annual report - nirmaretrospective+-+annual+report+2012.pdf · 20 12forward retrospective is the...

A N N U A L R E P O R T

2012FORWARD Retrospective is the theme we have selected for our 2012

Annual Report. It’s a word derived from the Latin word “retrospectare,” and when used as an adjective is in reference to looking back at events that have previously taken place.

Retrospective also can been used as a noun when referring to an exhibit of collective works, such as pieces that have been created by an artist or musical scores of a composer.

Since our 2012 Annual Report will look back on many of the events that took place during the year and now will be added to the collective works NIRMA has produced, we felt Retrospective was a theme consistent with our review.

What you will find on the pages that follow are a recap of events and highlights, an update on the financial status of the program, and a review of the pools’ claims and loss experience and how they compare with past years. We also include a brief look ahead at what our members can anticipate.

With 2012, NIRMA completed its 24th year of providing risk management services and comprehensive liability, property and workers’ compensation insurance coverages to Nebraska counties and county-related public entities. When you consider 24 years retrospectively, it quickly tallies into a sizeable collection of accomplishments.

So on the pages that follow, we focus our attention on those highlights of 2012 and those that we will then add to the collection of works NIRMA has produced over the years.

2012 Annual Report

mission statement CONTENTS

Message from the Executive Director .....................................................................2

Retrospective Shared by the Board of Directors Chair ............................3

Board of Directors ...................................................................................................................4

Committee Activities ..............................................................................................................5

Membership Development ................................................................................................6

Membership Maps and Rosters ....................................................................................7

2012 Highlights .........................................................................................................................8

2012 Award Recipients ...................................................................................................10

Measurements from the Year ......................................................................................12

Dividends by Year ..................................................................................................................13

Coverage Structure ..............................................................................................................14

Net Incurred Losses ............................................................................................................15

GL, LEL, POL/EPL and WC Claim Counts and Costs..........................16

Net Incurred Losses vs. Projected Losses .......................................................17

Average Claim Cost .............................................................................................................18

NIRMA II Medical Costs vs. Indemnity Expenses .......................................19

Prevalent Injuries ....................................................................................................................20

Prevalent Causes of Injuries .........................................................................................21

Audit Report ...............................................................................................................................22

Actuarial Statement .............................................................................................................23

Prospective .................................................................................................................................24

Service Providers ............................................................................ Inside Back Cover

Staff ........................................................................................................... Inside Back Cover

It is the mission of NIRMA, in partnership with Nebraska counties, other select public agencies, and the people they serve, to be a leader in providing superior, cost-effective, innovative and comprehensive coverages and risk management services to its members through a member-owned and directed program.

Vision StatementTo serve counties and other related public agencies as the provider of choice for group self-insurance coverages and risk management services.

Values and BeliefsNIRMA is dedicated to:

• Understanding and responding to the changing coverage and service needs of its members;

• Engaging members to actively reduce risk exposures and enhance health and safety;

• Adhering to fiscally sound and pru-dent business practices to ensure continued financial strength and stable, competitive rates over the long term;

• Maintaining a focused, assertive, timely approach to claims management and resolution;

• Recognizing and realizing the value of cooperative financial and admin-istrative action.

www.nirma.info

2012 was a year, at least on the national scene, largely dominated by presidential politics and continued economic uncertainty, both here and around the globe, and by very different proposals about how to head off our nation’s so-called fiscal cliff. Closer to home, perhaps the lead headline for Nebraska was the deepening drought which showed no sign of abating. This drought led to major crop losses as well as significant forest fires during the year in NIRMA member Keya Paha, Brown, Rock, Keith and Sheridan Counties, and in NIRMA member Dawes County, as well, which I and the NIRMA Board of Directors were personally there to witness in late August during a board meeting held at Fort Robinson. To see forests of trees decades old disappear in an instant, and to know it will be decades before there will be a full recovery, adds perspective to the long-term impact a single year can have.

Fortunately, amid this tumult and uncertainty, I can report that NIRMA had another very solid year. It was aided in great measure when we entered the year having just received the unanimous, 100 percent three-year recommitment of our entire eligible membership. With that kind of strong membership support, combined with nearly a quarter century of sound decision-making, governance of the program by and for county officials, and a singular focus on meeting the risk management and service needs of Nebraska county government, it is no accident that good things happen.

Among those good things, membership equity in the program increased again by nearly $1 million this past year despite having to deal with new and ever more challenging types of claims to defend and a drop in investment income due to declining interest rates. The year’s financial gain, in turn, enabled NIRMA to send dollars back to our members in the form of another membership dividend, this one in the amount of almost $650,000, marking the 17th consecutive year and 22nd time a monetary dividend has been issued, bringing to nearly $14 million the total amount that has been returned to our members.

Customer service, innovation and effective use of technology have always been key elements in NIRMA’s success. Just one example of that is NIRMA’s Online University through which our members over the past five years have accessed tens of thousands of online courses covering a variety of subjects relevant to county government, all without additional charge and accessible around the clock via their home or work computer.

Building on that technological innovation, this year NIRMA fully implemented its membership Interact web portal. This password-protected portal allows members anytime access to information specific to open claims involving their particular entity, including financial data. In turn, claim forms can also be submitted via this portal. The Interact portal also permits our contact persons to easily access and review their entity’s current property schedules and they can also view and search their NIRMA insurance policies. Also available on the portal are all of the various reference manu-als NIRMA has published over the years. And this year, for the first time ever, the Interact portal was used during the annual renewal process to electronically submit all underwriting information and questionnaires. This helps speed and promote the accuracy of this important process.

Providing training and continuing educational opportunities for our members also remained an important focus. In 2012, NIRMA hosted a series of regional seminars to address county road operations and liabilities during which an up-dated NIRMA Guide to the MUTCD for Nebraska Counties was reissued and a brand new NIRMA Road Department Manual was also distributed, adding to NIRMA’s growing reference library. This was followed by our 5th Annual Self De-fense for County Officials Conference which offered a dynamic variety of topics and speakers and attracted our largest attendance to date.

No achievement or progress is made without work and commitment. Despite all that has been accomplished over the years, including 2012, we know work and challenges remain. But we know when joined by our membership, continued success will come. On behalf of the NIRMA Board of Directors and all staff, we once again thank each of our members for their loyalty and commitment throughout 2012.

Craig Nelson

messageFROM THE

EXECUTIVE DIRECTOR

2 2012 Annual Report

Before we advance too far into 2013, we need to take a few minutes for a look back at what took place in 2012, a year in which there were some challenges to overcome, yet at the same time plenty of opportunities to seize.

As a partnership involving Nebraska counties and area agencies on aging, NIRMA constantly anticipates challenges that can affect members’ insurance needs and costs and is always on the lookout for opportunities that can help members reduce their risk and claim exposures and ultimately save tax dollars. That’s part of the reason our member-owned and operated program has been successful over the past 24 years.

Looking back on 2012, NIRMA once again provided members with multiple op-portunities to control costs. These came in the form of educational and specialized training programs that were presented, helpful reference manuals that NIRMA published and distributed, and grant funds that were awarded to members to help them achieve safety-related initiatives. And who can forget that yet another dividend was shared with many members, marking the 17th consecutive year that NIRMA has returned dollars to members that were not required to pay for claims and operating expenses.

I encourage each of you to take a moment to think about what NIRMA means for your respective county or area agency on aging, and what our program pro-vided for your entity in 2012. I am confident you will conclude that our program is truly unique and responsive to your needs, and that we all should take tremendous pride in knowing that we are not just another insured, but rather we are member-owners of a program that adapts to change, responds to challenges, and evolves with the times, with the objective being to meet our risk management and insur-ance needs.

That provides me with a perfect segue to mention my latest read. It was “Who Moved My Cheese” by Spencer Johnson, M.D. It examines change and how we can be prepared, and I would recommend it to all, as it is enlightening and pro-vides profound truths for not only business, but your own personal life.

Each new day should find us looking back on the past, and using what we learned to move forward and do the best we can, whether facing challenges or seizing opportunities that are presented to us.

I leave you with these words from Plato, “Always be kind, for everyone is fighting a hard battle.”

