approved by a unanimous vote. I, the undersigned, PRESIDENT/VICE PRESIDENT OF THE WASHINGTON STATE TRANSIT INSURANCE POOL (WSTIP) of the state of Washington, do hereby certify that the merchandise or services, herein specified have been received and the following checks are approved for payment. ___________________________________ PRESIDENT/VICE-PRESIDENT ___________________________________ DATE

Washington State Transit Insurance PoolAugust 2016 Administration Vouchers

US Bank Administration Account

Date Num Payee Description Account Amount

08/02/2016 Internet US Bank Visa (Purchasing Cards) Credit Card Exps - July (Combined Pmt) 300 · Accounts Payable 4,563.83

08/04/2016 26461 Clallam Transit System Travel Reimbursement - W. Clark-Getzin 300 · Accounts Payable 93.92

08/04/2016 26462 Color Graphics Safety Stars Plaque/Name Plates 300 · Accounts Payable 302.20

08/04/2016 26463 DCS Technologies, Inc. Pass Product Demo/Pierce Transit 300 · Accounts Payable 2,827.37

08/04/2016 26464 Emmett--Heath Travel Reimbursement 300 · Accounts Payable 153.38

08/04/2016 26465 Express Personnel Services Admin Services - M. Spears 300 · Accounts Payable 199.35

08/04/2016 26466 Island Transit Travel Reimbursement - S. Jordan 300 · Accounts Payable 170.18

08/04/2016 26467 ISO Services, Inc. Maintenance Fee 300 · Accounts Payable 25.00

08/04/2016 26468 Lindsey & Jeffers Succession Planning Discussion 300 · Accounts Payable 262.50

08/04/2016 26469 Nick Covey Travel Reimbursement 300 · Accounts Payable 204.12

08/04/2016 26470 Nick R. Covey (Wireless Device) Wireless Device Reimbusement 300 · Accounts Payable 180.00

08/04/2016 26471 Office Depot Office Supplies 300 · Accounts Payable 521.54

08/04/2016 26472 RICOH USA, Inc (Pasadena) Additional Images 300 · Accounts Payable 134.77

08/04/2016 26473 Shonda Shipman Travel Reimbursement 300 · Accounts Payable 195.51

08/04/2016 26474 Sound Predictions LLC Leadership Skills Training 300 · Accounts Payable 1,729.00

08/08/2016 ACH Geneva Financial Services, Inc. Professional Services 300 · Accounts Payable 2,667.50

08/11/2016 26475 American Driving Records Driver Abstracts - Reports 300 · Accounts Payable 75.75

08/11/2016 26476 Amy Asher Travel Reimbursement 300 · Accounts Payable 304.56

08/11/2016 26477 Capitol City Press, Inc. Letterhead 300 · Accounts Payable 299.63

08/11/2016 26478 Carlson, McMahon & Sealby, PLLC ADA Consulting 300 · Accounts Payable 500.00

08/11/2016 26479 Consolidated Technology Services Technology Services 300 · Accounts Payable 815.00

08/11/2016 26480 Evergreen Maintenance Landscaping, LLC Landscape Maintenance - July 300 · Accounts Payable 439.15


08/11/2016 26482 Gabe Beliz Photography Session - PASS Training 300 · Accounts Payable 271.50

08/11/2016 26483 Hendricks-Bennett, PLLC Community Transit 300 · Accounts Payable 100.00

08/11/2016 26484 Jill Lowe Expense Reimbursement 300 · Accounts Payable 42.22

08/11/2016 26485 Lemay - Pacific Disposal Recycling Services - July 300 · Accounts Payable 93.03

08/11/2016 26486 National Maintenance Contractors Janitorial Services - August 300 · Accounts Payable 200.97

08/11/2016 26487 Northwest Information Services Inc Security System Project Mgmt 300 · Accounts Payable 1,072.50

08/11/2016 26488 Puget Sound Energy Electric Utilities 300 · Accounts Payable 496.01

08/11/2016 26489 Ramada Lodging Exps - Multiple 300 · Accounts Payable 335.10

08/11/2016 26490 RICOH USA, Inc Copier Lease 300 · Accounts Payable 481.69

08/11/2016 26491 Thomson Reuters - West WA All Cases/Statutes 300 · Accounts Payable 184.56

08/11/2016 26492 Verizon Wireless Staff Wireless Services 300 · Accounts Payable 385.19

08/12/2016 26493 M. Jerry Spears Travel Reimbursement 300 · Accounts Payable 308.50

08/15/2016 ACH Christian DeVoll Travel Reimbursement 300 · Accounts Payable 1,054.79

08/15/2016 26494 Andrea Powell Travel Reimbursement 300 · Accounts Payable 216.00

08/17/2016 26495 Ronald A. Franz Travel/Expense Reimbursement 300 · Accounts Payable 388.94

08/17/2016 26496 Carlson, McMahon & Sealby, PLLC Island Transit 300 · Accounts Payable 689.68

08/17/2016 26497 Dept of Licensing Driver Record Monitoring 300 · Accounts Payable 3,172.28


08/17/2016 26499 Hotel RL - Olympia Lodging Exps - E. Heath 300 · Accounts Payable 111.05

08/17/2016 26500 Island Transit Guest Rider - Clallam Transit System 300 · Accounts Payable 972.78

08/17/2016 26501 Ken Mehin Travel Reimbursement 300 · Accounts Payable 45.68

Page 1 of 2

Washington State Transit Insurance PoolAugust 2016 Administration Vouchers

US Bank Administration Account

Date Num Payee Description Account Amount

08/17/2016 26502 Olympic Telephone, Inc. Network Ports 300 · Accounts Payable 599.71

08/17/2016 26503 State Auditor's Office Financial Audit 300 · Accounts Payable 4,282.60

08/17/2016 26504 Davis Wright Tremaine LLP (OR) Network Security Training 300 · Accounts Payable 7,500.00

08/19/2016 26505 Walk on Water Paddle Board Rental/Instructions 300 · Accounts Payable 217.60

08/24/2016 26506 Alliant Insurance - Newport Beach 2015-2016 APD Year End Adjustment 300 · Accounts Payable 5,539.95

08/24/2016 26507 C-TRAN - Vancouver 2016 Driver Recognition Program 300 · Accounts Payable 3,600.00

08/24/2016 26508 CenturyLink Telephone Services 300 · Accounts Payable 745.63

08/24/2016 26509 City of Olympia - Utilities Utilities: Current Billing 08-19-16 300 · Accounts Payable 1,332.47

08/24/2016 26510 Comcast Comcast Business Services 300 · Accounts Payable 290.51

08/24/2016 26511 Constance Poulsen Stepping Up to Leadership 300 · Accounts Payable 2,000.00

08/24/2016 26512 Crystal Springs (TX) Bottled Water 300 · Accounts Payable 57.95


08/24/2016 26514 Hermanson Company, LLP HVAC - Preventative Mtce 300 · Accounts Payable 364.57

08/24/2016 26515 Intercity Transit 2016 Driver Recognition Program 300 · Accounts Payable 2,500.00

08/24/2016 26516 KitsapTransit 2016 Driver Recognition Program 300 · Accounts Payable 1,500.00

08/24/2016 26517 LINK 2016 Driver Recognition Program 300 · Accounts Payable 800.00

08/24/2016 26518 Network Computing Architects, Inc. ShoreTel Partner Support 300 · Accounts Payable 323.00

08/24/2016 26519 Office Depot Office Supplies 300 · Accounts Payable 188.02

08/24/2016 26520 Summit Law Group Training - Legal Issues for Supvisors 300 · Accounts Payable 4,100.00

08/25/2016 ACH Data Driven Safety, Inc. Driver Record Monitoring 300 · Accounts Payable 29,840.78

08/25/2016 Internet Citi Cards (Costco Visa Card) Credit Card Exps 300 · Accounts Payable 935.78

08/29/2016 ACH Anna Broadhead Travel Reimbursement 300 · Accounts Payable 1,222.15

08/30/2016 Internet US Bank Visa (Purchasing Cards) Credit Card Exps - August (Combined Pmt) 300 · Accounts Payable 9,153.73

08/31/2016 26521 Everett Transit 2016 Driver Recognition Program 300 · Accounts Payable 1,025.00

08/31/2016 26522 FedEx FedEx Services 300 · Accounts Payable 224.46

08/31/2016 26523 Guy Fraker Collision Avoidance Consulting Balance 300 · Accounts Payable 2,500.00

08/31/2016 26524 KitsapTransit Guest Rider - Mason Transit 300 · Accounts Payable 41.88

08/31/2016 26525 RICOH USA, Inc (Pasadena) Additional Images 300 · Accounts Payable 121.35

08/31/2016 26526 Steve--Mertens Travel Reimbursement 300 · Accounts Payable 44.20

109,484.33

08/04/2016 5851 Health Care Authority Staff Benefits - Inv Month: 08/2016 300 · Accounts payable 9,411.02

08/15/2016 Wire Trans WSTIP Payroll Account 08/15/2016 Payroll & Taxes 300 · Accounts payable 50,110.38

08/31/2016 Wire Trans WSTIP Payroll Account 08/31/2016 Payroll & Taxes 300 · Accounts payable 47,798.57

Total 216,804.30

Page 2 of 2

August 2016 Claims Voucher Approval August 1st to August 31st 2016 vouchers audited and certified by the auditing officer as required by RCW 42.24.080, and those expense reimbursement claims certified as required by RCW 42.24.090, have been recorded on a listing which has been e-mailed to the Executive Committee members on September 22, 2016. ACTION: I, __________________________, as of this date, ________________________, 2016 Move that the following checks be approved for payment: Vouchers: Check Numbers 8795 through 8881 in the amount of $392,819.31. Total voucher approval requested is $392,819.31. The motion was seconded by _________________________________and approved by a unanimous vote. I, the undersigned, PRESIDENT/VICE PRESIDENT OF THE WASHINGTON STATE TRANSIT INSURANCE POOL (WSTIP) of the state of Washington, do hereby certify that the merchandise or services, herein specified have been received and the following checks are approved for payment. ___________________________________ PRESIDENT/VICE-PRESIDENT ___________________________________ DATE

Washington State Transit Insurance PoolAugust 2016 Claims Vouchers

US Bank Claims Account

Issue Date Check Number Status Pay To The Order Of Bank Account Amount

8/5/2016 8795 Cleared Ben Franklin Transit US Bank 250.00

8/5/2016 8796 Cleared Bennett, Billie US Bank 1,000.00

8/5/2016 8797 Cleared Carlson, McMahon & Sealby, PLLC US Bank 1,771.60

8/5/2016 8798 Cleared CCC Information Services, Inc. US Bank 54.96

8/5/2016 8799 Cleared Chambers, Deborah US Bank 2,426.13

8/5/2016 8800 Cleared Community Transit US Bank 17,133.00

8/5/2016 8801 Cleared Counsell, Murphy & Cox, PS US Bank 176.00

8/5/2016 8802 Cleared Enterprise Rent A Car US Bank 2,694.04

8/5/2016 8803 Cleared Garritano, Paula US Bank 3,984.82

8/5/2016 8804 Cleared Gerber Collision & Glass - Burlington US Bank 900.15

8/5/2016 8805 Cleared Hendricks-Bennett, PLLC US Bank 720.00

8/5/2016 8806 Cleared Hultgren, DeAnn US Bank 437.12

8/5/2016 8807 Cleared J&E Appraisal, LLC US Bank 401.00

8/5/2016 8808 Cleared JG McDonald and Associates US Bank 4,219.45

8/5/2016 8809 Issued Kassa Insurance Services, Inc. US Bank 199.50

8/5/2016 8810 Cleared Mills Meyers Swartling PS US Bank 120.00

8/5/2016 8811 Cleared North Kitsap Family Practice & Immediate Clinic US Bank 33.90

