Minutes 08-01-2022 Special Meeting

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2 2. Ratification of County Manager's Execution of an Insurance Coverage Agreement with Travelers Insurance and Approval of a Letter of Credit Agreement The Board ratified the County Manager's execution of an agreement with Travelers Indemnity Company for Casualty and Workers' Compensation insurance coverage and approved a Letter of Credit for Travelers Indemnity Company. BACKGROUND: As part of a comprehensive risk management program, the County purchases liability, property, and workers compensation insurance. Those programs had been purchased through the North Carolina Association of County Commissioners' Risk Pools. The County marketed these programs in 2022 and has moved these programs to Travelers Indemnity Company (Travelers). The Travelers coverage offered a premium savings of over $250,000, provided more robust risk control and claim advocacy, and provided access to a state of the art risk management information system. The Travelers proposal also included a dedicated, as opposed to shared, policy limits for each claim category with the same or better coverage limits and deductibles compared to the County's former provider. Due to the timing of this conversion, the County Manager signed the agreement to purchase this insurance coverage from Travelers. This agenda item seeks ratification of the County Manager's signature from the Board of Commissioners. In addition, Travelers is requiring the County to secure a $300,000 letter of credit to guarantee the County is in a position to meet its financial obligations under the terms and conditions of the policy. This amount is equivalent to the per claim deductible for the Workers Compensation coverage. The letter of credit would only be accessed if the County failed to pay a part or all of the deductible. This practice is consistent with industry standards for loss programs. The County's current bank, Truist, will provide a letter of credit not to exceed $500,000 for a rate of 0.5% if it needs to be accessed by Travelers. Even though the FY2022-23 Budget contains sufficient funding to pay deductibles, Truist is requiring Board approval of the letter of credit since the bank considers it a debt instrument. John Roberts introduced the item. He said the county received quotes from insurance carriers after the Board's meetings ended for the previous fiscal year. He said the county would save $260,000 a year by entering into an agreement with Travelers. He said initially there was nothing that indicated that a follow-up Board meeting would be required. He said Travelers required a letter of credit, and the county's bank, Truist, required that the letter of credit be approved by the Board of Commissioners. Gary Donaldson, Chief Financial Officer, said the letter of credit would be treated as a pre-paid expense on the balance sheet. He said this is a required step by the bank. He said funds are budgeted in the FY23 budget for the expense. Commissioner McKee asked why the county would need to draw on the funds. Gary Donaldson said it would be extremely unlikely. Commissioner McKee asked why the cap on the letter of credit is $500,000 and not $300,000 as requested by Travelers. Gary Donaldson said the $500,000 cap provides additional flexibility. Commissioner Fowler asked what the purpose is of the letter of credit. Gary Donaldson said the county does not expect claim amounts that would trigger a draw on the letter of credit. He said there are budgeted funds for claim amounts. He said the letter of credit is a requirement from Travelers. He said this is additional security. He said it would be an extraordinary event to draw on the funds.