Doris Karloff

RETROSPECTIVE SHARED BY

board of directors chair

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Doris Karloff

Saunders County Supervisor

Chair

Beth Fiegenschuh Cheyenne County Clerk

Willis Luedke

Saline County Commissioner

Jim GravesMerrick County Supervisor

Vice Chair

Larry Cerny Fillmore County Supervisor

Mark MastertonScotts Bluff County Commissioner

Brian HansonSarpy County Fiscal Administrator

Secretary-Treasurer

Dennis Byars Gage County Supervisor

Dan Purdy Hall County Supervisor

Jean Andrews Dodge County Zoning Administrator

Doug TeafordKeith County Commissioner

board of directors

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committee activitiesClaims CommitteeThe Claims Committee meets as needed throughout the year to consider liability and workers’ compensation claims where a potential settlement amount exceeds $15,000 or where there are unusual coverage matters. The committee, working with NIRMA’s executive staff, adjusters, and defense counsel, if as-signed, reviews factual information for these claims and makes a recommendation to staff on how to proceed in settling a claim and determining the settlement authority levels.

Activities: Committee members met four times in 2012 to consider 11 claims that had the potential to exceed the $15,000 settlement threshold. During the year a total of 11 claims, some which carried over from previous years, were settled within the authority level that had been recommended by the committee. Settlement efforts continue on the other claims. In addition, the NIRMA staff has the authority to settle members’ property damage claims or issue payments mandated by statute or legal processes, even if the settlement or payment amount exceeds $15,000. Those claims/payments are reported to the committee on a periodic basis. There were 26 such claims/payments that exceeded $15,000 during the year.

Members: Larry Cerny (chair); Beth Fiegenschuh; Jim Graves; Mark Masterton; Doris Karloff (ex officio).

Loss Prevention and Safety CommitteeThe Loss Prevention and Safety Committee reviews and makes recommendations for programs and procedures de-signed to reduce the frequency and severity of members’ loss experience. This includes the development of safety initiatives and education programs, and the distribution of the NIRMA loss prevention policy.

Activities: The committee met in May and November. The May meeting was to review and update NIRMA’s Risk Management/Loss Prevention Strategic Plan. Committee members also addressed the loss prevention budget for the 2012-2013 policy and fiscal year and were presented the ser-vice plans for loss prevention staff members. The November meeting was to review and take action on the ASSIST applica-tions that had been received by the November 1 submission deadline. The committee considered a total of 51 applications that were submitted by various departments in 37 member counties and awarded a total of $84,991 in grant funds.

Members: Jim Graves (chair); Jean Andrews; Larry Cerny; Beth Fiegenschuh; Doug Teaford; Doris Karloff (ex officio).

Finance, Audit and Compliance CommitteeThe Finance, Audit and Compliance Committee is responsible for oversight of NIRMA and NIRMA II financial management, including the periodic review of the administrative budget and investments. The committee also ensures proper audits of the pools are conducted annually and analyzes actuarial and other reports for the purpose of recommending the annual contribu-tion level for the pools and members.

Activities: Committee members met in May and August to review and discuss the pools’ investment policy and practices. At the May meeting, committee members recommended a change in the policy to allow for the purchase of fully-insured CDs in banks outside of Nebraska in order to have the flexibil-ity to obtain the best interest rates possible, with the prefer-ence being to continue to invest in banks located in member counties, recommended the 2012-2013 policy/fiscal year ad-ministrative budget and funding levels for programs, reviewed auditor and actuarial agreements and reports, and reviewed excess and reinsurance pricing for the 2012-2013 policy pe-riod. At the August meeting the committee recommended that application be made for approval of a membership dividend that would be distributed during NIRMA’s October conference.

Members: Brian Hanson (chair); Dennis Byers; Willis Luedke; Mark Masterton; Doug Teaford; Doris Karloff (ex officio).

Policy and Coverage Review CommitteeThe Policy and Coverage Review Committee thoroughly re-views and examines NIRMA’s existing insurance contracts and coverage and considers revisions or additions that it deter-mines necessary or beneficial to protect member counties and area agencies on aging, and protect the pools’ assets.

Activities: The committee met in May to address a number of issues. An extensive agenda was considered with the following conclusions and decisions made: to purchase an Accidental Death and Dismemberment policy to apply to volunteers per-forming a service on behalf of the member county or agency who are not otherwise eligible for workers’ compensation benefits; to broaden the punitive damage exclusion to apply to all liability coverages; to discontinue providing uninsured and underinsured motorist coverage under the Automobile Liability coverage part of the Liability Package Policy, understanding this coverage is not required of public entities under Nebraska law; and to clarify the intent of the Fraud, Dishonesty or Criminal Acts exclusion of the Liability Package Policy. Several other relatively minor revisions were made to NIRMA’s liability and property insurance policies based on recommendations made by NIRMA’s reinsurer and by legal counsel.

Members: Mark Masterton (chair); Jean Andrews; Dennis Byars; Brian Hanson; Dan Purdy; Doris Karloff (ex officio).

NIRMA began with 32 charter member counties on January 7, 1988, and over the years has enjoyed con-tinual growth.

As this graph shows, by the time NIRMA concluded its second year of operation a total of 46 counties were being served. In nearly each year that followed, one or more coun-ties also would become a NIRMA member, as you will see in the membership roster that appears on the next page.

After exclusively serving counties for years, a decision was made in 2002 to amend NIRMA’s Formation Agree-ments to allow other county-related agencies to become members of the pools. This decision was prompted by requests from the county membership and led to the addition of six area agencies on aging between 2007 and 2009. This has proven to be a very good fit as these regional agencies serve Nebraska counties and their governing boards are made up of county commissioners and supervisors.

There are many reasons that can be identified for NIRMA’s consistent growth. But one that clearly stands

out is that NIRMA is able to provide member counties and area agencies on aging with the broadest range of coverages available, tailored to meet their specific needs, at stable and affordable pricing. Members also benefit from NIRMA’s comprehensive array of loss prevention services, something not typically found through the com-mercial insurance marketplace.

Today, NIRMA is proud to serve 85 percent of all Ne-braska counties, along with six area agencies on aging. The NIRMA Board of Directors regularly looks at ways the program might also benefit other county-related agencies and entities as well.

Public entity risk management pooling was an untested concept in Nebraska when NIRMA was created. But history now shows that it is indeed a viable option and NIRMA has come to be recognized as one of the most stable and financially sound county pools operating in the United States.

membershipDEVELOPMENT

46 53

62 65

76 85 85

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'89 '93 '97 '01 '05 '09 '12

MEM

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Membership Development


membershipROSTER BY YEAR

1988 (charter members) Adams, Boone, Brown, Buffalo, Cass, Cedar, Cheyenne, Custer, Dakota, Dodge, Grant, Hall, Johnson, Kearney, Keith, Madison, Merrick, Nemaha, Nuckolls, Pawnee, Phelps, Platte, Polk, Richardson, Saline, Sarpy, Saunders, Seward, Sheridan, Sherman, Thayer, Webster

1988 (joining after May 1) Scotts Bluff, Perkins, Banner, Clay, Kimball, Thurston, Cuming

1989 Antelope, Hamilton, Hayes, Nance, Thomas, Logan, Fillmore

1990 Blaine, Dawes, Keya Paha

1991 Arthur, Howard

1992 McPherson, Garden

1994 Knox, Garfield

1995 Rock, Franklin

1996 Wheeler

1997 Deuel, York, Gage, Chase

1999 Colfax

2000 Gosper, Boyd

2002 Frontier, Hitchcock, Morrill

2003 Dundy, Stanton, Box Butte, Cherry

2004 Greeley, Loup

2005 Valley, Washington

2006 Dixon

2007 Butler

2009 Jefferson

2010 Dawson

2007 Midland Area Agency on Aging

(serving Adams, Clay, Hall, Hamilton, Howard, Merrick, Nuckolls and Webster Counties)

Northeast Nebraska Area Agency on Aging

(serving Antelope, Boone, Boyd, Brown, Burt, Cedar, Cherry, Colfax, Cuming, Dakota, Dixon, Holt, Keya Paha, Knox, Madison, Nance, Pierce, Platte, Rock, Stanton, Thurston and Wayne Counties)

Blue Rivers Area Agency on Aging

(serving Gage, Jefferson, Johnson, Nemaha, Otoe, Pawnee, Richardson and Thayer Counties)

2008 West Central Nebraska Area Agency on Aging

(serving Arthur, Chase, Dawson, Dundy, Frontier, Gosper, Grant, Hayes, Hitchcock, Hooker, Keith, Lincoln, Logan, McPherson, Perkins, Red Willow and Thomas Counties)

South Central Nebraska Area Agency on Aging

(serving Blaine, Buffalo, Custer, Franklin, Furnas, Garfield, Greeley, Harlan, Kearney, Loup, Phelps, Sherman, Valley and Wheeler Counties)

2009 Aging Office of Western Nebraska

(serving Banner, Box Butte, Cheyenne, Dawes, Deuel, Garden, Kimball, Morrill, Scotts Bluff, Sheridan and Sioux Counties)

County Membership By Year of Enrollment

Member counties highlighted in green.