8/5/2016 8812 Cleared Partners Claim Services, Inc. US Bank 2,414.00


8/5/2016 8814 Cleared Pierce Transit US Bank 30,818.15

8/5/2016 8815 Cleared Poirier, Tera US Bank 694.00

8/5/2016 8816 Cleared Quality Collision Center US Bank 2,661.38

8/5/2016 8817 Cleared Mark A. Hammer & Associates Trust Acct US Bank 9,000.00

8/5/2016 8818 Cleared USAA US Bank 11,502.44

8/5/2016 8819 Cleared The Hartford US Bank 13,987.17

8/5/2016 8820 Cleared Chea, Holy US Bank 1,480.81

8/5/2016 8821 Cleared O'Neal, Phylicia US Bank 1,500.00

8/5/2016 8822 Cleared Rose City Adjusters, LLC US Bank 1,402.50

8/12/2016 8823 Issued Allstate Insurance Co US Bank 2,377.64

8/12/2016 8824 Cleared Bud Clary Auto Group US Bank 5,484.60

8/12/2016 8825 Cleared Camp Chevrolet Body Shop US Bank 169.85


8/12/2016 8827 Cleared Enterprise Rent A Car US Bank 3,857.63

8/12/2016 8828 Cleared Health First Chiropractic US Bank 1,155.00

8/12/2016 8829 Cleared Hickson, Wendy US Bank 500.00

8/12/2016 8830 Issued Kassa Insurance Services, Inc. US Bank 1,281.00

8/12/2016 8831 Cleared Kitsap Transit US Bank 1,830.12

8/12/2016 8832 Cleared Law, Lyman, Daniel, Kamerrer & Bogdanovich, PS US Bank 3,938.50

8/12/2016 8833 Issued Malarchick Law Office US Bank 2,375.00

8/12/2016 8834 Cleared Northwest Document Retrieval US Bank 447.72

8/12/2016 8835 Cleared Pierce Transit US Bank 300.00

Page 1 of 3




8/12/2016 8836 Cleared T-SCAN Corporation US Bank 700.25


8/12/2016 8838 Cleared Westlie Collision Center US Bank 131.11

8/12/2016 8839 Cleared Whitney's Inc US Bank 295.90

8/12/2016 8840 Cleared Zaremba Claims Service-Yakima US Bank 2,113.73

8/12/2016 8841 Cleared Capas, Nidas US Bank 2,383.73


8/12/2016 8843 Cleared Tillson, Don US Bank 220.00


8/16/2016 8845 Cleared Geer, Jim US Bank 100.00

8/18/2016 8846 Issued Everett Transit US Bank 726.95

8/18/2016 8847 Cleared Gig Harbor Auto Body, Inc. US Bank 1,928.28

8/18/2016 8848 Cleared Investigative Training Service, LLC US Bank 687.50

8/18/2016 8849 Cleared IOD Incorporated US Bank 125.27

8/18/2016 8850 Cleared C-Tran US Bank 3,057.04

8/18/2016 8851 Cleared Community Transit US Bank 6,881.23

8/18/2016 8852 Cleared Island Transit US Bank 75.00

8/18/2016 8853 Cleared JG McDonald and Associates US Bank 1,305.00

8/18/2016 8854 Cleared Law Office of Steven G. Toole, PS US Bank 750.00

8/18/2016 8855 Cleared Martinez, Christopher US Bank 1,500.00

8/18/2016 8856 Cleared Michael & Alexander PLLC US Bank 2,672.50


8/18/2016 8858 Cleared Rose City Adjusters, LLC US Bank 447.80


8/18/2016 8860 Cleared Vasquez, Colin US Bank 377.41

8/18/2016 8861 Cleared Williams, Kastner & Gibbs PLLC US Bank 4,702.02


8/18/2016 8863 Issued Link Transit US Bank 2,791.29

8/19/2016 8864 Issued Brady's Auto Body Inc. US Bank 1,656.55

8/19/2016 8865 Cleared DLK Motors US Bank 731.29

8/19/2016 8866 Cleared Hawkins, Anne US Bank 1,500.00

8/19/2016 8867 Cleared Paine Hamblen LLP US Bank 166.50


8/19/2016 8869 Issued Checker's Auto Body, LLC US Bank 865.97

8/19/2016 8870 Issued Kamiakin Apartments US Bank 380.10

8/25/2016 8871 Issued Eurotech Bodywerkes US Bank 2,318.51

8/25/2016 8872 Cleared Hays Electric, LLC US Bank 591.15

8/25/2016 8873 Issued Medina, Dorothy US Bank 898.26

8/25/2016 8874 Cleared Spokane Transit Authority US Bank 1,447.49

8/25/2016 8875 Issued Kassa Insurance Services, Inc. US Bank 2,411.46

8/25/2016 8876 Cleared Liz Bowers US Bank 28.21

Page 2 of 3




8/25/2016 8877 Cleared Paine Hamblen LLP US Bank 4,884.18


8/25/2016 8879 Issued Whatcom Transportation Authority US Bank 147.52

8/25/2016 8880 Issued Zaremba Claims Service-Yakima US Bank 3,920.80

8/31/2016 8881 Issued Columbia County Court Registry US Bank 187,500.00

Total 392,819.31

Page 3 of 3

Claim Settlement Procedures Governance Section: Operations

Revision Date: 12/5/20139/29/2016 Page: 1 of 1

Purpose

To establish procedures and parameters to facilitate the settlement of claims against the Pool's members.

Authority

1. Interlocal Agreement, Section 3 (resolution of claims); and

2. Bylaws, Sections 20 (resolution of claims).

Policy Statement

1. Executive director settlement authority

a. The executive director is authorized to settle third party bodily injury, property damage,

and public officials' liability claims for up to $100,000250,000 of Pool funds.

b. The executive director is authorized to settle first-party property claims up to $100,000 of

Pool fundsthe Pool’s self-insured retention.

2. Executive Committee settlement approval

The Executive Committee must approve any settlement above the amounts set forth above.

The executive director shall provide his or her recommendation to the Executive Committee

regarding a proposed settlement for any claim or event.

3. Pre-litigation investigation and settlement

a. The Pool may participate in funding investigation and indemnity costs for the resolution of

events which, if not resolved, would likely result in a claim against a Pool member which,

if made, would likely trigger defense or indemnity obligations of the Pool's coverage

documents.

b. The executive director is authorized to craft creative, non-traditional resolutions of pre-

litigation events.

Amendment

This policy may be amended by the Executive Committee.

Passed by the Executive Committee on September 29, 2016.

Emmett Heath, President

Attest:


Approved as to form:

Ronald A. Franz, General Counsel

Claim Settlement Procedures Governance Section: Operations

Revision Date: 9/29/2016 Page: 1 of 1

Purpose

To establish procedures and parameters to facilitate the settlement of claims against the Pool's members.

Authority

1. Interlocal Agreement, Section 3 (resolution of claims); and

2. Bylaws, Sections 20 (resolution of claims).

Policy Statement

1. Executive director settlement authority

a. The executive director is authorized to settle third party bodily injury, property damage,

and public officials' liability claims for up to $250,000 of Pool funds.

b. The executive director is authorized to settle first-party property claims up to the Pool’s

self-insured retention.

2. Executive Committee settlement approval

The Executive Committee must approve any settlement above the amounts set forth above.

The executive director shall provide his or her recommendation to the Executive Committee

regarding a proposed settlement for any claim or event.

3. Pre-litigation investigation and settlement

a. The Pool may participate in funding investigation and indemnity costs for the resolution of

events which, if not resolved, would likely result in a claim against a Pool member which,

if made, would likely trigger defense or indemnity obligations of the Pool's coverage

documents.

b. The executive director is authorized to craft creative, non-traditional resolutions of pre-

litigation events.

Amendment

This policy may be amended by the Executive Committee.

Passed by the Executive Committee on September 29, 2016.


Attest:




2016 Executive Committee Work Plan

Who Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec2017 Jan Feb Mar

1Review efficacy of Committees/Charter and Close Committees EC *

*

2 Ron's evaluation/Al's evaluation President/EC * * *

3 Training Coalition appointment EC / Tracey

4 Executive Director's salary review EC/Board * * * *

5 Employee handbook EC *

20 Audit/Finance Executive Committee/Ben

21 Board DevelopmentBen, Staci, Rob L.,

Shondacharter * * * * * * * * * *

22 Emerging Risks and OpportunitiesStaci, Ed, Ben, Rob H.,

Rob L., Ken, & Mike * * * *

23 Governance Emmett, Paul, & Diane * * * * * * * * * *

24 Nominations Emmett, Paul, & Diane * * *

25 Executive Director Succession CommitteeEmmett, Ken, Nick,

Wendy, Tom * * * * * * *

28 Driver Recognition CommitteeBen, Paul G., Rob H.,

Mike R., Shonda charter * * * * * * * * * * * * * *

Who Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec2017 Jan Feb Mar

SP1 Loss Prevention (1a-c) EC * *

SP2 Loss Control (2a-i) EC * * * *

SP3 Board & Staff Relationships (3a-e) EC * * *

SP4 Stable Rates (4a-c) EC *

SP5

Develop Products & Services to meet member needs (5a-e) EC * * * *

KEY: * = start and SUN SYMBOL = end

Working Principles on Page 3Mental Models on Page 4

Subcommittees

Strategic Priorities Review

General Work Items

Page 1 of 6

2016 Executive Committee Work PlanWORKING PRINCIPLES*

1 Strive for transparency about the role you are playing.

2 Instead of driving an issue, the Executive Committee will work from its work plan to decide what to do.

3 Operate under parliamentary procedures.

4 Be recognized before speaking.

5 Members will come prepared; read materials in advance and participate during the meeting.

6 Try not to dominate the conversation; let someone else have a turn.

7 Finish the meeting on time.

8 No side conversations.

9 Show respect by adhering to principles 4 and 8.

10 The President runs the meetings; not the Executive Director.

11 The Executive Committee can agree to allocate more time to discuss a topic.

12 The Executive Committee decides by majority rule, but strives for consensus. Consensus is defined as the ability for every Executive Committee member to be able to live with the decision.

13 The Executive Committee will flag "hot topics" for members to check in with members on.

14 Proposals to the Board are forwarded with Executive Committee endorsement. Proposals that require Board action, Executive Committee members can share their opinion if they disagree with the Executive Committee's recommendation.

15 The Executive Committee will review their work plan every month and identify what needs to be taken to members.

16 Make sure that communication to the Board is complete.

*Working Priniciples originally formed during the 2007 Executive Committee Retreat, November 29 and 30, 2007; revised during 2009 Executive Committee Retreat, Jnauary 22 and 23, 2009. Reviewed at Executive Committee 2011 Retreat. Revised during the 2012 Retreat. Working principles were not changed in 2014, 2015, and 2016.

TRIBAL RULES*

1 Put the needs of WSTIP first.

2 Serve as member representative before taking a leadership role.

3 Provide a development track for members.

4 Expect people to take a leadership role.

5 Everyone who ran for Executive Committee office can come to the Executive Committee retreat.

6 No side deals -- raise your concerns with the entire Executive Committee

7 Everyone's views are heard. Once Board decision is made, support it.

8 Respect the office -- respect the roles each person takes.

*Tribal Rules added at 2012 retreat and unchanged since addition.

Page 2 of 6

2016 Executive Committee Work PlanMENTAL MODELS

1 . WSTIP Board will meet four times per year.2 . WSTIP will offer $20,000,000 in policy limits for Auto/General Liability.3 . All Members will receive the same Risk Management Grant of $2,500.4 . All members are assessed on the same rating methodology.5 . The Executive Director will be hired by the Board and evaluated annually.6 . General Counsel is hired by the EC and evaluated annually.6 . All best practices will be agreed to on a voluntary basis (exception: driver record monitoring).7 . Membership is restricted to Washington State transits of a minimum size and experience history.8 . WSTIP primary purpose is insurance.9 . No rail or ferry coverage will be offered.

10 . General wage adjustments are subject to the action taken by Intercity Transit and approval by the Board.11 . Auto liability rates are determined by mileage and experience.12 . General/Public Officials (E & O)/Property rates are all determined by the actuary with no experience rating.13 . Claims will be resolved in a "fair, equitable and responsible" manner.14 . Subrogation is a value added service and all recovery is returned to the members.15 . WSTIP offices will be located in Olympia.16 . WSTIP/WSTA relationship will be collaborative and mutual.