Area Agency on Aging Membership By Year of Enrollment

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The year began with a resounding display of con-fidence in the program, as 100 percent of eligible

NIRMA members committed to participate for another three-year period. It marked the eighth consecutive time since NIRMA was

created in 1988 that all eligible members adopted a resolution to continue their participation.

What punctuated this latest recommitment was the fact that each of the 84 members who were eligible to recommit adopted their resolution by a unanimous vote. This further demonstrates the confidence NIRMA members have in their pro-gram.

One of the reasons NIRMA asks members to make a three-year commitment is because it assists NIRMA in securing the best excess and reinsurance coverages and pricing and provides continuity to make available to members the broadest coverages possible at the most economical price.

NIRMA previously received a 100 percent recommit-ment in 1990, 1993, 1996, 1999, 2002, 2005 and 2008.

In April NIRMA presented a series of five regional seminars to address the various liability exposures as-sociated with county roads and bridges.

A total of 280 county highway superintendents, road department personnel, and county commissioners and supervisors attended the seminars and learned about how Nebraska’s Political Subdivisions Tort Claims Act applies to county road operations, the requirements and minimum standards for road sign retroreflectivity

and assessment methods counties can use to ensure their signs meet federal requirements, and the liability issues related to establishing speed limits.

At each seminar NIRMA reis-sued its updated and expanded Guide to the MUTCD for Nebraska Counties to reflect the most recent changes made to both the 2009 fed-eral guide and the 2011 Nebraska State Supplement, and introduced its new Road Department Manual, a comprehensive reference guide that addresses all facets of county road department operations.

A new process was utilized for the 2012-2013 policy year renewal, one which was completed through NIRMA’s new members-only, password-protected Interact web portal and which streamlined much of the work.

NIRMA contact persons were able to electronically access their property schedules, submit changes needed, complete and submit their renewal questionnaire, and access their insurance coverage document for the policy year.

The Interact portal, which is located on the NIRMA website, now serves as the primary means for contact persons to communicate with NIRMA, quickly access policy information and data, and submit claim forms.

Despite a hardening in the insurance marketplace, a nearly 6 percent increase in members’ liability exposures that NIRMA insures, and actuarial projections of ap-proximately $200,000 more for members’ claims and loss activity for the 2012-2013 policy year, in May the Board of Directors was able to avoid a significant increase in the overall premium contribution levels for NIRMA and NIRMA II.

Current market conditions, combined with mem-bers’ recent claims and loss experience, led to NIRMA re-ceiving price quotes of roughly 11 percent more for the property and liability reinsurance coverages it purchas-es. At the same time, the cost for workers’ compensa-tion reinsurance coverage came in at 6.8 percent less. Taking each of these factors into account, along with a modest 2.6 percent increase in the NIRMA/NIRMA II

2012HIGHLIGHTS

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operating budgets, the board was able to approve combined premium contribution levels that represented a modest overall average increase of 6.27 percent. It is important to keep in mind, however, that the amount of premium increase a member may have received was dependent on its respective loss history. On the other hand, some members actually saw their contribution levels decrease as a result of having a favorable loss history.

Members of the Board of Directors got a firsthand look at the destruction Mother Nature can cause when two large wildfires broke out in August within just a few miles of

Fort Robinson State Park, site of the board’s annual retreat and meeting.

Fortunately, the historic park was not in the path of either fire, only the residual smoke that hung over the area, and the board was able to tackle its aggressive agenda, which included an examination of board effectiveness and governance best practices, an extensive review of

results from a strategic planning survey intended to identify NIRMA’s strengths, weaknesses, threats and opportunities, and a discussion of strategic business development goals for NIRMA and NIRMA II, along

with a number of other agenda items. It was also at this meeting that the board approved the issuance of the program’s 22nd divi-

dend.

NIRMA’s annual Self Defense for County Officials Conference

in October was once again well-received by the membership as more than 225 officials and em-ployees representing 70 members were in attendance.

The conference provided nearly 20 hours of instructional sessions that focused on human resource

management and employment practices, workplace safety, county road operations, law enforcement, correc-tions and personal health and wellness.

In conjunction with the annual conference, NIRMA conducted its annual membership meeting to review with members highlights from the past 12 months and report on the program’s financial status. It also was at

this meeting that members re-elected Doris Karloff, Beth Fiegenschuh and Mark Masterton to three-year terms on the Board of Directors.

The membership meeting culminated with the issuance of a $640,156 dividend to 76 counties and four area agencies on aging. It marked the 17th consecutive year that NIRMA has issued a dividend and increased to nearly $13.9 million the total amount NIRMA has returned to members since 1991.

Members of NIRMA’s Loss Preven-tion and Safety Committee met in November to review applications mem-bers had submitted for grant fund-ing assistance through the ASSIST Program.

It was the sixth time in five years that members were invited to submit for consideration their proposals for funding assistance to achieve a variety of safety initiatives or help them make safety-related equipment purchases.

For 2012, a total of 51 applications were submitted by various departments in 37 member counties. Fol-lowing a thorough review of each application, commit-tee members approved awarding a total of $84,991 in grant funds.

The latest awards increased to $535,532 the total amount NIRMA has provided to members since 2008 as grant funding through the ASSIST Program.

N I R M AA S S I S T

A W A R D S C H O L A R S H I P S A F E T Y I N C E N T I V E S A F E T Y T R A I N I N G


Each year NIRMA honors those members and individuals that demonstrate a commitment to risk management by reducing potential risks, liability exposures and claim costs, and that take positive steps to ensure public health and safety. NIRMA is pleased to introduce our 2012 award recipients.

Contact Person of the YearAntelope County Clerk Carolyn Pedersen was

named Contact Person of the Year during the annual awards banquet held in conjunction with NIRMA’s

Self Defense for County Officials Conference October 4-5 in Kearney.

Carolyn was chosen to receive the award because of the prompt and timely manner in which she assists NIRMA staff and responds to requests for information. She takes very seriously her responsibilities as the county’s

principal contact with the NIRMA office and its service providers. She has consistently maintained excellent and timely communication with NIRMA, has provided detailed information each time it has been requested, and has actively participated in the training programs NIRMA annually provides.

Carolyn is shown receiving her award from NIRMA Board of Directors Chair Doris Karloff.

Outstanding Loss Prevention Efforts

Perkins County was selected to receive the 2012 award for

Outstanding Loss Prevention Efforts.

Along with the award, Perkins County received a $1,000 grant for future loss prevention efforts. The award recognizes the ongoing efforts Perkins County has demonstrated toward its safety programs and training, for

utilizing NIRMA’s loss prevention services, and for proactively working to reduce the county’s liability risks and exposures.

Shown here with the award and grant check are Clerk Rita Long and Commissioner Leon Pankonin.

It was the second time Perkins County has received this award, the first being in 1992.

Outstanding Loss HistoryPhelps County was chosen to receive NIRMA’s annual Outstanding Loss History Award for 2012.

This award is presented to a county or agency which has the best loss experience among the program’s 85 members over the past five years. In determining the award recipient each year, NIRMA looks at each member’s total dollars paid for claims in comparison to total premium paid during that period.

The award and a $1,000 grant for future loss prevention efforts were accepted on behalf of the county by Clerk Sally Fox, Sheriff Gene Samuelson and Commissioners Jim Ostgren and Tom Nutt.

Phelps County previously received a NIRMA award in 1990 for Least Number of Losses.

2012AWARD RECIPIENTS

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Chris Lewis, Adams County ClerkAdams County Clerk Chris Lewis was recognized

for a third time by NIRMA, this time with a Special Recognition Award.

Chris was selected for the award in recognition of her professional commitment and conscientious service while serving as Adams County’s primary contact person with NIRMA since 1989. Chris retired from county government in mid January 2013.

NIRMA enjoyed a close working relationship with Chris over the years

and appreciated her attention to detail and how she maintained the lines of communication with the NIRMA staff. Chris was a very strong proponent of NIRMA and the award was in recognition of her years of outstanding service.

In 1993 Chris was presented NIRMA’s Contact Person of the Year Award and in 2008 she received a Special Recognition Award for the assistance she provided to the NIRMA claims adjusting staff.

Paul Schaub, Cheyenne County Attorney

Cheyenne County Attorney Paul Schaub received a Special Recognition Award because of the

professional manner in which he works with NIRMA’s claims adjusting staff and legal counsel.

Paul was selected to receive the award because he has been an asset for both Cheyenne County and NIRMA. Throughout his years as county attorney he has provided valuable assistance in NIRMA’s claims adjusting process

and litigation efforts. This has enabled Cheyenne County to save local taxpayer dollars that might otherwise have been spent defending litigation.

Raymond “Buddy” Small, Brown County CommissionerBrown County Commissioner Raymond “Buddy” Small was presented a Special Recognition Award for his active involvement and proactive approach toward risk management and his personal efforts to help Brown County minimize its liability exposures.

Buddy was chosen for this award because of the emphasis he has placed on promoting safety in the workplace. The initiatives he has taken to ensure a safe and healthy work environment in his county have greatly reduced the potential for liability and injury claims, which ultimately helps save Brown County taxpayer dollars.

Buddy, left, was presented his plaque by NIRMA Road Safety and Loss Prevention Specialist Tim Baxter.

Jeff Davis, Sarpy County SheriffSarpy County Sheriff Jeff Davis was chosen to receive a Special Recognition Award because of his leadership in providing professional training for his deputies and other staff members, and his efforts to ensure Sarpy County remains a safe and secure place in which to live and work.

Since taking office, Sheriff Davis has conducted a study to determine the cause and effect of law enforcement automobile accidents within the county and implemented an internal program to address his department’s vehicle fleet accident frequency, all in an effort to promote safety, reduce claims, and save tax dollars. He also has utilized a variety of programs, services and training that is provided by NIRMA to reduce liability exposures within his office.

Sheriff Davis, left, is shown receiving his plaque from NIRMA Board of Directors member Brian Hanson.

2012AWARD RECIPIENTS


The nation’s economic recovery seemed to move at a snail’s pace in 2012. Investment interest rates remained stagnant, predictions of financial gloom and doom once again dominated the headlines, and our leaders in Washington, D.C., continued to demonstrate an unwillingness to work together in a bipartisan manner.

Despite what seemed to be a year-long stalemate, an 11th hour move was made to avoid a national financial disaster, if at least only on a temporary basis.

And while NIRMA continued to feel the impact of minimal returns on its financial investments, that fact certainly did not overshadow what was otherwise a very solid year for the program.

We saw another increase in member equity and concluded the year with a combined Member Fund Balance of $21.3 million, as indicated by the bar graph that appears on the following page. As the green bars in this graph further reveal, NIRMA has been able to maintain a consistent Member Fund Balance over the years, representing the equity member-owners have in the program, even as it has continued to return funds to members in the form of dividends.

The NIRMA Board of Directors adopted a policy in 1997 that the combined NIRMA and NIRMA II equity balance be main-tained at a minimum of $10 million to protect members and the pools from catastrophic losses and any extreme spikes in pricing for the insurance NIRMA purchases.

Again referring to the graph, you will notice that the Member Fund Balance can and does fluctuate from year to year. The greatest influence on the year-end balance amount is the num-ber of net incurred losses NIRMA experiences during the year. These represent dollars that have been paid out for claims or have been reserved for future payments on claims that have yet

to be resolved. You can find more about the net incurred losses for the 2012 contract year printed on page 15.

We’ve briefly touched on investment income earlier and how interest rates remained flat in 2012. But investment income certainly is a component when determining member equity and impacts the final figure, although not to the degree that losses do.

A third component is the issuance of dividends, as these funds are derived from members’ equity in the program. In 2012, a $640,156 dividend was issued from the NIRMA property and liability pool to 80 members. As indicated by the gold bar in the graph, with this latest dividend NIRMA has now returned nearly $13.9 million to members over the years.

Also provided here is a look at how each premium contribution dollar a member paid for the 2012-2013 policy year has been allocated.

As shown with this pie chart, 65 percent, or 65 cents of each premium contribution dollar, is earmarked for the payment of members’ claims. Nineteen cents of each dollar was used to pay for excess and reinsurance, and pay the insurance pre-mium tax NIRMA and NIRMA II are required to pay the State of Nebraska. The remaining 16 cents, the smallest portion, is used to pay for adminis-trative costs, including the pools’ annual audits, actuarial services, property apprais-als, human resources help line costs, staffing and other administrative costs.

As we show in this table, the collective exposure NIRMA is insuring for 2012-2013 increased by $91.5 million from the 2011-2012 policy year, or nearly 4.5 percent. The total exposure is now $2.14 billion.Most exposure areas saw modest increases. The exception

was in auto values where there was an increase of 28.5 percent. The reason for this was the automobile rating values used by NIRMA had not been revised for eight years. These rating values were updated to ensure that accurate and appropriate values were reported to our reinsurers.Understanding this revision would mean an increase for

members’ contribution levels, a decision was made to offset the majority of the value increase by reducing by 23.8 percent the rate charged for auto physical damage coverage.

Renewal Renewal Percent 2012-2013 2011-2012 Change

Number of Members 85 86Buildings and Contents Values $985,222,260 $939,218,996 4.90Inland Marine Values $193,725,862 $190,982,609 1.44Auto Values $82,344,000 $64,040,000 28.58Payroll $200,429,057 $199,542,771 0.44Operating Expenses $678,657,875 $655,082,384 3.60Total Exposure $2,140,379,054 $2,048,866,760 4.47** Number of Vehicles 3,276 3,199 2.41** Number of Law Enforcement Officers 1,530 1,505 1.66

** = these figures are also included in the overall exposure, but not as part of the financial total.

2012MEASUREMENTS

16%

19% 65%

NIRMA/NIRMA II

2012-2013

Administrative CostsExcess/Reinsurance/Premium TaxProjected Losses

www.nirma.info 13

October 2012 80 members $640,156

December 2011 78 Members $393,864

October 2011 79 Members $600,000

August 2010 77 Members $750,000

February 2009 76 Members $1,498,652

February 2008 70 Members $788,448






July 2002 56 Members $400,000




December 1999 62 Members $1,000,000



May 1997 47 Members $311,493

December 1996 57 Members $264,998



August 1991 39 Members $127,182*

Total Returned $13,882,672* = NIRMA/NIRMA II returned $127,182 as credits against the forthcoming year’s premium in the form of retrospective premium adjustments.

$0.0

$2.5

$5.0

$7.5

$10.0

$12.5

$15.0

$17.5

$20.0

$22.5

$25.0

1991 2002 2004 2006 2008 2010 2012$2.5

$14.9 $14.9

$13.2 $14.3

$17.8 $18.1

$21.2

$22.5

$20.3 $19.6 $19.0 $21.3

$4.9 $5.7

$6.7 $7.2 $7.7 $8.7

$9.2 $10.0

$11.5 $12.2

$13.2 $13.9

Mill

ions

Member Fund Balances As of December 31

TOTAL MEMBER FUND BALANCE DIVIDENDS

Pre 1991 Member Fund Balances have been excluded due to fluctuations relating to changes in contract year coverage periods.

This graph focuses only on the past 12 years.

dividendsBY YEAR


Nebraska Intergovernmental

Risk Management Association / II

2012 / 2013 Pool Structure

County Reinsurance

Ltd.

Property (incl. Building

& Contents, Inland Marine, Auto Physical

Damage)

$1,750,000 Each Occ.

NIRMA

$250,000 Retention Each Occ.

Various & NFIP

Deductibles

General Liability

$4,700,000

Each Occurrence

No

Annual Aggregate

Automobile Liability

$4,700,000

Each Occurrence

No Annual

Aggregate

Employee Benefits Liability

$4,700,000

Each Wrongful

Act

$4,700,000 Annual

Aggregate

Public Officials & Employment Practices Liab.

$4,700,000 Each

Wrongful Act

$6,700,000 Annual

Aggregate

County Reinsurance Ltd.

County Reinsurance

Ltd.

$2,500,000 Workers’

Compensation

$1,500,000 Employers Liability

Each Occ.

Safety National Statutory Workers’

Compensation

NIRMA

Commercial Crime

Employee Dishonesty/

Faithful Performance

$300,000

Money & Securities

$50,000

Depositors Forgery and

Money Orders & Counterfeit

Papers

$100,000

$1,000

Deductible

Various Reinsurers

Property

$498,000,000 Each Occ.

Shared

NIRMA II $500,000

Retention Each

Occurrence

NIRMA

$300,000 Retention

Each Occurrence / Wrongful Act No

Deductible No Deductible

Law Enforcement

Liability

$4,700,000 Each

Occurrence

No Annual

Aggregate

Various Deductibles

NIRMA purchases excess and reinsurance coverages to pay for claims that exceed the self-insured retention (SIR) levels that have been established by the NIRMA Board of Directors. The SIR is the amount NIRMA itself pays on each claim, and this amount varies by line of coverage.