Page 3 of 6

2016 Strategic Priority Staff Work Plan

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb MarExecutive Committee * *

Loss Prevention WSTIP desires to keep people and property safeReduce claims resulting from aggressive braking, pedestrian/bicycle strikes and improper mobility device securement by 10% over the previous year by December 31, 2017.By December 2020 have a minimum of a 50% reduction in claim frequency and severity of claims greater than $500,000 as compared to the loss data December 31, 2015.

1a.

Document accountability and compliance to Best Practices with annual reporting to Board by December 2016. Christianson

1b.

Conduct ongoing reconnaissance for emerging risks with semi-annual reporting to the Executive Committee on findings and recommendations. Christianson *

1c. Reduce bus pedestrian/cyclist strikes to "zero."Christianson &

Spears

*Report out by June 2017 on outcomes of the Collision Avoidance Pilot Study. Spears

*

Compare idea grant study to the loss data of December 31, 2015, and index mileage as baseline. Spears

Loss Control

Increase Board member representative awareness of claim cost via the Origami data reports to be completed by December 2016.

2a.

Provide access to automated reports on indemnity/expense claim cost by May 2016 to at least 15 of 25 members. Spears

2b.

Establish a baseline of pedestrian strikes, mobility device securement accidents, and rear-end collisions by June 2017. Spears

2c.Review large loss report greater than $100,000 categories by claim types of the Annual Meeting Spears Achieve fair and equitable settlements as measured by ensuring member representatives are invited to settlement discussions and/or to participate in mediations for claims above $100K effective July 1, 2016.

2d.

Ensure all adjusters know/understand the WSTIP claim philosophy and claims manual and sign their acknowledgement by August 1, 2016. Spears

Adopt SMART Goals

2017

Strategic Priority Review

2016Who

Page 4 of 6


Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar

Adopt SMART Goals

2017


2016Who

2e.Ensure all parties (member transit, adjusters, legal) are kept in the communication loop via the Origami database. Spears

2f.Provide notice to members regarding liability settlements greater than $100K by July 1, 2016. Spears

2g.Train and support all Origami data-entry users on basic use by September 2016. Spears

2h.Establish data points on complaints by claimants and members. Spears Develop best practices for investigating and document accidents.

2i.

Have adjusters subscribe to the code of conduct in the Claims Manual by December 2016. Spears

Board and Staff Engagement/ Relationships

Improve Board engagement as measured by participation in Board activities such as meetings, workshops, member representatives meeting, out-of-state travel and joint programs with other stakeholders

3a.88% participation at all quarterly Board meetings (minimum of 22 members present). Christianson

3b.60% participation in board member training opportunities supported by WSTIP (in and out of state) Christianson

3c.After quarterly meetings, conduct short surveys on location, content, like, dislikes, and food. Christianson * * * Improve Board knowledge and education as measured by testing and completion of the "Behind the Curtain" exercises.

3d.

75% completion of the Board Orientation program, "Behind the Curtain" by all appointed and alternate member representatives by December 2016. Christianson

3e.

Short quizzes at member representative meetings (pass/fail). Group discussion. Christianson * * *

Stable Rates

Verify that WSTIP composite rates are competitive as compared to the private insurance market for similar products and services.

4a.

By Sept 2016 the broker will secure market indicators of rates for a minimum of 2 WSTIP members based on low claims events and size. Hatten Maintain WSTIP rate stability and strive to ensure rates increase are not greater than 5% of the previous year.

Page 5 of 6


Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar

Adopt SMART Goals

2017


2016Who

4b.No composite mileage, property, and vehicle components rate increase greater than 5% by September 2016. Hatten

4c.

Ensure the rate supports the long range goal "to have the option to self-insurance liability events up to $5 million on or before 2023" by September 2016. Hatten

Develop products and services

Improve utilization/usefulness of products and services as measured by 75% participation on a member survey on a triennial basis by September 2016Improve member satisfaction, by achieving no less than an average combined rating of 4 overall on a scale of 1-5 by October 2016.

Improve response rate of surveys as measured by prior surveys participation and targeted audiences to be accomplished by September 2016.

5a. Define who should receive surveys by March 2016. Christianson *

5b. Develop survey to respective audiences by June 2016. Christianson *

5c.Initiate surveys and work to get a 75% or greater return by September 2016. Christianson *

5d. Report out to the Executive Committee by October 2016. Christianson *

5e. Make recommendations to the Board December 2016. Christianson

Page 6 of 6

WSTIP Reorganization Plan September 2016

Staff Request to the Executive Committee Staff request the Executive Committee support the Reorganization Plan by providing a recommendation to support the Reorganization Plan as presented. An action item will be placed on the Board agenda for the December meeting. Overview The departure of Jerry Spears, and the promotion of Tracey Christianson into the Deputy Director position coupled with the approaching departure of Denise Ellison, our Claims Specialist, creates opportunity in the organization for many staff members to take on new roles and exciting challenges. WSTIP management is proposing a new organizational structure that will assist with the transition. In order to fully implement this plan, WSTIP’s Board will have to do the following: Approve one Claims Manager position for hire in 2017 Approve one Administrative Services Manager (which will encompass existing Information Technology Program Manager) for hire in 2016 The Existing Structure The existing functional staff structure looks like this:

Executive Director

Deputy Director

IT (1 position)

Claims (2 positions)

Accounting/Payroll/Underwriting (1 position)

Member Services Manager

Office & Clerk of the Board (2 positions)

Loss Prevention (1.5 positions)

Training (.5)

The proposed structure looks like this:

Reorganization timeframe

October 2016

Deputy Director - position filled

Member Services Manager - position filled

December 2016

Administrative Services Manager – position approved and filled

Claims Manager – position approved but not filled until 2017 (appropriate overlap with retirement

of the Claims Specialist)

April 2017

Claims Manager – position hired

May 2017

Claims Specialist – position remains although with no funding

Positions to be eliminated

Information Technology Program Manager – December 2016 (becomes Administrative Services

Manager)

The final results

Administrative services includes: Administrative Services Manager, Finance Specialist, and Receptionist

Claims services includes: Claims Manager, Claims Specialist, and Claims Assistant

Member services includes: Member Services Manager, Transit Risk Consultant, and Training and Risk

Coordinator

Management team includes: Executive Director, Deputy Director with the Clerk of the Board

Background

Upon Jerry Spears’ (Deputy Director) resignation, Al Hatten (Executive Director) appointed Tracey

Christianson (Member Services Manager) to the position as an acting Deputy Director. Tracey accepted

the position as Deputy Director starting on October 1. The Executive Director and acting Deputy Director

met with all staff members, one-on-one, to discuss the possibility of re-organizing or re-aligning the

organization. The original plan was revised based on staff feedback. This revised plan is presented here

and depicted on page 2 under the heading Organizational Chart October 2016.

WSTIP checked with personnel attorney, Kristin Anger, from the Summit Law Group regarding the

reorganization to ensure that staff’s plan was in keeping with our existing personnel policies. Although

the policies do not specifically discuss reorganization, they do give the Executive Director the authority to

put aside external recruitment if there are any viable internal candidates. Kristin concluded that the

reorganization of this scope was not contrary to the personnel policies.

The WSTIP Board retains the authority to approve all newly created positions. Since WSTIP has never

reorganized to this extent, staff have assumed that the WSTIP Board needs to (1) authorize the Claims

Manager position, (2) eliminate the position of the IT Program Manager, and (3) authorize the

Administrative Services Manager position. All other re-organization steps fall within the authority of the

Executive Director to implement.

Collision Avoidance Project / Grant

Since Jerry Spears has been so involved in the Collision Avoidance project and grant, WSTIP has signed

a personal services contract with him until the conclusion of the project in June of 2017. This will be

funded as part of consulting services from the grant. As the Board is aware, we also have a project

manager on that project, Steve Clancy from Geneva Financial Services. Jerry will continue to act in the

role of the WSTIP business owner.

Claims Department

This reorganization cannot be fully appreciated without understanding the needs of the claims

department. Over the last year, as the needs of the Collision Avoidance project emerged, more claims

oversight was transferred to external claims managers and adjusters. With the two veteran employees

(Jerry and Denise) providing oversight, this solution worked. Denise has announced her intention to retire

in 2017 around May. This is good timing to hire a new person in that position that will have the ability to

manage the litigated files and take back some of these high end duties from the outside adjusters. If the

assistant position is vacant within the department, the new Claims Manager can participate in that hiring

process.

Staff also anticipate the needs of the members will start to change in the next five years with more

emphasis being placed on public-private partnerships and technology projects. The Claims Manager

position will be created with the intention to recruit for experience in contractual risk transfer and contract

law as well as expertise with litigation management.

The claims department spends a high percentage of time on subrogation activities. This is a service the

members appear to highly value. It is possible to suspend these activities for a time and/or contract for

these services. Rather than making those decisions now, it will be helpful to have the Claims Manager on

board to really consider the overall needs of the organization.

For present, the Deputy Director will continue to function in the claims area being assisted by our claims

adjuster partners and legal representatives. And staff are not requesting the elimination of the other

claims positions (Claims Specialist and Claims Assistant) although there are no plans to re-hire the

Claims Specialist position.

Administrative Services Department

The other significant reorganization will be the creation of a new administrative services department.

Network administration/IT, facility management, accounting, underwriting and procurement will have a

new home within a new Administrative Services Department. By eliminating the Information Technology

Manager position, duties can be expanded into the position of Administrative Services Manager and staff

reallocated to that department.

Executive Committee Request Staff request the support of the Executive Committee to have the Board do the following:

Approve one Administrative Services Manager (which will encompass existing Information Technology Program Manager) for hire in 2016

Approve one Claims Manager position for hire in 2017

Budget Impact

There is no budget impact from this plan on the 2016 budget. There is a minor budget impact on the 2017

budget which is already allocated within the draft 2017 budget.

/tc

Appendix I Job Description Excerpts

Excerpted from

Administrative Services Manager Job Description

Reports to: Deputy Director Status: Exempt DESCRIPTION: This position manages the Administrative Services Department which includes managing WSTIP’s

information technology infrastructure and facilities, supervising finance and underwriting, and supporting members, internal WSTIP departments, and WSTA by providing project and records management and data analytics for the organization. The Administrative Services Manager supervises the following positions: Finance Specialist and Receptionist. The Administrative Services Manager serves as the Public Records Officer for the organization.

Top five duties: 1. Manage scope of financial services 2. Manage the collection of underwriting information 3. Manage WSTIP information technology infrastructure 4. Manage and maintain the WSTIP facilities 5. Manage purchasing activities

Excerpted from

Claims Manager Job Description

Reports to: Deputy Director Status: Exempt DESCRIPTION: This position manages the Claims Department and is responsible for administering the various claims incurred by WSTIP members which include claims that can be described as general liability, auto liability, errors and omissions, property, crime, boiler and machinery. The Claims Manager manages internal and vendor-serviced claims and lawsuits and directs the litigation of complex cases. The Claims Manager supervises the Claims Department staff.

Top five duties: 1. Oversee claims department operations inclusive of claims processing, subrogation, and claims

staff 2. Provide coverage analysis and determination recommendations for the Executive Director 3. Create litigation defense plans, collaborate strategies with attorneys, and direct defense firm

lawyers and claims service company adjusters 4. Attend depositions, mediations, trials, and settlement conferences

MEMORANDUM

To: Executive Committee

From: Ronald A. Franz, General Counsel

Date: July 19, 2016

Subject: Policy on Non-transit risks

Introduction

Late last year the Pool’s executive director raised concerns regarding Pool coverage for non-transit risks.

General counsel was tasked to draft non-transit coverage exclusions for the general liability and public

officials liability coverage documents. These exclusions were considered by the Executive Committee and

Board at their March meetings. The Board rejected the coverage changes but requested that the executive

director survey all Members for non-transit exposures at their properties. The results of the survey were

considered by the Executive Committee at its April meeting.

The Executive Committee directed general counsel to draft a best practices/governance policy document

regarding non-transit risks. That document is before you today for consideration. This is one of those

subject areas where your latitude is huge.

Policy on Non-transit risks

1. Definition. The policy defines non-transit risks as those risks which are not a logical or integral part of

transit operations.

2. Third party activities. A Member is required to have a written agreement with a third party that conducts

non-transit activities on transit property. The agreement must have a hold harmless and indemnity in

favor of the Member and requires the third party to obtain general liability insurance with limits no less

than $1 million. There is an exclusion from the insurance requirement for “occasional” use of property by

“community organizations” for “community purposes.”

3. Member activities. For its own activities which are non-transit in nature, a Member must use its “best

judgment” to minimize the risk. I appreciation that this is wishy-washy but I needed to have something

that did not intrude on a Member’s own operations.

4. Annual reporting. Members must report non-transit exposures annually. Perhaps this will be an

additional component of a Member’s annual report card.

5. Indemnity fee. This is the stick element of this policy. The Pool’s liability coverage documents have no

deductible. This indemnity fee is similar to a deductible that would apply to non-transit claims and

losses. My sense was that the Board was reluctant to exclude non-transit risks from coverage. I share

that sense as insurance it intended to provide peace-of-mind. The indemnity fee should encourage

Members to treat non-transit risks seriously while still retaining full coverage.

Policy on Non-transit Risks Governance Section: Operations

Revision Date: 7/13/2016 Page: 1 of 1

Purpose: To reduce the Members’ and the Pool’s exposure to non-transit risks.

Authority

1. RCW 48.62.031(3)(a) (“provide for risk management and for loss control services”),

2. WAC 82-60-040 (a pool “shall have a written risk management program”), and

3. Interlocal Agreement, section 3e (“provide for risk management [and] loss control”).

Policy Statement

1. Definition. Non-transit risks are those which follow from any activity or undertaking not an integral

and logical part of a Member’s transit operations. These risks are either the result of third-party

activities and undertakings or Member’s own activities and undertakings.

2. Third-party activities.

a. Activities or undertakings by third-parties authorized by Member on Member’s premises.

b. Such activities or undertakings must be pursuant to a written lease or agreement which

specifies the activity or undertaking permitted and its location. The lease or agreement

shall contain a hold harmless and indemnity if favor of Member, its officers, employees,

and agents. It shall require the third-party to obtain a comprehensive general liability

insurance policy with limits of no less than $1million per occurrence with Member as an

additional insured.

c. Notwithstanding the insurance requirement of paragraph 2b above, a Member may allow

the occasional use of its premises or facilities by community organizations for community

purposes without the requirement of insurance.

3. Member non-transit activities. A Member conducting non-transit activities or undertakings shall

use its best judgment and practices to reduce its risk.

4. Annual reporting. On an annual basis and in conjunction with furnishing information required for

coverage renewals, Members shall report all non-transit risks to the Pool arising from third-party

and Member non-transit activities and undertakings.

5. Indemnity fee. In the event of any claim or suit against a Member for any non-transit activity or

undertaking which is tendered to the Pool for defense or indemnity, the Member shall pay the Pool

an indemnity fee of $25,000 in the nature of a policy deductible to be used by the Pool to defray

costs which may be incurred.

Passed by the Executive Committee on ____________, ______ 2016.


Attest:




A Discussion With

Washington State Transit Insurance Pool

September 2016

A Brief History

• Government Entities Mutual, Inc. PCC (GEM) is a captive insurance company domiciled in Washington, D.C.

• Incorporated 12/24/2002 and licensed to write liability, workers compensation and property insurance and reinsurance

• GEM launched its liability reinsurance program on 1/1/2003, property and workers’ compensation programs followed in 2005

• Converted to a Protected Cell Corporation as of 1/1/2010

• GEM completed its thirteenth year of operations on 12/31/2015

• Owned by 16 member pools from across the United States

Governance & Management

• Governed by a 10-member Board of Directors

• Directors are elected on a staggered term basis

• 3 Board Committees:

Governance & Nominating

Audit

Executive Compensation & Benefits

• 5 full-time staff, 2 part-time staff and 1 contract employee

• Auditor: Crowe Horwath

• Insurance Regulator: D.C. Department of Insurance, Securities & Banking

GEM Board Members

Dean Boes – Chair, Wisconsin Municipal Mutual Insurance Company (WMMIC)

Parker Chambers – Vice Chair, Texas Water Conservation Assoc. Risk MgmtFund (TWCARMF)

Micheon Balmer - Secretary, California Transit Indemnity Pool (CalTIP)

Brett Davis, Park District Risk Management Agency (PDRMA)

David Harmer, Virginia Transit Liability Pool (VTLP)

Al Hatten, Washington State Transit Insurance Pool (WSTIP)

Alan Hulse, Montana Municipal Interlocal Authority (MMIA)

Tom Judy, Miami Valley Risk Management Association (MVRMA)

Bryan Anderson, Michigan Municipal Risk Management Authority (MMRMA)

Greg Womack , Texas Council Risk Management Fund (TCRMF)

Recent Performance

• Volatility in recent years: record net income of $3.6M in 2014 followed by record net loss of $9.5M in 2015

• Several changes have been and are being implemented to mitigate risk and improve performance

• GEM surplus $22.5M as of 12/31/2015

• Solvency ratios are fully compliant with D.C. requirements

Recent Developments

• GEM negotiated a Liability reinsurance ‘treaty’ with strong reinsurance markets

• As a result, GEM has the capacity to provide Liability limits of up to $10MM

• Several GEM members have subscribed to higher limits

Liability Reinsurance StructureGEM Members

GEM Members

GEMnet retention

Self-Insured Retentions

External Reinsurancerisk transfer

Coverage Provided by GEM

Member Engagement

We’re in this together…• Understanding the challenges facing our members

• A collaborative approach to developing solutions

Expected Outcomes ofWSTIP’s Investment

Maintenance of an economically sound company while providing long term cost-effective reinsurance and service

Member control of the Company through member-elected Board

Follow form coverage eliminating differences in conditions, retention of claims handing authority at the pool level

High quality claims, underwriting and pool support services provided by staff and service providers with extensive pool & public entity experience

Stabilization or reduction of the overall cost of reinsurance in GEM’s retained layer through the law of large numbers and risk distribution

Building mutual strength of pools to retain higher limits before accessing the commercial reinsurance market

Building Mutual StrengthGEM’s

mission is tobe a long-

termrisk financing

partnerto its memberpublic entities.

FINANCIAL STABILITY. SHARED RISK.

PMS: 3135 U

K

PMS: 548 U

PMS: 468 U

PMS: 7427 U

GOVERNMENTENTITIES MUTUALINC., PCC

2015 ANNUAL REPORT

Table of Contents

Letter from the Chairman and President

Leadership

Management Discussion and Analysis

Critical Accounting Estimates

Results of Operations

GEM’s Financial Position

Members’ Equity

Enterprise Risks

2015 Audited Financial Statements

2

3

4

5

6

9

10

11

12

1

Letter from the Chairman and President

Andrew HalsallPresident and Chief Executive Officer

2

The most effective companies embrace change and appreciate a new perspective. GEM recently had a change in leadership, and both Dean and I will continue to build on the successes of our predecessors. GEM’s vision is unchanged: to be a long-term risk partner for public entities. My promise is to chart the most direct course to get us there.

Andrew Halsall

There were many accomplishments at GEM in 2015. Here are highlights of just a few:

• We developed and implemented retrocessional treaties with strong reinsurance partners, which enabled GEM to increase our Liability limits to $10M. In response, several members have increased their limits with GEM.

• In addition to higher liability limits, the membership took advantage of our new cyber risk program as this risk to public entities increases.

• 2015 marked the completion of a market expansion analysis, which enabled us to establish a more managed growth plan, the first milestone of which was the enhancement to our liability coverage.

• The second phase of the market expansion analysis was to include brokers in an extensive survey determining how better to offer a long-term risk management solution and how to improve our relationships with these key partners.

Our goal for GEM is controlled growth – to build a superior risk portfolio capable of providing meaningful capacity to our members. We are fortunate to have the fundamental elements already in place: members that are committed to long-term partnerships; a diversified risk portfolio; a highly-engaged Board; and strong governance. Further, GEM’s infrastructure – a mutual insurance core and the flexibility to form protected cells, supported by skilled staff – is not only scalable but also a platform for innovation. With this foundation, GEM has the capacity to deliver more to our members. Realizing that potential requires a shift from a pure product mindset to a problem-solving and solution perspective, which is what we strive for as an organization.

Unfortunately, we have to report that 2015 closed with a net loss of $9.5 million, the result of prior-year adverse loss development. This compares to 2014, when GEM recorded its highest net income to date, $3.6 million. We are taking steps to mitigate the root causes of the adverse loss development, working closely with specific members. The alignment of interest between GEM and its members makes this a process of collaboration with a commitment to success.

The contrasting results of these two consecutive years demonstrate the real potential for short-term volatility in the classes of risk in which GEM participates. However, it is GEM’s capacity to absorb volatility and grow over the longer-term that creates value for our members.

We close by thanking our members for their collaboration and support; it is ultimately they who energize the company. Our talented and dedicated staff continue to deliver at the highest levels of performance and we appreciate their commitment, drive and creativity. It is with the strength of these partnerships that we look forward to the next stage of our journey together.

Dean BoesAndrew Halsall

Dean BoesChairman

LeadershipParker Chambers(Vice Chair), Texas Water Conservation Association Risk Management Fund

Micheon Balmer(Secretary), California Transit Indemnity Pool

David HarmerVirginia Transit Liability Pool

Thomas JudyMiami Valley Risk Management Association

Allen HattenWashington State Transit Insurance Pool

Michael RhynerMichigan Municipal Risk Management Authority

Dean Boes(Chair), Wisconsin Municipal Mutual Insurance Company

Alan HulseMontana Municipal Interlocal Authority

Gregory WomackTexas Council Risk Management Fund

GEM Officers

Board of Directors & President

Andrew HalsallPresident and Chief Executive Officer

Bridget Rogier, Esq.Vice President of Claims & Member Services

Christy Dell'OrfanoUnderwriting Manager

Diane CaleyExecutive Services & Operations

Carol MacDougallStaff Assistant

Marietherese D’AgostinoTreasurer

Kathy TremblayStaff Assistant

Melanie McDonoughAssociate Claims Adjuster

Staff3

Brett DavisPark District Risk Management Agency

Management’s Discussion and Analysis of Financial Conditions and Results of Operations December 31, 2015

Company Overview Government Entities Mutual, Inc. PCC (“GEM” or the “Company”) was organized as a mutual insurance company in 2002 under the captive statues of the District of Columbia as an association sponsored captive. GEM is a non-profit corporation dedicated to serving the insurance needs of public entity self-insurance pools and public entity insurance companies. The Company commenced operations on January 1, 2003 and writes casualty, workers’ compensation, auto physical damage and property insurance and reinsurance. The Company has received a Section 115 letter ruling from the Internal Revenue Service that is exempt from federal income taxes based on its submitted plan of operations.

In December 2009, the Company’s Board of Directors approved amendments to the Company’s Articles of Incorporation to convert the Company to a protected cell captive insurer under the District of Columbia Insurance Department’s captive insurance laws. GEM converted to a Protected Cell Corporation (PCC) as of January 1, 2010. To date the Company has not formed any cells within the PCC.

There are two active classifications of membership within the Company: Founding and Premiere Members. The Board has adopted a Surplus Contribution and Withdrawal Policy that establishes the surplus requirements for each of the membership classes. Founding Members are those who made a surplus contribution prior to October 1, 2003. Premiere Members are eligible entities that made the required surplus contribution after October 1, 2003.

The Company is a non-assessable mutual insurance company. However, the Board may request additional surplus contributions, in such amounts and at such times as may be deemed necessary and appropriate by the Board, in order to maintain adequate surplus to premium ratios for the safe and sound operation of the Company.

If a Member ceases to obtain insurance from the Company, it can either withdraw its surplus account or maintain the account. If the Member elects to withdraw the account, such withdrawal will be completed, at the sole discretion of the Board and approval by the District of Columbia Department of Insurance, Securities and Banking (the Department), no later than five years from the date of notice of withdrawal.

GEM derives its income principally from premiums on the insurance contracts it writes for casualty, workers’ compensation and property and secondarily from net investment income. Since GEM is organized as a non-profit company, the Company does not build a profit margin into its underwriting guidelines. Therefore, its profitability depends primarily on its ability to generate investment income and maintain its combined ratio near 100%.

4

5

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of income and expenses during the accounting period. Actual results could differ from these estimates.