To ensure members have an added level of stability in their insurance coverage pricing, NIRMA became a member of County Reinsurance, Limited, (CRL) in 2003. CRL is a national self-insurance captive that exclusively serves county pools like NIRMA that operate in 17 states. Prior to becoming a CRL member, NIRMA individually purchased excess and reinsurance coverages through the commercial insurance market, but with CRL is part of a much larger group of county pools and is able to leverage that group strength for better pricing and terms.

Just as NIRMA’s SIR levels vary, so too do the deductible amounts members pay. In 2011, NIRMA began offer-

ing members an opportunity to choose their deductible amounts for certain property coverage lines as a means of helping them determine what their contribution level would be.

As this chart indicates, NIRMA pays the first $250,000 on each property claim. For general liability, auto liabil-ity, public officials and employment practices liability, employee benefits liability, and law enforcement liability claims, NIRMA retains the first $300,000. And for work-ers’ compensation claims, NIRMA pays the first $500,000 of each claim. NIRMA also retains varying amounts for its commercial crime coverages.

Among its various responsibilities, NIRMA’s Policy and Coverage Review Committee annually examines the self-insured retention levels and deductible amounts, and makes recommendations it determines will help moderate the insurance costs members pay.

coverageSTRUCTURE

www.nirma.info 15

net incurredLOSSES

GL, $2,035,584,

45%

LEL, $160,021, 4%

AL, $412,301, 9%

APD, $696,481, 16%

BC, $554,805, 12%

IM, $153,214, 3%

POL/EPL, $494,123, 11%

Total NIRMA Net Incurred Losses 2012 Contract Year as of June 30, 2012

Total: $4,506,530

GL, $647,102, 18%

LEL, $348,263, 10%

AL, $863,311, 24% APD, $441,192,

13%

BC, $773,337, 22%

IM, $259,825, 7%

POL/EPL, $205,746, 6%

Total NIRMA Net Incurred Losses 2011 Contract Year as of June 30, 2012

Total: $3,538,776

GL, $944,366, 29%

LEL, $325,931, 10%

AL, $401,812, 12%

APD, $507,392, 15%

BC, $558,265, 17%

IM, $120,437, 4%

POL/EPL, $436,490, 13%

Total NIRMA Net Incurred Losses 5 year average 2008-2012

Total: $3,294,693

On this page we provide a comparison of NIRMA’s net incurred property and liability losses for the 2012 and 2011 contract years, and also look at the 5-year average for 2008 through 2012.

The chart at the top provides a breakdown of losses by line of coverage and the amounts that have been paid on claims or reserved for payment in the future for the 2012 policy year.

You will see that NIRMA had net incurred losses of $4.5 mil-lion for the 2012 policy year. It is important to point out here, however, that this amount is subject to change as open claims continue to be resolved.

General liability claims accounted for the largest share of total claims, with 45 percent and incurred losses of just over $2 million. This represented an increase of more than 27 percent over the previous year.

NIRMA also experienced a sizeable increase in public officials/employment practices liability claims. You will see this coverage line had net incurred losses totaling $494,123 for 2012, more than double the amount during the previous policy year.

There also was an increase in auto physical damage claims where losses are anticipated to approach $700,000, compared to $441,000 for 2011.

But not all lines of coverage experienced an increase.

Law enforcement liability claims showed a significant reduction, accounting for only 4 percent of all claims for the 2012 policy year, down six percentage points from 2010-2011. But what is even more noteworthy is that 2012 LEL net incurred losses were just over $160,000, compared to $348,000 for 2011.

It appears auto liability claims losses will be half of what they accounted for the previous year, both in terms of the overall percentage of claims and the cost. There also were sizeable decreases in inland marine and buildings and contents net incurred losses.

So, in a comparison of the two years you will see that net in-curred loss expenses for 2012 have increased by approximate-ly $1 million from the previous policy year. Again, it is important to remember that these figures can change as outstanding claims are resolved.

If you look at the chart showing the 5-year average, you will see that general liability accounted for the most incurred losses, followed by buildings and contents. And the 5-year average for the total net incurred losses stood at about $3.3 million.

AL Auto Liability

APD Auto Physical Damage

BC Buildings and Contents

GL General Liability

IM Inland Marine

LEL Law Enforcement Liability

POL/EPL Public Officials/Employment Practices Liability


claim countsAND LOSSES

0

5

10

15

20

25

30

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

'00 '01 '02 '03 '04 '05 '06 '07 '08* '09 '10 '11 '12

Clai

m C

ount

Ave

rage

sev

erit

y

Contract Year

LEL Claim with Costs & Estimated Average Severity -- June 30, 2012

Estimated Ultimate Average Severity Claim w/CostSource: Appendix E, 6/30/12 Actuary Report *2008 was an 11 month yeear.

0

5

10

15

20

25

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

'04 '05 '06 '07 '08* '09 '10 '11 '12

Clai

m C

ount

Ave

rage

sev

erit

y

Contract Year

POL/EPL Claim with Costs & Estimated Average Severity -- June 30, 2012

Estimated Ultimate Average Severity Claim w/Cost

Source: Appendix E, 6/30/12 Actuary Report *2008 was an 11 month yeear.

0

50

100

150

200

250

300

350

400

450

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

'00 '01 '02 '03 '04 '05 '06 '07 '08* '09 '10 '11 '12

Clai

m C

ount

Ave

rage

sev

erit

y

Contract Year

WC Claim with Costs & Estimated Average Severity -- June 30, 2012


Source: Appendix E, 6/30/12 Actuary Report *2008 was an 11 month yeear.

0

20

40

60

80

100

120

140

160

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

'00 '01 '02 '03 '04 '05 '06 '07 '08* '09 '10 '11 '12

Clai

m C

ount

Ave

rage

sev

erit

y

Contract Year

GL Claim with Costs & Estimated

Average Severity -- June 30, 2012


Source: Appendix E, 6/30/12 Actuary Report GL excluding LEL *2008 was an 11 month year.

Here we provide an interesting look at annual claim counts and their average severity in terms of costs.

The graph on the top left shows how general liability claims have been trending. In the early 2000s we saw a noticeable increase in claims and average costs. After 2004 the number of claims with cost declined significantly and since then has only increased modestly, though the average cost of these claims has varied significantly and is now much higher than it was 10 years ago.

In recent years, again we’ve seen a steady increase in the number of general liability claims and their severity. With the exception of 2011, the average severity has been between $9,000 and $12,000.

In the graph on the top right, we provide a similar look at law enforcement liability claims going back to 2000. You will notice here that while total claims and ex-penses have been moderating, in three of the past four years the average severity has been between $25,000 and $30,000, which is nearly three times higher than the cost of an average general liability claim.

Our third graph, printed on the lower left, takes a look at public officials/employment practices liability, which NIRMA began providing within the pooled program in the 2003-2004 policy year. What is interesting here is that while the number of claims spiked in 2009 and 2011, the average severity of each claim remained relatively modest. Yet in 2010 and 2012 we saw a de-crease in the number of claims, but an increase in the severity/cost.

Finally, the graph on the lower right focuses on workers’ compensation claims. You will see that over the past 12 years the number of claims has remained fairly static, not experiencing the peaks and valleys of the other three lines of coverage. At the same time, the average severity of a claim has been relatively consistent, with the noticeable exceptions being 2010 and 2011 when they topped the $8,000 and $10,000 mark, respective-ly. For 2012 we saw the severity recede back to where it was prior to 2010 and 2011.

A critical element when determining the annual fund-ing levels for NIRMA and NIRMA II and establishing the annual contribution levels for members is examining a re-port prepared by our independent actuaries that projects losses for the coming policy year.

Over the years, the size of NIRMA’s membership and the total exposure that is insured have steadily increased. So as these two areas have increased, so too has the potential for losses.

Working with our members’ loss data, the independent actuaries are able to provide a fairly accurate forecast for what the pools can anticipate in terms of total losses for the policy year ahead and the funds that will be needed to pay for them. This represents the largest share of the overall funding pie. Also taken into account are our own excess/reinsurance costs and administrative costs.

In this series of graphs we take a look at both NIRMA and NIRMA II net incurred losses since 2000 and how they have compared with what had been projected. Years that come in under the actuaries’ projections are consid-ered positive; years where losses exceed what had been projected are viewed as negative.