GEM has identified the estimates inherent in the valuation of investments and loss reserves (including reserves for unreported claims – IBNR) as critical in that they involve a higher degree of judgment and are subject to a significant degree of variability. In developing these estimates, management makes subjective and complex judgments that are inherently uncertain and subject to material change as facts and circumstances develop. Although variability is inherent in these estimates, management believes the amounts provided are appropriate and conservative based upon the facts available as of the date of the financial statements and the assistance of an outside actuarial firm in relation to the IBNR and overall loss reserve adequacy.

InvestmentsOne significant estimate inherent in the valuation of investments is the evaluation of fair value and other than temporary impairment (OTTI). Fair value requires management judgment on the appropriate classes of assets and liabilities for which disclosures about fair value measurements should be provided. Fair value for investments is primarily a quantitative assessment. For debt and equity securities, class is determined on the basis and nature and risks of the investments. A full disclosure of GEM’s fair value methodology can be found in Note 3 in the Notes to the Audited Financial Statements.

The determination of OTTI is a quantitative and qualitative process, which is subject to judgment in the determination of whether declines in the fair value of investments are other than temporary. The cost basis of fixed maturity investments is adjusted for impairments in value, deemed to be other than temporary, with the associated realized loss reported in net income. Factors considered in evaluating whether a decline in value is other than temporary include: 1) the magnitude of the decline in value; 2) current economic conditions and the financial condition and near-term prospects of the issuer; 3) the amount of time that the fair value has been less than cost; and 4) the estimated period over which the security is expected to recover and whether GEM’s cash or working capital requirements and contractual or regulatory requirements may indicate a need to sell the security before its forecasted recovery.

Loss ReservesProperty/casualty reserves are estimates of losses and loss development and as such will differ from the ultimate results. Therefore, one of the critical accounting estimates is the proper amount of reserves to be set aside to meet future liabilities of the current in-force business. Changes in or deviations from the assumptions used to develop the loss reserves can significantly affect GEM’s reserve levels and related future operations. Assumptions include company methodology for underwriting and claims handling and current estimates of the legal, inflation rate and social environments.

Critical Accounting Estimates

6

Annually, GEM retains an outside independent actuary, to provide a loss reserve opinion and establish a range for GEM’s loss reserves. GEM’s policy is to book reserves no less than the central estimate issued by the actuary. This estimate includes reserves for claims incurred but not yet reported (IBNR). There are two components of IBNR reserves. The first is the provision for claims that have occurred but which the insurance company is not yet aware of, so called pure IBNR. The second part of IBNR reserves is for claims that have been reported to the insurer but the ultimate value of the claim has not yet been established. In this instance the IBNR provides a cushion against adverse development of known claims.

Results of Operations

Operating Results For Years Ended December 31, 2015 and 2014:2015 2014 $ Change % Change

Revenues: Net earned premiums 8,335 8,155 180 2.2%Investment income, net 1,768 1,725 43 2.5%Realized gains on investments 394 200 194 97.0%Total Revenues $ 10,497 $ 10,080 $ 417 4.1%

Expenses: Loss and loss adjustment expenses 17,764 4,659 13,105 281.3%G&A expenses 2,120 1,787 333 18.6%Underwriting expenses 73 73 0 0.0%Total Expenses 19,957 6,519 13,438 206.1%Net (Loss) Income $ (9,460) $ 3,561 $ (13,021)

Other Comprehensive (Loss) Income:Unrealized holding (loss) gain on available for sales securities

(805) 1,326 (2,131) (160.7%)

Reclassification adjustments for realized gains included in net (loss) income

(394) (200) (194) 97.0%

(1,199) 1,126 (2,325)Comprehensive (Loss) Income $ (10,659) $ 4,687 $ (15,346)

($ thousands)

7

Net Income from OperationsGEM reported a net loss from operations for the year ended December 31, 2015 of $9,460 thousand or a decrease of $13,021 thousand as compared to the prior year end net income of $3,561 thousand. The decrease is driven primarily by unfavorable loss development, as more fully described below.

Net Earned PremiumsNet earned premiums increased by $180 thousand or 2.2% to $8,335 thousand at December 31, 2015. The increase is attributable to additional premiums written.

Net Investment Income Including Realized GainsInvestment income of $2,162 thousand, including realized losses on investments, at December 31, 2015 was 12.3% or $237 thousand greater than the same period during 2014. The increase is primarily the result of realized gains from the sale of securities. Included is an increase in net investment income of 2.5%, which substantially represents interest income attributable to the growth in the size of the overall investment portfolio.

Loss and Loss Adjustment ExpensesLoss and loss adjustment expenses increased by 281%, from $4,659 thousand in 2014 to $17,764 thousand in 2015. The increase, arising mainly out of general and automobile liability business, was substantially attributable to adverse development on prior-year losses:

Whereas, in 2014, there had been a net reduction of $3,358 thousand in prior-year incurred losses, there was adverse development in 2015 amounting to a net increase of $9,693 thousand.

General, Administrative, and Underwriting ExpensesOther underwriting expenses were $2,193 thousand and $1,860 thousand respectively, for the years ended December 31, 2015 and 2014. The increase was attributed to three items: consulting, travel and insurance. Additional consulting and travel expenses were incurred in the executive search and recruitment process for the hiring of GEM’s new Chief Executive Officer. Insurance expense was higher because GEM contributed to the cost of a new insurance program issued to the membership.

Other Comprehensive IncomeOther comprehensive income, which for GEM is solely composed of change in fair value of the investment portfolio, was ($1,199) thousand at December 31, 2015 versus $1,126 thousand at December 31, 2014. GEM accounts for the change in other comprehensive income through an adjustment to members’ equity which was negatively impacted by the reduction in fair market value. This was a result of the rise in interest rates during 2015, which created an unrealized loss on the bonds, together with declining equity markets.

2015 2014Current accident year 8,071 8,017Prior accident years 9,693 (3,358)Total $ 17,764 $ 4,659

8

2015 2014 $ Change % ChangeAssets: Cash and cash equivalents 5,772 4,519 1,253 27.7%Investments available for sale, fair value 73,872 73,700 172 0.2%Total Invested Assets $ 79,644 $ 78,219 $ 1,425 1.8%Premiums receivable 186 165 21 12.7%Reinsurance recoverable 2,076 2,946 (870) (29.5%)Prepaid reinsurance 1,264 900 364 40.4%Other assets 517 634 (117) (18.5%)Total Assets $ 83,687 $ 82,864 $ 823 1.0%

Liabilities and Members’ Equity: Unpaid loss and loss adjustment expenses 56,511 45,902 10,609 23.1%Unearned premiums 3,266 3,081 185 6.0%Accrued expenses 612 127 485 381.9%Other liabilities 834 132 702 531.8%Total Liabilities $ 61,223 $ 49,242 $ 11,981 24.3%Members’ contributions 14,887 15,387 (500) (3.2%)Accumulated other comprehensive income 829 2,028 (1,199) (59.1%)Retained earnings 6,747 16,207 (9,460) (58.4%)Members’ Equity 22,463 33,622 (11,159) (33.2%)Total Liabilities And Members’ Equity $ 83,687 $ 82,864 $ 823 1.0%

GEM’s Financial Position

Balance Sheets For Years Ended December 31, 2015 and 2014:

Invested AssetsTotal invested assets for the year ended December 31, 2015 increased to $79,644 thousand or a 1.8% increase over the December 31, 2014 balance of $78,219 thousand. Free cash flow from operations was invested, predominantly into bonds, with a corresponding increase in the investment portfolio. For the years ended December 31, 2015 and 2014, respectively, GEM did not have any securities within its portfolio that were deemed to be other than temporarily impaired (OTTI).

($ thousands)

Premiums ReceivablePremiums receivable were $186 thousand at December 31, 2015, compared with $165 thousand at December 31, 2014.

Reinsurance RecoverableReinsurance recoverable was $2,076 thousand at December 31, 2015 versus $2,946 thousand at December 31, 2014. This reduction of $870 thousand was driven primarily by decreases in ceded Property case reserves and IBNR reserves.

Prepaid ReinsurancePrepaid reinsurance increased to $1,264 thousand at December 31, 2015, from $900 thousand for the prior year. The prior-year balance comprised entirely of ceded unearned premium. The ceded unearned premium as of December 2015 was $1,055 thousand, increased due to the fact that all Liability business is now subject to the new reinsurance treaty, whereas previously reinsurance was placed selectively on a facultative basis. The remaining $209 thousand represented the unearned portion of a deposit premium paid to reinsurers under the terms of the new reinsurance treaty.

Other AssetsOther assets decreased by $117 thousand to $517 thousand at December 31, 2015 compared to $634 thousand at December 31, 2014. There were three major components of the decrease of $117 thousand. First, prepaid expenses reduced by $82 thousand, primarily because certain payments were made in January 2015 rather than December 2014. Second, fixed assets depreciated by $50 thousand in 2015. Third, there was an offsetting amount of $21 thousand, representing ceded reinsurance commission receivable.

Loss ReservesLoss reserves for unpaid losses and loss adjustment expenses increased by 23.1% to $56,511 thousand at December 31, 2015 versus $45,902 thousand the previous year. This increase is substantially due to the adverse loss development on prior-year losses mentioned earlier. The loss reserves as of December 31, 2014 had included an amount of $3,000 thousand above the actuarial point estimate, representing a reserve stabilization fund. Pursuant to the provisions of the reserve stabilization fund policy, the Company utilized these additional reserves in the year ended December 31, 2015, to offset the prior-year loss development.

Unearned PremiumsThe Company writes only 12-month insurance policies, so all of the $3,266 thousand unearned premium reserve carried in 2015 will be fully earned in 2016.

9

910

Accrued ExpensesAccrued expenses were $612 thousand at December 31, 2015, compared to $127 thousand the previous year. Included in the 2015 balance is a return of contributed surplus of $400 thousand payable to a former member of GEM which withdrew from the Company during 2015.

Other LiabilitiesOther liabilities increased to $834 thousand at December 31, 2015 from $132 thousand the previous year. Included in the 2015 balance is $739 thousand related to investment transactions initiated at the year-end but not settled.

Members’ EquityGEM’s members’ equity at December 31, 2015 was $22,463 thousand, a decrease of $11,159 thousand from the December 31, 2014 balance of $33,622 thousand. The decrease resulted from the net loss of $9,460 thousand combined with unrealized losses of $1,199 thousand in the investment portfolio and a reduction in contributed surplus of $500 thousand as a result of the withdrawal of a member.

At December 31, 2015, GEM had paid-in capital (members’ contributions) from its members’ of $14,887 thousand and retained earnings and accumulated other comprehensive income of $7,576 thousand.

Liquidity Sources and RequirementsGEM’s two primary liquidity sources are cash flows from premiums and investment income from its investment portfolio. GEM generated a positive cash flow from operations of $1,888 thousand for the year ended December 31, 2015, as compared with a positive cash flow of $6,966 thousand in 2014.

A secondary source of liquidity is the investment portfolio which is primarily invested in high quality bonds that are readily marketable. During 2014, GEM generated $32,323 thousand of proceeds from investments sold or matured and used $32,861 thousand to acquire new bonds and common stock.

In addition, during 2015, GEM applied cash to a distribution of member capital of $100 thousand.

Cash and cash equivalents, defined as short-term investments or long-term investments with a maturity under three months, increased to $5,772 thousand at December 31, 2015 from $4,519 thousand at December 31, 2014, which is the difference between the positive cash flow from operations and the cash consumed by investment activities.

11

Enterprise Risks

Liquidity RiskLiquidity risk is the risk that GEM will not have access to sufficient funds to meet its liabilities when due. GEM’s liquidity management consists of policies and procedures to ensure that adequate liquidity is available at all times. The liquidity position is assessed on a monthly basis and both normal and stressed market conditions are considered as part of this process. Where liquidity gaps exist, they are primarily more than three years in the future since GEM’s invested assets have a duration of approximately 4.06 years while its liabilities have longer durations due to the type of insurance risk.

Market RiskGEM has exposure to market risk arising from its insurance operations and investment activities. Market risk can be defined as the risk of potential fluctuation in earnings, cash flows and fair value of its assets and liabilities due to changes in the level of market rates and prices. Since GEM is a regulated entity, market risk can also arise from changes in the political or regulatory landscape that impact GEM as a captive reinsurance company or impact GEM’s members as public entity risk pools.