The first graph shows NIRMA’s property and liability losses. The thing you will notice is that in each of the past four years our net incurred losses have exceeded what had been projected. This has resulted in NIRMA spending or reserving more to pay claims than our actu-aries had anticipated.

You see that for 2012, losses of just over $3.5 million had been projected, but in reality they currently stand at $4.5 million. However, keep in mind that this figure can change as more of the claims that remain open are resolved.

The fact that we are seeing net incurred claims exceed projections should serve to further underscore the impor-tance of members’ loss prevention activities.

Turning your attention to the second graph, here we show that for 2012 the net incurred workers’ compensation losses for NIRMA II had a positive year, coming in at just under $500,000 less than what had been projected. This is very encouraging as the previous two years saw in-curred claims greater than had been anticipated.

The third graph provides a look at combined net incurred losses for NIRMA and NIRMA II versus what the actuar-ies had projected.

As mentioned at the outset, one could safely assume that projected losses would increase as the pools’ mem-bership and total exposure increased each year, com-bined with members’ loss history, and that is depicted by this graph. Since 2000, we have seen an annual increase in projected losses, growing from just under $3 million at the start of the new millennium to over $7 million for the 2011-2012 policy year.

You will see for many of those years the combined net incurred losses of NIRMA and NIRMA II came in under the projections. Unfortunately, in each of the past three years that has not been the case and that reflects the cyclical nature of losses and insurance.

VS.

www.nirma.info 17

NET INCURRED LOSSES VSACTUARIAL PROJECTED LOSSES

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2000 2001 2002 2003 2004 2005 2006 2007 2008* 2009 2010 2011 2012

Thou

sand

s

Contract Year

NIRMA Net Incurred Losses vs Actuarial Expected Losses As of June 30, 2012

Tl Net Incurred Actuarial Projected

Source: NIRMA DOI annual statement 6/30/2012 actuary premium indication report 8/1/2010-2012 * 2008 was an 11 month year.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2000 2001 2002 2003 2004 2005 2006 2007 2008* 2009 2010 2011 2012

Thou

sand

s

Contract Year

NIRMA II Net Incurred Losses vs Actuarial Expected Losses

As of June 30, 2012

Tl Net Incurred Actuarial ProjectedSource: NIRMA II DOI annual statement 06/30/2012

actuary premium indication report 08/01/2010-2012

* 2008 was an 11 month year.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2000 2001 2002 2003 2004 2005 2006 2007 2008* 2009 2010 2011 2012

Thou

sand

s

Contract Year

NIRMA & NIRMA II Net Incurred Losses vs Actuarial Expected Losses As of June 30, 2012

Tl Net Incurred Actuarial Projected

Source: NIRMA/II DOI annual statement 06/30/2012 actuary premium indication report 08/01/2010-2012 *2008 was an 11 month year.

Combined Average Claim Cost for NIRMA & NIRMA II

2012 $7,224.752011 $6,536.082010 $6,149.292009 $5,010.912008 $3,418.022007 $4,376.62

2006 $4,976.342005 $3,552.812004 $3,800.682003 $3,625.812002 $3,504.392001 $2,757.86

2000 $2,954.221999 $1,723.931998 $2,038.851997 $2,285.551996 $1,842.151995 $1,624.66

1994 $2,506.471993 $1,777.551992 $1,933.471991 $2,052.31


averageCLAIM COST

On average, NIRMA II workers’ compensation claims have been more expensive over time than NIRMA prop-erty and liability claims, as is indicated in this graph.

But for the 2011-2012 policy year, we saw the aver-age cost of a property/liability claim overtake workers’ compensation for only the second time in 19 years. The average cost of a property/liability claim was $8,119.87 while the average cost of a workers’ compensation claim was $6,240.99.

A couple of factors contributed to this reversal. First, there was a significant increase in general liability claims, with net incurred losses totaling over $2 million, or 27 percent more than the preceding year. Second, the aver-age workers’ compensation claim cost for 2011-2012

was nearly $1,400 less than the average for the 2010-2011 policy year. NIRMA II’s average claim cost for 2011-2012 was $6,240.99, which is still relatively high, but it is understandable when you take into account the severity of some of the claims, the rising costs for medi-cal treatment, and inflationary increases.

Also shown here is a table that lists the combined aver-age claim cost for NIRMA and NIRMA II dating back to 1991. It should be no real surprise that the aver-age cost has increased over the years, due to the ever increasing costs of medical care, increasing litigation costs, inflationary pressures, and the general cost of do-ing business. That is why the best way to control claim costs is not to have a claim at all.

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

Average Net Incurred Claim Cost

As of June 30, 2012

NIRMA NIRMA II

Source: NIRMA/NIRMA II DOI annual statement

*2008 was an 11 month year

VS.

www.nirma.info 19

For many years, employers found themselves paying more in lost time wages for their employees who had been injured on the job than they were paying for actual medical treatment costs. Times have changed, however.

As you will see illustrated in these three graphs, NIRMA II has seen a significant increase over the past 15 years in what is spent for medical treatment of injured employ-ees compared to what is paid out as indemnity/wage expenses.

In the first graph, which represents 1998-2002, you will see that NIRMA II spent an average of $27,200 per in-demnity claim while the average medical cost was $452. You will note that medical costs were 57 percent of what was paid out then, with indemnity expenses making up 43 percent.

Moving on to the second graph, you will begin to see a shift. For 2003-2007, medical costs represented 59 percent of our workers’ compensation overall expenses compared to 41 percent for indemnity. The average claim cost for both indemnity expenses and medical treatment costs increased.

For the most recent 5-year period, we again saw medical costs comprise a larger share of the expenses than what was paid in indemnity expenses. But what is important to point out is that the average claim cost for indemnity expenses actually decreased, while medical costs rose yet again.

To provide a further perspective, if you compare the average indemnity expenses from 1998-2002 with the 2008-2012 average, we saw an increase of just 16 percent. However, drawing a comparison of the medi-cal costs for the same two time frames, those expenses increased by 113 percent.

Of course, a major contributor to this obviously is the es-calating medical costs we have been experiencing. But we should also note that we are seeing a smaller per-centage spent for indemnity expenses as a result of the managed care program NIRMA II utilizes and the prompt medical treatment injured employees receive which al-lows an employee to return to work more quickly, and the emphasis that is placed on encouraging light duty accommodations and return to work plans for employees who have been injured.

MEDICAL COSTS VS INDEMNITY EXPENSES

Indemnity, 43%

Medical, 57%

1998-2002 5 year average

Indemnity

Medical

Average claim cost Indemnity: $27,200 Medical: $452

Indemnity, 41%

Medical, 59%

2003 - 2007 5 year average

Indemnity

Medical

Average claim cost

Indemnity: $33,827 Medical: $582

Indemnity, 29%

Medical, 71%

2008-2012 5 year average

Indemnity

Medical

Average claim cost Indemnity: $31,501 Medical: $963

January 1, 2003, through December 31, 2007 (Based on 2,324 Injury Reports)

Percent of

Body Part Total All Injuries

Multiple Body Parts 321 13.81

Knee 224 9.64

Lower Back Area (Inc. Lumbar) 220 9.47

Finger(s) 174 7.49

Shoulder(s) 127 5.46

Hand 108 4.65

Eye(s) 104 4.48

Ankle 80 3.44

Lower Arm 65 2.80

Thumb 65 2.80

Elbow 64 2.75

Wrist 63 2.71

Multiple Upper Extremities 62 2.67

Body Systems and Multiple Body Systems 62 2.67

Foot 51 2.19


Percent of Body Part Total All InjuriesMultiple Body Parts 370 14.09Knee 260 9.90Lower Back Area (Inc. Lumbar) 251 9.56Finger(s) 196 7.46Shoulder(s) 154 5.86Multiple Upper Extremities 124 4.72Hand 112 4.27Eye(s) 101 3.85Lower Leg 89 3.39Ankle 83 3.16Multiple Lower Extremities 78 2.97Wrist 77 2.93Foot 74 2.82Lower Arm 70 2.67Skull 65 2.48


prevalentINJURIES

When a member submits a first report of injury, NIRMA II in turn reports the injury to the Ne-braska Workers’ Compensation Court which classifies injuries by more than 50 different body parts.

These tables will give you an idea of the body parts that have been injured most frequently during the past 10 years by NIRMA member employees. We have divided them into 5-year increments and have limited the types of injuries to the top 15.

For 2003-2007, NIRMA II received 2,324 injury reports. For the next 5-year period, that total in-creased to 2,626. You will see that the five most frequently injured body parts remained consis-tent over the past 10 years.

Multiple body parts is a category the court ap-plies when more than one major body part has been affected, such as an arm and a leg. There were 321 of these injuries in 2003-2007. That increased to 370 for 2008-2012.

The next four most frequently injured body parts have been the knee, lower back, finger and shoulder.

When we compared these two tables, we no-ticed that in 2008-2012 the number of injuries being reported in the multiple upper extremities classification had doubled from the previous 5-year period and had climbed to sixth on the frequency list. These are injuries that involve any combination of the arm, elbow or fingers. There were 124 of these injuries reported in 2008-2012 compared to 62 in 2003-2007.

The remainder of injuries reported during both time periods were fairly similar, with only a few minor changes in the type of injury or the total that was reported.


Percent of

Cause of Injury Total All Injuries

Fall or Slip – Miscellaneous 215 9.31

Strain or Injury by – Miscellaneous 179 7.75

Strain or Injury by – Lifting 164 7.10

Miscellaneous Causes – Other 117 5.06

Fall or Slip – On Ice or Snow 110 4.76

Miscellaneous Causes – Person in Act of Crime 97 4.20

Cut, Puncture, Scrape – Miscellaneous 96 4.16

Cut, Puncture, Scrape – Object being Lifted or Handled 71 3.07

Miscellaneous Causes – Absorption, Ingestion, Inhalation 71 3.07

Fall or Slip – From a Different Level 69 2.99

Cut, Puncture, Scrape – Hand Tool or Utensil 67 2.90

Strain or Injury by – Twisting 65 2.81

Strain or Injury by – Pushing or Pulling 64 2.77

Fall or Slip – On Stairs 60 2.60

Struck or Injured by – Falling or Flying Object 59 2.55

January 1, 2008, through December 31, 2012(Based on 2,626 Injury Reports)

Percent of Cause of Injury Total All InjuriesFall or Slip – Miscellaneous 316 12.04Miscellaneous Causes – Person in Act of Crime 192 7.31Fall or Slip – On Ice or Snow 174 6.63Strain or Injury by – Twisting 170 6.48Strain or Injury by – Lifting 137 5.22Strain or Injury by – Miscellaneous 100 3.81Struck or Injured by – Object being Lifted or Handled 93 3.54Struck or Injured by – Falling or Flying Object 88 3.35Fall or Slip – From Different Level 85 3.24Strain or Injury by – Pushing or Pulling 82 3.12Miscellaneous Causes – Absorption, Ingestion, Inhalation 79 3.01Struck or Injured by – Animal or Insect 68 2.59Cut, Puncture, Scrape – Object being Lifted or Handled 65 2.48Fall or Slip – On Stairs 55 2.10Motor Vehicle – Miscellaneous 55 2.10Miscellaneous Causes – Foreign Matter (Body) in Eye 54 2.10

When one talks about workers’ com-pensation injuries, it is also important that we consider what caused those injuries. With these tables we provide a look at the top 15 causes of injuries reported by NIRMA members over the past 10 years.

For the sake of making comparisons, these also have been divided into 5-year increments.

The first thing you will notice in comparing the two tables is that NIRMA II has seen an increase in the number of injuries that were reported. For the period of 2003-2007 there were 2,324 injury reports. For 2008-2012 that number grew to 2,626.

Falls and slips have been the most common cause of injuries over the past 10 years. These are followed by strains or injuries caused by lifting, twisting, pulling or pushing.

Other frequent reports include cuts and punctures that were caused by various tools or other items being handled, injuries caused by objects that either fell or were flying, those that were the result of absorption, in-gestion or inhalation, and those where a person was injured as a result of physical contact with another person involved in a criminal act.

As you can see from your review of these tables, the Nebraska Workers’ Compensation Court has multiple classifications of causes that can produce a similar injury.

www.nirma.info 21

prevalent causesOF INJURIES

NIRMA

Independent Auditors’ Report We have audited, in accordance with auditing standards generally accepted in the United States of America, the statutory basis balance sheets of Nebraska Intergovernmental Risk Management Association as of June 30, 2012 and 2011, and the related statutory basis statements of income, changes in surplus, and cash flows for the period then ended (not presented herein); and in our report dated August 31, 2012, we expressed an unqualified opinion on those statutory basis financial statements. In our opinion, the information set forth in the accompanying condensed financial statements is fairly stated, in all material respects, on a statutory basis, in relation to the financial statements from which it is derived.

Lincoln, Nebraska August 31, 2012 BALANCE SHEETS - STATUTORY BASIS AS OF JUNE 30, 2012 AND 2011 Assets: 2012 2011

Cash on deposit 3,334,504$ 4,406,839 Short-term investments Common stock 298,140 284,654 Other short-term investments 2,156,012 1,013,975 Long-term investments 11,044,917 11,244,482 Real estate 814,869 826,800 Accrued investment income 294,986 234,527 Premiums receivable 3,197,571 3,136,160 Recoverable on paid claims 88,227 181,483 EDP equipment 14,874 10,147

Total Assets 21,244,100$ 21,339,067

Liabilities:Reserve for claims 4,538,207$ 5,271,024 Reserve for adjusting claims 1,437,358 1,624,597 Unearned future premiums 4,535,818 4,443,336 Draft liability 84,844 70,725 Taxes, licesnes, fees 60,702 57,438 Accounts payable 175,975 188,349

Total Liabilities 10,832,904 11,655,469

Surplus 10,411,196 9,683,598

Total Liabilities and Surplus 21,244,100$ 21,339,067

STATEMENTS OF INCOME AND CHANGES IN SURPLUS - STATUTORY BASIS FOR THE PERIOD ENDED JUNE 30, 2012 AND 2011

2012 2011

Net premiums earned $ 4,410,902 4,442,935 Net losses incurred (1,687,406) (1,408,693)Loss expenses incurred (898,795) (939,275)

Other underwriting expenses incurred (1,129,863) (1,182,767)

Net investment income earned 507,925 456,000

Net Income 1,202,763 1,368,200

Unrealized capital gain (loss) 597,023 391,794

Change in non-admitted assets (574,817) (235,113)

Dividends to members (497,371) -

Net change in surplus 727,598 1,524,881

Surplus at beginning of year 9,683,598 8,158,717

Surplus at end of year $ 10,411,196 $ 9,683,598

NIRMA II

Independent Auditors’ Report We have audited, in accordance with auditing standards generally accepted in the United States of America, the statutory basis balance sheets of Nebraska Intergovernmental Risk Management Association II as of June 30, 2012 and 2011, and the related statutory basis statements of income, changes in surplus, and cash flows for the period then ended (not presented herein); and in our report dated August 31, 2012, we expressed an unqualified opinion on those statutory basis financial statements. In our opinion, the information set forth in the accompanying condensed financial statements is fairly stated, in all material respects, on a statutory basis, in relation to the financial statements from which it is derived.

Lincoln, Nebraska August 31, 2012 BALANCE SHEETS - STATUTORY BASIS AS OF JUNE 30, 2012 AND 2011 Assets: 2012 2011

Cash on deposit 4,176,089$ 4,709,421 Short-term investments Common stock 1,038,267 987,391 Other short-term investments 2,029,759 946,845 Long-term investments 10,304,116 10,588,948 Accrued investment income 246,957 206,986 Premiums receivable 2,642,787 2,779,049 Recoverable on paid claims 32,977 62,961 EDP equipment 16,296 11,285

Total Assets 20,487,248$ 20,292,886

Liabilities:Reserve for claims 5,379,406$ 5,513,449 Reserve for adjusting claims 395,339 445,607 Unearned future premiums 4,542,191 4,384,647 Draft liability 106,837 84,055 Accounts payable 103,896 97,435

Total Liabilities 10,527,669 10,525,193

Surplus 9,959,579 9,767,693

Total Liabilities and Surplus 20,487,248$ 20,292,886

STATEMENTS OF INCOME AND CHANGES IN SURPLUS - STATUTORY BASIS FOR THE PERIOD ENDED JUNE 30, 2012 AND 2011

2012 2011

Net premiums earned $ 4,325,476 3,999,566 Net losses incurred (2,832,313) (3,264,973)Loss expenses incurred (325,377) (468,694)Other underwriting expenses incurred (886,894) (956,574)Net investment income earned 395,074 376,562

Net Income 675,966 (314,113)

Unrealized capital gain (loss) 155,135 93,473

Change in non-admitted assets (142,722) (52,053)

Dividends to members (496,493) -

Net change in surplus 191,886 (272,693)

Surplus at beginning of year 9,767,693 10,040,386

Surplus at end of year $ 9,959,579 $ 9,767,693


AUDIT REPORT

IDENTIFICATIONI, Lisa Dennison, President, am associated with the firm, By the Numbers Actuarial Consulting, Inc. I am a Member of the American Academy of Actuaries, a Fellow of the Casualty Actuarial Society, and a Fellow of the Conference of Consulting Actuaries and meet their qualification standards for statements of actuarial opinion regarding fire and casualty insurance company statutory Annual Statements. I was appointed by the Board of Directors of the Nebraska Intergovernmental Risk Management Association on June 25, 1993 to render this opinion and By the Numbers Actuarial Consulting, Inc. was appointed on November 19, 1999.