Interest Rate RiskGEM’s exposure to interest rate changes results from its significant holdings of fixed rate investments. GEM manages its interest rate risk through the use of investment managers and investment consultants. GEM consults with its investment manager and investment consultant in order to ensure that the construction of its investment portfolio is designed to specifically satisfy the cash flow needs from its insurance activities on an on-going basis

The investment portfolio is constrained in terms of quality of investments and the maturity and duration of the securities in order to make sure that GEM is not subject to undue interest rate risk.

Other Required DisclosuresOff-Balance Sheet Arrangements – None

Participation in High Yield Financings, Highly Leveraged Transactions or Non-Investment Grade Loans and Investments – None

Preliminary Merger and Acquisition Negotiations – None

12

To The Board of Directors and Members ofGovernment Entities Mutual, Inc., PCC:

We have audited the accompanying financial statements of Government Entities Mutual, Inc., PCC (the Company), which comprise

the balance sheet as of December 31, 2015, and the related statements of comprehensive (loss) income, changes in Members’ equity

and cash flows for the year then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting

principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal

control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether

due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance

with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The

procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the

Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the

reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial

statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Government

Entities Mutual, Inc., PCC as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in

accordance with accounting principles generally accepted in the United States of America.

Other Matter

The financial statements of Government Entities Mutual, Inc., PCC as of December 31, 2014, were audited by Saslow Lufkin & Buggy,

who combined with Crowe Horwath LLP as of July 1, 2015, and whose report dated May 11, 2015, expressed an unmodified opinion

on those statements.

Simsbury, ConnecticutMay 19, 2016

Independent Auditor’s Report

13

2015 2014AssetsCash and cash equivalents 5,771,777 4,518,930Certificate of deposit 1,006,023 1,006,023Investments, available for sale, at fair value 72,865,509 72,693,536Premiums receivable 186,499 165,236Reinsurance recoverable 2,076,297 2,946,357Prepaid reinsurance 1,263,688 900,397Deferred policy acquisition costs 7,347 6,932Prepaid expenses and other assets 71,350 136,926Accrued interest receivable 387,126 388,679Fixed assets, net of accumulated depreciation of $499,688 and $452,051 in 2015 and 2014, respectively 50,989 101,028Total Assets $ 83,686,605 $ 82,864,044

Liabilities And Members’ EquityLIABILITIESUnpaid losses and loss adjustment expenses 56,510,932 45,901,811Unearned premiums 3,266,047 3,080,772Premium taxes payable 22,971 21,456Accounts payable and accrued expenses 611,761 126,630Payable for unsettled investment transactions 738,807 -Employee benefits payable 72,719 111,146Total Liabilities $ 61,223,237 $ 49,241,815

Members’ EquityMembers’ contributions 14,887,369 15,387,369Accumulated other comprehensive income 828,633 2,027,984Retained earnings 6,747,366 16,206,876Total Members’ Equity 22,463,368 33,622,229Total Liabilities And Members’ Equity $ 83,686,605 $ 82,864,044

Balance Sheets For Years Ended December 31, 2015 and 2014

The accompanying notes are an integral part of these financial statements.

14

Note 1 - General

Reporting EntityGovernment Entities Mutual, Inc., PCC (the Company) is domiciled in the District of Columbia and is capitalized by Member public entity risk pools. The Company was originally formed as an association sponsored reinsurance captive on behalf of a group of public entity risk pools. The Company received its certificate of authority on December 19, 2002, and commenced operations on January 1, 2003. The Company provides reinsurance to its Members on an excess of loss or quota share basis for liability, workers’ compensation, auto physical damage, property and cyber.

The Company’s Board of Directors approved amendments to the Company’s articles of incorporation to convert the Company to a protected cell captive insurer under the captive insurance laws of the District of Columbia. The change to a protected cell captive insurer became effective January 2010. As of December 31, 2015, the Company has not created any protected cells.

A protected cell captive insurer in the District of Columbia has the ability to establish separate protected cells within the Company whereby the assets and liabilities of any one cell are financially and legally protected from the assets and liabilities of other cells. Should any individual cell become insolvent, the creditors of that cell will only have access to the assets of that specific cell and will not have recourse against the assets of other cells within the Company.

Note 2 - Summary of Significant Accounting Policies

Basis of ReportingThe accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), as promulgated by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

Use of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.

Statements Of Comprehensive (Loss) IncomeYears Ended December 31, 2015 and 2014

2015 2014RevenuesNet earned premiums 8,334,776 8,154,457Investment income, net 1,767,589 1,725,211Realized gains on investments 394,200 200,280Total Revenues $10,496,565 $ 10,079,948

ExpensesLosses and loss adjustment expenses 17,763,731 4,659,481General and administrative expenses 2,119,788 1,786,883Underwriting expenses incurred 72,556 72,626Total Expenses 19,956,075 6,518,990Net (Loss) Income $ (9,459,510) $ 3,560,958

Other Comprehensive (Loss) IncomeUnrealized holding (losses) gains on available for sales securities

(805,151)

1,325,828

Reclassification adjustments for realized (losses) included in net income.

(394,200)

(200,280)

Total Other Comprehensive (Loss) Income (1,199,351) 1,125,548Comprehensive (Loss) Income $ (10,658,861) $ 4,686,506

Statements Of Changes In Members’ EquityYears Ended December 31, 2015 and 2014

Members’Contributions

AccumulatedOther

ComprehensiveIncome

RetainedEarnings Total

Balance at Jan.1, 2014 $15,387,369 $902,436 $12,645,918 $28,935,723Net income – – 3,560,958 3,560,958Other comprehensive income

– 1,125,548 – 1,125,548

Balance at Dec. 31, 2014 $15,387,369 $ 2,027,984 $16,206,876 $33,622,229Capital Distribution (500,000) – – (500,000)

Net loss – – (9,459,510) (9,459,510)Other comprehensive loss – (1,199,351) – (1,199,351)Balance at Dec. 31, 2015 $14,887,369 $828,633 $6,747,366 $22,463,368


15

Note 2 - Summary of Significant Accounting Policies (continued)

Cash and Cash EquivalentsThe Company classifies certain securities with original maturity dates of three months or less from the date of purchase as cash equivalents. Cash equivalents are comprised of money market funds as of December 31, 2015 and 2014. The amount held in money market account as of December 31, 2015 and 2014 was $2,443,065 and $871,233, respectively. The Federal Deposit Insurance Corporation (FDIC) insures cash balances up to $250,000 per depositor, per bank. Northway bank provides the Company with a daily repurchase agreement that collateralizes all of the funds in excess of the FDIC limits.

Certificate of DepositAs of December 31, 2015 and 2014, the Company holds a certificate of deposit that has a maturity of less than one year. The certificate of deposit is carried at cost, which approximates fair value. Early withdrawal of the Company’s certificate of deposit is subject to penalty.

InvestmentsThe Company accounts for its investments in accordance with FASB ASC 320, Investments - Debt and Equity Securities. The Company’s management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date.

Investments held as of December 31, 2015 and 2014, were classified as available for sale, and accordingly, were reported at their estimated fair value, with unrealized gains and losses being reported as a separate component of Members’ equity as accumulated other comprehensive income. Realized investment gains and losses on investments sold, determined on a specific identification basis, are included in realized gains on investments on the statements of comprehensive (loss) income.

The amortized cost of debt securities is adjusted using the interest method for amortization of premiums and accretion of discounts. Such amortization and accretion are included in net investment income on the statements of comprehensive income.

Statements Of Cash Flows Years Ended December 31, 2015 and 2014

2015 2014

Cash Flows From Operating Activities:

Net (loss) income (9,459,510) 3,560,958

Adjustments to reconcile net (loss) income to net cash provided by operating activities

Depreciation 47,637 55,137

Amortization of debt securities 299,628 249,263

Realized (losses) (394,200) (200,280)

Changes in assets and liabilities:

Premiums receivable (21,263) 119,359

Reinsurance recoverable 870,060 6,615,794

Prepaid reinsurance (363,291) 341,176

Deferred policy acquisition costs (415) 1,170

Prepaid expenses and other assets 65,576 (9,752)

Amount due from Member - 433,165

Accrued interest receivable 1,553 (4,336)

Unpaid losses and loss adjustment expenses 10,609,121 (3,713,578)

Unearned premiums 185,275 (519,778)

Premium taxes payable 1,515 (927)

Accounts payable and accrued expenses 85,131 (26,512)

Employee benefits payable (38,427) 65,646

Net Cash Provided By Operating Activities $ 1,888,390 $ 6,966,505

Cash Flows From Investing Activities:

Maturity of certificate of deposit 1,006,023 1,000,000

Purchase of certificate of deposit (1,006,023) (1,006,023)

Purchases of available for sale investments (31,854,790) (32,481,209)

Proceeds from sales of available for sale investments

29,548,845 22,363,907

Proceeds from maturities of available for sale debt securities

1 ,768,000 2,211,416

Disposal (purchases) of fixed assets 2,402 (26,009)

Net Cash Used In Investing Activities $ (535,543) $(7,937,918)

Cash Flows From Financing Activities:

Distribution of Member capital (100,000) -

Net cash used in investing activities (100,000) -

Change In Cash and Cash Equivalents 1,252,847 (971,413)

Cash and Cash Equivalents, Beginning of Year

4,518,930

5,490,343

Cash and Cash Equivalents, End of Year $ 5,771,777 $ 4,518,930

Supplemental Disclosure:

Unsettled investment transactions 738,807 -


16

Note 2 - Summary of Significant Accounting Policies (continued)Investments (continued)

The Company measures its investments in accordance with FASB ASC 820, Fair Value Measurements and Disclosures, which defines fair value, provides a framework for measuring fair value under GAAP and requires certain disclosures about fair value measurements. The definition of fair value under FASB ASC 820 focuses on the price that would be received to sell the asset, which is referred to as the exit price. FASB ASC 820 provides guidance on how to measure fair value, when required, under existing accounting standards. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into broad levels as follows:

Level 1 - Valuation is based upon quoted prices in active markets for identical securities. Level 2 - Inputs to the valuation methodology include: • Quoted prices for similar assets in active markets; • Quoted prices for identical or similar assets in inactive markets; • Inputs other than quoted prices that are observable for the asset • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset has a specific (contractual) term, the Level 2 input must be observable for substantially the full term of the asset. Level 3 - Valuation is based upon significant unobservable inputs (including the Company’s own assumptions determining the fair value of investments).

The Company has recorded its investments at fair value, as more fully described in Note 3.

The fair values of investments are measured using quoted market prices or dealer quotations, when available. When quoted market prices are not available, fair value is measured using quoted market prices for similar securities.

Other Than Temporary Impairments on Investments

When a decline in fair market value is deemed to be other than temporary, a provision for impairment is charged to earnings, and the cost basis of that investment is reduced.

The Company determines other than temporary impairments on debt securities in accordance with the provisions of FASB ASC 320. This guidance requires the Company to evaluate whether it intends to sell an impaired debt security or whether it is more likely than not that it will be required to sell an impaired debt security before

recovery of the amortized cost basis. If either of these criteria is met, an impairment loss equal to the difference between the debt security’s amortized cost and its fair value is recognized in earnings.

For impaired debt securities that do not meet these criteria, the Company determines if a credit loss exists with respect to the impaired security. If a credit loss exists, the credit loss component of the impairment (i.e., the difference between the security’s amortized cost and its projected net present value of future cash flows) is recognized in earnings and the remaining portion of the impairment is recognized as a component of other comprehensive income. No impairments related to debt securities were recorded in 2015 or 2014.

For equity securities, the Company’s management reviews several factors to determine whether a loss is other than temporary, such as the length of time a security is in an unrealized loss position, extent to which the fair value is less than the cost, the financial condition and near term prospects of the issuer and the Company’s ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. No impairments related to equity securities were recorded in 2015 or 2014.

Premiums Receivable

Premiums receivable are stated at the amount the Company expects to collect balances outstanding at year-end. Based on management’s assessments of the credit history with policyholders having outstanding balances and current relationships with them, management has concluded that realization of losses on balances outstanding at year-end will be insignificant.

Fixed Assets

Fixed assets, consisting of computer equipment, software, furniture and fixtures, are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the respective assets. Depreciation expense for the years ended December 31, 2015 and 2014 was $47,637 and $55,137, respectively.

Premium Deficiency

The Company recognizes premium deficiencies when there is a probable loss on an insurance contract. Premium deficiencies are recognized if the sum of expected losses and loss adjustment expenses, expected dividends to the policyholders, unamortized deferred policy acquisition costs, and maintenance costs exceed unearned premiums and anticipated investment income. No premium deficiencies have been recognized in 2015 and 2014.

17

Reinsurance

In the normal course of business, the Company seeks to reduce its loss exposure by ceding certain levels of risk to reinsurers. Reinsurance is accounted for in accordance with FASB ASC 944, Financial Services - Insurance. Ceded premiums are expensed over the period that coverage is provided. Prepaid reinsurance premiums are calculated on a pro-rata basis for the unexpired term of the policy in force. Amounts recoverable from reinsurers are estimated in a manner consistent with the reinsurance contracts. As these estimates change, the adjustment is recorded in the current period.

Unpaid Losses and Loss Adjustment Expenses

The liability for unpaid losses and loss adjustment expenses and related reinsurance recoverable includes case basis estimates of reported losses, plus supplemental amounts for incurred but not reported losses calculated based upon loss projections utilizing the Company’s historical and industry data. In establishing the liability for losses and loss adjustment expenses and related reinsurance recoverable, the Company utilizes the findings of an independent consulting actuary. Management believes that its aggregate liability for unpaid losses and loss adjustment expenses and related reinsurance recoverable at year-end represents management’s best estimate, based upon available data, of the amount necessary to cover the ultimate cost of losses; however, because of the limited population of insured risks and limited historical data, actual loss experience may not conform to the assumptions used in determining the estimated amounts for such liability at the balance sheet date. Accordingly, the ultimate liability could be in excess of, or less than, the amount indicated in the financial statements. As adjustments to these estimates become necessary, such adjustments are reflected in current operations.

Deferred Policy Acquisition Costs

Deferred policy acquisition costs consist of premium taxes, which have been deferred and amortized over the terms of the policies to which they relate. Amortization of acquisition costs amounted to $22,556 and $22,626 for the years ended December 31, 2015 and 2014, respectively, and are included in underwriting expenses incurred within the statements of comprehensive (loss) income.

Comprehensive (Loss) Income

The Company reports comprehensive (loss) income in accordance with FASB ASC 220, Comprehensive Income. Comprehensive (loss) income is a measurement of certain changes in Members’ equity that results from transactions and other economic events other than transactions

with Members. For the Company, these events consist of changes in unrealized gains and losses on the investment portfolio, which are used to adjust net income to arrive at comprehensive (loss) income. The cumulative amount of these changes is reported in the balance sheets within accumulated other comprehensive income. The Company has provided information about the amounts reclassified out of accumulated other comprehensive income by component within Note 9.

Income Taxes

The Company is exempt from federal taxes in accordance with Section 115(1) of the Internal Revenue Code.

The Company accounts for uncertain tax positions in accordance with FASB ASC 740, Income Taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, on a tax return. FASB ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. FASB ASC 740 permits the recognition of tax positions that meet a “more likely than not” threshold, based on the technical merits of the position.

The Company did not record any unrecognized tax benefits for the years ended December 31, 2015 and 2014. The Company anticipates that it will not have a change in unrecognized tax benefits during the next twelve months that would have a material impact on the Company’s financial statements. The Company’s policy is to recognize interest and penalties related to income taxes as a component of general and administrative expenses. For the years ended December 31, 2015 and 2014, the Company did not record any penalties or interest associated with unrecognized tax benefits. All tax years from 2012 and forward are open and subject to examination. Company’s financial statements. The Company’s policy is to recognize interest and penalties related to income taxes as a component of general and administrative expenses. For the years ended December 31, 2014 and 2013, the Company did not record any penalties or interest associated with unrecognized tax benefits. All tax years from 2012 and forward are open and subject to examination.

Subsequent Events

Subsequent events have been evaluated through May 19, 2016, which is the date the financial statements were available to be issued.

18

Note 3 - InvestmentsInvestments, classified as available for sale and carried at fair value as of December 31, 2015, are as follows:

Proceeds from sales and maturities of available for sale investments amounted to $29,548,845 and $1,768,000, respectively, in 2015. Proceeds from sales and maturities of available for sale investments amounted to $22,363,907 and $2,211,416, respectively, in 2014. Gross realized gains on sales amounted to $481,176 and $318,235 in 2015 and 2014, respectively. Gross realized losses on sales amounted to $86,976 and $117,955 in 2015 and 2014, respectively.

The amortized cost and fair value of debt securities available for sale, shown by contractual maturity, as of December 31, 2015 are as follows:

Original or Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses Fair Value

Debt SecuritiesCorporate and foreign debt securities 24,739,784 390,375 (263,757) 24,866,402U.S. government obligations 3,849,642 13,644 (10,419) 3,852,867Foreign government obligations 800,000 5,968 (1,030) 804,938Municipal bonds 4,386,706 77,055 (8,847) 4,454,914Treasury inflation protected securities 1,880,601 - (30,065) 1,850,536Mortgage and asset backed securities 33,287,126 429,949 (183,316) 33,533,759Total Debt Securities $ 68,943,859 $ 916,991 $ (497,434) $ 69,363,416

Equity Securities - Mutual FundsLarge value fund 1,936,097 453,530 - 2,389,627Foreign large blend fund 390,098 9,534 - 399,632Small blend fund 257,285 - (7,760) 249,525Mid-cap blend fund 257,306 11,554 - 268,860Diversified emerging markets 252,230 - (57,781) 194,449Total Equity Securities 3,093,016 474,618 (65,541) 3,502,093Total $ 72,036,875 $ 1,391,609 $ (562,975) $ 72,865,509

Original or Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses Fair Value

Debt SecuritiesCorporate and foreign debt securities 22,616,278 699,660 (64,160) 23,251,778U.S. government obligations 2,807,871 31,748 (1,177) 2,838,442Municipal bonds 5,512,832 148,477 (5,734) 5,655,575Treasury inflation protected securities 1,345,689 - (3,186) 1,342,503Mortgage and asset backed securities 35,314,153 749,100 (179,915) 35,883,338Total Debt Securities $ 67,596,823 $ 1,628,985 $ (254,172) $ 68,971,636

Equity Securities - Mutual FundsLarge value fund 1,936,098 623,405 - 2,559,503Foreign large blend fund 379,155 23,483 (1,845) 400,793Small blend fund 253,637 5,317 - 258,954Mid-cap blend fund 253,409 19,105 (5) 272,509Diversified emerging markets 246,430 465 (16,754) 230,141Total Equity Securities 3,068,729 671,775 (18,604) 3,721,900Total $ 70,665,552 $ 2,300,760 $ (272,776) $ 72,693,536

Due to mature: Amortized Cost Fair Value

One year or less 2,147,550 2,155,095After one year through five years 14,367,624 14,594,273After five years through ten years 18,176,493 18,134,829After ten years 965,066 945,460Mortgage and asset backed securities 33,287,126 33,533,759Total Debt Securities $ 68,943,859 $ 69,363,416

Investments, classified as available for sale and carried at fair value as of December 31, 2014, are as follows:

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Note 3 - Investments (continued)The following table shows the investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2015:

As of December 31, 2015, the Company holds 167 securities in an unrealized loss position, of which 106 have been in an unrealized loss position for a period of less than 12 months and 61 have been in an unrealized loss position for greater than 12 months. Based upon the evaluation of the criteria as identified in Note 2, the Company does not consider these securities to be other than temporarily impaired as of December 31, 2015.

The following table shows the investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position, as of December 31, 2014:

As of December 31, 2014, the Company holds 116 securities in an unrealized loss position, of which 62 have been in an unrealized loss position for a period of less than 12 months and 54 have been in an unrealized loss position for greater than 12 months. Based upon the evaluation of the criteria as identified in Note 2, the Company does not consider these securities to be other than temporarily impaired as of December 31, 2014.

The fair value measurement level selected within the fair value hierarchy discussed in Note 2 is based on using the lowest level of input that is significant to the fair value measurement. The valuation techniques used by the Company maximize the use of observable inputs and minimize the use of unobservable inputs. Investments in money market funds and mutual funds were recorded using Level 1 fair values based on observable quoted market prices from national securities exchanges.

Prices for government, agency, municipal, corporate, mortgage backed, and asset backed securities of the Company are based on observable market data for the same or similar securities, including quoted prices in markets that are not active, or matrix pricing or other similar techniques that use observable market inputs, such as benchmark yields, expected prepayment speeds and volumes, and issuer ratings and, consequently, are classified as Level 2. To a lesser extent, indicative quotes are obtained from independent brokers. Broker prices may be classified as Level 2 or Level 3, depending on the availability of observable inputs. All prices are validated through internal price models.

Less Than 12 Months Greater Than 12 MonthsFair Value Unrealized Losses Fair Value Unrealized Losses

Debt SecuritiesCorporate and foreign debt securities 7 ,996,745 (196,790) 3,153,644 (66,967)U.S. government obligations 3,140,021 (9,601) 145,177 (818)Foreign government obligations 248,970 (1,030) - -Municipal bonds 309,633 (6,597) 350,611 (2,250)Treasury inflation protected securities 524,354 (3,380) 1,326,181 (26,685)Mortgage and asset backed securities 9,136,398 (65,712) 9,199,676 (117,604)Total Fixed Maturities $ 21,356,121 $ (283,110) $ 14,175,289 $ (214,324)

Equity Securities - Mutual FundsDiversified emerging markets - - 194,451 (57,781)Small blend fund 249,524 (7,760) - -Total Equity Securities 249,524 (7,760) 194,451 (57,781)Total $ 21,605,645 $ (290,870) $ 14,369,740 $ (272,105)

Less Than 12 Months Greater Than 12 MonthsFair Value Unrealized Losses Fair Value Unrealized Losses

Debt SecuritiesCorporate and foreign debt securities 2,699,809 (19,174) 1,511,632 (44,986)U.S. government obligations 193,607 (426) 48,229 (751)Municipal bonds 339,322 (678) 576,333 (5,056)Treasury inflation protected securities 1,332,901 (2,967) 9,601 (219)Mortgage and asset backed securities 4,597,808 (21,547) 8,292,501 (158,368)Total Fixed Maturities $ 9 ,163,447 $ (44,792) $ 10,438,296 $ (209,380)

Equity Securities - Mutual FundsDiversified emerging markets 221,276 (16,754) – –Foreign large blend fund 24,012 (1,845) – –Mid-cap blend fund 3,405 (5) – –Total Equity Securities 248,693 (18,604) – –Total $ 9,412,140 $ (63,396) $ 10,438,296 $ (209,380)

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Note 4 - Insurance ActivityThe Company provides general liability, workers’ compensation, auto liability, property, and cyber risk reinsurance protection to its members on an excess of loss or quota share basis. The Company participates in various insurance layers depending on the specific underlying insurance program of the individual members. The coverages provided are in excess of varying self-insured retentions (SIR), which also vary by member. The Company procures reinsurance coverage to limit its net exposure, and the amount of the Company’s retention is determined based upon the specific insurance limits written for each individual member. The Company’s maximum net retention for policies with effective period in each fiscal year is as follows for each line of business:

Net Retained Maximum Limit2015 2014

Property (per occurrence) $ – $ 1,000,000Property (aggregate) $ – $ 5,000,000General Liability (per occurrence) $ 3,000,000 $ 3,000,000Auto Liability (per occurrence) $ 3,000,000 $ 3,000,000Worker’s Compensation (per occurrence) $ 1,500,000 $ 1,500,000Cyber (per occurrence) $ 50,000 $ 750,000Cyber (per aggregate) $ 150,000 $ 3,000,000

Note 3 - Investments (continued)The following table sets forth by level, within the fair value hierarchy, the Company’s investments at fair value as of December 31, 2015 and 2014:

Quoted Prices in Active Markets(Level 1)

Significant Observable Inputs(Level 2)

Significant Unobservable Inputs(Level 3)

December 31, 2015Debt SecuritiesCorporate and foreign debt securities – 24,866,402 –U.S. government obligations – 3,852,867 –Foreign government obligations – 804,938 –Municipal bonds – 4,454,914 –Treasury inflated protected securities – 1,850,536 –Mortgage and asset backed securities – 33,533,759 –

Mutual FundsLarge value fund 2,389,627 – –Foreign large blend fund 399,632 – –Small blend fund 249,525 – –Mid-cap blend fund 268,860 – –Diversified emerging markets 194,449 – –Total $ 3,502,093 $ 69,363,416 –

Quoted Prices in Active Markets(Level 1)

Significant Observable Inputs(Level 2)

Significant Unobservable Inputs(Level 3)

December 31, 2014Debt SecuritiesCorporate and foreign debt securities – 23,251,778 –U.S. government obligations – 2,838,442 –Municipal bonds – 5,655,575 –Treasury inflated protected securities – 1,342,503 –Mortgage and asset backed securities – 35,883,338 –

Mutual FundsLarge value fund 2,559,503 – –Foreign large blend fund 400,793 – –Small blend fund 258,954 – –Mid-cap blend fund 272,509 – –Diversified emerging markets 230,141 – –Total $ 3,721,900 $ 68,971,636 –

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Prior to September 1, 2015, the Company procured reinsurance on a facultative basis. Effective September 1, 2015, the Company entered into a treaty reinsurance agreement, which provides coverage to the Company for all Members’ general liability coverage. The first layer of coverage is a 40% quota share of $2,000,000 per occurrence. The premium is 40% of subject written related to this layer of coverage. The contract provides a 20% ceding commission on all premiums ceded to the two retrocessionaires.