SCOPEI have examined the actuarial assumptions and methods used in determining the reserves listed in the Annual Statement of the Association as prepared for filing with state regulatory officials, as of June 30, 2011.

My examination of the loss and loss adjustment expense reserves was based upon data and related information prepared by the Association. In this regard, I relied on Mr. Craig Nelson, Executive Director, and Ms. Tammy Neff, Information Systems Manager, of the Association, as to the accuracy and completeness of the data. I evaluated the data used directly in my analysis for reasonableness and consistency. My evaluation did not reveal any data points materially affecting my analysis that fell outside the range of reasonable possibilities. In performing this evaluation, I have assumed that the Association used its best efforts to supply accurate and complete data and did not knowingly provide any inaccurate data. I also reconciled the paid loss and loss adjustment expenses amounts and case reserves amounts as of June 30, 2011 used in my analysis against Schedule P of the current Financial Statements. In other respects, my examination included the use of such actuarial assumptions and methods and such tests of the calculations as I considered necessary.

OPINIONIn my opinion, the amounts carried in the balance sheet on account of the items identified above:

A) Meet the requirements of the insurance laws of Nebraska.

B) Are consistent with reserves computed in accordance with Standards of Practice issued by the Actuarial Standards Board (including the Casualty Actuarial Society’s Statement of Principles Regarding Property and Casualty Loss and Loss Adjustment Expense Reserves); and

C) Make a reasonable provision for all unpaid loss and loss expense obligations of the Association under the terms of its contracts and agreements.

RELEVANT COMMENTSThere have not been any significant changes in the actuarial assumptions and/or methods from those employed last year.

This is the eighteenth opinion I have rendered for the Association. An actuarial report and underlying work papers supporting the findings expressed in this Statement of Actuarial Opinion have been provided to the Association to be retained for a period of seven years at its administrative offices and available for regulatory examination.

This statement of opinion is solely for the use of, and only to be relied upon by, the Association and the various state departments with which it files its Annual Statement.

Sincerely,

Lisa Dennison, FCAS, FCA, MAAAPresident and Consulting ActuaryBy the Numbers Actuarial Consulting, Inc.Suite 1005213 Country Club DriveBrentwood, TN 37027(615) 369-0753

January 17, 2012

for the Nebraska Intergovernmental Risk Management Association and Nebraska Intergovernmental Risk Management Association II as of 6/30/11

www.nirma.info 23

statement ofACTUARIAL OPINION


2013PROSPECTIVEWhat might our membership expect to see in the com-ing year from NIRMA? What is likely to happen in 2013 from an insurance and risk management perspective that our members should be interested in? Honest questions. Some answers are relatively clear, others a bit fuzzy.

NIRMA has an advantage with our underwriters in that we went through a recommitment process last year and with the complete and total recommitment of our eligible membership we are confident in the stability of our mem-bership and exposure base as we look ahead. It is easier to underwrite a risk that is not a moving target.

In addition, NIRMA’s relationship with County Reinsurance, Limited, and its other member county pools from across the country, helps to cushion the effects of the insurance market on our programs to a degree, but the trends of the insurance industry are still to be watched closely.

As a rule, insurers depend on generating investment income on collected premiums to supplement their underwriting results. Pools such as NIRMA are affected by lackluster investment returns, too. Interest rates are projected to stay low for several years so emphasis on sound underwriting practices will be more evident in pric-ing coverage.

A general perception of the insurance industry in 2013 is that the pricing and conditions from an underwriting per-spective are being scrutinized more than ever by insurers. Markets are no longer soft, but hardening, meaning most insurance buyers can expect to pay more for their cover-age in the foreseeable future.

Workers’ compensation is the biggest challenge in the in-dustry. There have been too many years of combined loss and expense ratios well in excess of the acceptable 100 percent mark. Most casualty markets seem to expect 5 to 10 percent increases in 2013.

Property rates were expected to stay relatively flat prior to Superstorm Sandy hitting the Northeast coastal states.

The insurance industry has operated on the perception that the past is a reliable indicator of the future and yet it seems we have suffered natural catastrophes that are described as “one-in-500-year events” on a regular basis in recent years. Property rates will likely see some movement upward, although nothing extreme. In addition, FEMA is looking to remap many properties, moving them into Flood Zone A which will likely result in increased flood coverage costs for members buying flood coverage.

Although it may seem at times like we have little to no control over what we pay for our insurance coverage, that perception is not true. One way is to take on more of the loss potential with higher retention and deductible levels. Increasing the amount of loss you assume will result in a reduction in the up-front cost of insurance coverage. Of course, if an insured chooses to increase deductibles, an even greater emphasis should be paid to risk manage-ment.

Attention to the loss prevention aspect of risk manage-ment will in most instances reduce the frequency and se-verity of losses. Any loss reduction is to the benefit of the insured and the insurer. One of the most practical loss prevention tactics that can be taken in the next year to affect your insurance cost is to look to transfer risk when possible through the contracts you enter into. NIRMA has expended considerable effort to help members man-age and mitigate risk associated with contracts.

Although inflation is low, loss costs are increasing with no end in sight. Being a member of a pool significantly helps control those increasing costs. Take advantage of the enhanced services that we have tailored for our members. These are not typically available through the commercial insurance market and are there to help you control and prevent losses. Visit NIRMA’s website – www.nirma.info – to see the full array of services your membership in NIRMA provides.

Claims Management Software Provider CSC RISKMASTER

200 West Cesar Chavez

Austin, TX 78701

Independent Actuary By The Numbers Actuarial Consulting, Inc.

5213 Country Club Drive, Suite 100

Brentwood, TN 37027

Independent Auditor Thomas, Kunc & Black, L L P

300 North 44th Street, Suite 200

Lincoln, NE 68503-3706

Information Technology Engineers Five Nines Technology Group

1560 South 70th Street

Lincoln, NE 68506

Medical Bill Review Service Stratacare, LLC

17838 Gillette Avenue

Irvine, CA 92614

Member Human Resource and Employment Law Consulting Woods & Aitken LLP

10250 Regency Circle, Suite 525

Omaha, NE 68114

Online Education Partner LocalGovU

a Division of U, Inc.

11225 College Boulevard, Suite 400

Overland Park, KS 66210

Pool Administration Nebraska Risk Management Association, Inc.


Lincoln, NE 68501

Printing Services Cornerstone Print & Marketing

1201 Infinity Court

Lincoln, NE 68512

Property Appraisal Services HCA Asset Management, LLC

d/b/a Hirons & Associates, Inc.

225 East Fairmount Avenue

Milwaukee, WI 53217

Reinsurer County Reinsurance, Limited

6201 Towncenter Drive, Suite 240

Clemmons, NC 27012

Workers’ CompensationCertified Managed CareServices

OHARA, LLC

300 Cherapa Place, Suite 502

Sioux Falls, SD 57109-9527

Craig Nelson Executive Director

Terry Baxter Law Enforcement and Safety Specialist

Tim Baxter Road Safety and Loss Prevention Specialist

John Christensen Property/Liability/Workers’ Compensation Claims Adjuster

Pat Clancy Loss Prevention Assistant

Pete Eiden Property/Liability Claims Manager

Chad Engle Loss Prevention and Safety Specialist

Denise Hardison Workers’ Compensation Claims Manager

Bill Hilton Property/Liability Claims Adjuster

Lisa Kelly Workers’ Compensation Claims Adjuster

Shawna Lammers Administrative Assistant

Traci Miller Member Services Assistant

Tammy Neff Information Systems Manager

Larry Pelan Underwriting and Risk Manager

Andrea Thieman Budget and Finance Manager

Marshall Tofte Communications and Events Manager

Sophia Viteri Accounting Assistant

www.nirma.info

service providers

staff

CenterStone Building


P.O. Box 85210

Lincoln, NE 68501-5210

402.742.9220

www.nirma.info

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