Reinsurance provided to the Company related to the second layer of coverage for general liability is 95% of $8,000,000 in excess of $2,000,000 per occurrence with an annual aggregate of $30,400,000. The premium is 90% of subject written related to this layer of coverage.

Effective January 1, 2015, the Company provides cyber risk coverage on a quota share basis, retaining 5% of $1,000,000 per occurrence with an annual aggregate of 5% of $3,000,000. In fiscal year 2014, the Company provided direct cyber risk coverage with net retained limits described above.

The reinsurance contracts reduce the exposure to large losses by permitting recovery of a portion of the losses and loss adjustment expenses. The reinsurance contracts do not relieve the Company from its primary obligations to its policyholders. Additionally, failure of a reinsurer to honor its obligations for claims incurred in prior years and reported in the current or future years could result in significant losses to the Company. Reinsurance recoverable as of December 31, 2015 and 2014 are due from U.S. and foreign reinsurers, all with A.M. Best ratings of A (Excellent) or higher.

The Company recorded reinsurance recoveries (expense) of $290,758 and ($426,941) in 2015 and 2014, respectively, which is reflected as a decrease (increase) in losses and loss adjustment expenses incurred in the statements of comprehensive (loss) income. The change in reinsurance recoveries is offset by unpaid losses and loss adjustment expenses and paid losses and relates to development on reinsured claims.

Premiums assumed and the related reinsurance amounts for the years ended December 31, 2015 and 2014, are as follows:

2015 2014Written Earned Written Earned

Assumed 10,209,482 10,024,207 9,535,942 10,055,720Ceded (1,843,796) (1,689,431) (1,560,087) (1,901,263)Net $ 8,365,686 $ 8,334,776 $ 7,975,855 $ 8,154,457

2015 2014Balance at January 1 45,901,811 49,615,389Less: reinsurance recoverable (unpaid losses) (2,946,357) (9,562,151)Net Balance At January 1 $ 42,955,454 $ 40,053,238Incurred Related To:Current year 8,070,688 8,017,028Prior years 9,693,043 (3,357,547)Total Incurred $ 17,763,731 $ 4,659,481Paid Related To:Current year – –Prior years (6,284,550) (1,757,265)Total Paid $ (6,284,550) $ (1,757,265)Net Balance At December 31 54,434,635 42,955,454Add: Reinsurance recoverable (unpaid losses) 2,076,297 2,946,357Balance At December 31 $ 56,510,932 $ 45,901,811

The total incurred losses increased in 2015 by a total of $17,763,731 which included an increase of $9,693,043 in prior year loss activity due to unfavorable development on liability claims. Subsequent to December 31, 2015, management became aware of $5,450,192 of unfavorable development on claims related to prior policy periods.

The unfavorable development has been appropriately reflected in the accompanying financial statements as of December 31, 2015.

The total incurred losses increased in 2014 by a total of $4,659,481, which included a decrease of $3,357,547 in prior year loss activity due to favorable development on property claims.

The Company leased office space from one of its Members under a five year lease agreement that expired on December 31, 2013. The lease agreement was renewed for one year, expiring December 31, 2014. Annual rental payments of $12,752 are included within the Company’s general and administrative expenses in the statements of comprehensive (loss) income for the year ended December 31, 2014.

Note 5 - Leasing Arrangements and Related Party TransactionsThe Company maintains a long-term operating lease for office accommodation in New Hampshire which was effective October 1, 2014, with a five year term, expiring September 30, 2019. The annual rental fees charged include Company’s pro rata share of taxes and common area charges. The rental expense related to this lease for the years ended December 31, 2015 and 2014 was $52,603 and $10,870, respectively, and is included within the Company’s general and administrative expenses in the statements of comprehensive (loss) income. Minimum future lease payments required under this operating lease are as follows:

Minimum Future Lease Payment

2016 $ 44,8402017 $ 45,9262018 $ 47,0132019 $ 48,100

Activity in the liability for unpaid losses and loss adjustment expenses for the Company is summarized as follows for the years ended December 31, 2015 and 2014:

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Note 6 - Members’ Equity

There are three classifications of membership within the Company: Founding, Premiere and Associate Members. The Board has adopted a Surplus Contribution and Withdrawal Policy that establishes the surplus requirements for each of the membership classes. Founding Members are those who made a surplus contribution prior to October 1, 2003. Premiere Members are eligible entities that made the required surplus contribution after October 1, 2003. In 2011, The Company’s Board of Directors amended the By-laws for Associate Membership whereby Associate Members would contribute a lower initial surplus. The Company currently has no Associate Members.

The Company is a non-assessable mutual insurance company. However, the Board may request additional surplus contributions, in such amounts and at such times as may be deemed necessary and appropriate by the Board, in order to maintain adequate surplus to premium ratios for the safe and sound operation of the Company.

Founding and Premiere Members shall have one vote for each $100,000 of the Member’s allocated surplus account. Associate Members will receive one vote once the total surplus contribution of $100,000 is attained.

If a Member ceases to obtain insurance from the Company, it can either withdraw its surplus account or maintain the account. If the Member elects to withdraw the account, such withdrawal will be completed, at the sole discretion of the Board and approval by the District of Columbia Department of Insurance, Securities and Banking (the Department), no later than five years from the date of notice of withdrawal. Founding and Premiere Members withdrawing from the Company within a five year period of becoming a Member will forfeit all contributed surplus and any amounts allocated to the Members’ surplus account. Associate Members’ electing to withdraw from the Company will forfeit all of their initial surplus contribution. As of December 31, 2015, a Member has elected to not renew insurance coverage and request withdrawal of surplus held with the Company. The Board of Directors and the Department approved to pay the contributed surplus back over a five year term beginning December 31, 2015. A distribution of $100,000 was paid in cash as of December 31, 2015 and the remaining $400,000 is recorded on the balance sheets in accounts payable and accrued expenses.

The following is a schedule of Member surplus contributions as of December 31, 2015 and 2014:

District of Columbia captive insurance statutes require $500,000 minimum unimpaired paid-in capital and surplus be maintained by a mutual/association protected cell company. The Company has filed its Annual Statement with the Department on a statutory basis.

2015 2014Founding MembersPDRMA $ 2,400,000 $ 2,400,000NH PRIMEX $ 2,250,000 $ 2,250,000MMRMA $ 1,144,795 $ 1,144,795ENDURIS $ 975,708 $ 975,708DVIT $ 926,866 $ 926,866MMIA $ 750,000 $ 750,000WSTIP $ 750,000 $ 750,000WCIA $ 750,000 $ 750,000MVRMA $ 750,000 $ 750,000TCRMF $ 1,000,000 $ 1,000,000MPR $ 500,000 $ 500,000VTLP $ 500,000 $ 500,000

2015 2014Founding MembersWMMIC $ 500,000 $ 500,000TASBRMF $ – $ 500,000

Premiere MembersCALTIP $ 655,000 $ 655,000TWCARMF $ 500,000 $ 500,000NPAIP $ 500,000 $ 500,000

Associate MembersSCCPLT $ 25,000 $ 25,000SDRMA $ 5,000 $ 5,000AMLJIA $ 5,000 $ 5,000

Totals $ 14,887,369 $ 15,387,369

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Note 6 - Members’ Equity (continued)

The following table reconciles the financial statements to the annual statutory statement filed with the Department as of and for the years ended December 31, 2015 and 2014.

Note 7 - Employee Benefit Plans

The Company has established a 401(k) employer contribution plan. The Company will provide an immediately vested contribution to this plan in the amount equal to 10% of the employee’s gross salary, which is voluntary and up to management discretion. Employees earning over the social security wage base of $118,500 and $117,000 in 2015 and 2014, respectively, will receive an additional 6.2%, respectively, on the amount earned between the social security wage base and their annual salary. The Company has recorded these contributions of $89,889 and $85,645 within general and administrative expenses on the statements of comprehensive (loss) income for the years ended December 31, 2015 and 2014, respectively.

Note 8 - Reinsurance Trust

The Company has a reinsurance trust to benefit one of its Members to collateralize the Member’s reinsurance recoverable (including incurred but not reported claims and case reserves) from the Company. The value of this trust was $1,099,978 as of December 31, 2015, with $2,537 included within cash and cash equivalents, and the remaining $1,097,441 included within investments, available for sale, at fair value. The value of this trust was $1,087,900 as of December 31, 2014, with $12,683 included within cash and cash equivalents, and the remaining $1,075,217 included within investments, available for sale, at fair value.

The following table presents the changes in accumulated other comprehensive income, which is comprised of unrealized gains and losses on available for sale securities as of December 31, 2015 and 2014:

Note 9 - Accumulated Other Comprehensive Income

Assets Liabilities Members’ Equity Net (Loss) Income

December 31, 2015:As reported within audited financial statements 83,686,605 61,223,237 22,463,368 (9,459,510)Deferred acquisition costs (7,347) (13,810) 6,463 13,395Market value adjustment (453,315) – (453,315) 2,531Reclassifications (3,076,678) (3,076,678) – –Non-admitted assets (53,129) – (53,129) –Other – (4) 4 2As Reported Within The Annual Statement On A Statutory Basis $ 80,096,136 $ 58,132,745 $ 21,963,391 $ (9,443,582)December 31, 2014:As reported within audited financial statements 82,864,044 49,241,815 33,622,229 3,560,958Deferred acquisition costs (6,932) – (6,932) 1,170Market value adjustment (1,374,545) – (1,374,545) 15,651Reclassifications (3,846,754) (3,846,754) – –Non-admitted assets (206,477) – (206,477) 23,845Other – (1) 1 –As Reported Within The Annual Statement On A Statutory Basis $ 77,429,336 $ 45,395,060 $ 32,034,276 $ 3,601,624

2015 2014Beginning Balance $ 2,027,984 $ 902,436Unrealized holding gains onavailable for sale securities

(805,151) 1,325,828

Reclassification adjustment for realized gains included in net income (394,200) (200,280)Net current-period other comprehensive (loss) income (1,199,351) 1,125,548Ending Balance $ 828,633 $ 2,027,984

FINANCIAL STABILITY. SHARED RISK.

PMS: 3135 U

K

PMS: 548 U

PMS: 468 U

PMS: 7427 U

GOVERNMENTENTITIES MUTUALINC., PCC

1627 CONNECTICUT AVENUE NW, SUITE 6WASHINGTON, DC 20009

WWW.GEMRE.COM

agenda2016/09/29 · consent agenda 1. minutes – august 25, 2016 2. august 2016 administrative...

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