Contact: Michelle Smith, ext 01962 846666 [email protected]

1 Background

At the meeting of the Committee in December Members asked for information regarding the County Council's self insurance arrangements and what evidence there is that they still provide value for money.

2 Current Position

2.1 The County Council operates a `mixed economy' in terms of insurance cover. Currently we self insure up to a limit of indemnity of £5m for:

· Public Liability

· Employers' Liability

· Officials' Indemnity

Self cover arrangements also operate for Fidelity Guarantee and Personal Accident to staff.

2.2 Property, buildings and contents including IT equipment are covered for fire, lightening, explosion and theft. School buildings are also covered for major storm and flood damage and the central IT Suite for all risks.

2.3 The County Council has external `catastrophic loss' cover with commercial insurers for public liability, employers' liability and officers' indemnity for claims over £5m or £14m aggregated in any one year.

2.4 Certain properties are also insured externally where the property is high value, the premiums can be recharged to the occupier or insurance is required under funding arrangements.

2.5 Other risks insured externally are:

· Motor Fleet

· Libel and Slander

· Liability of Hirers of County Council premises

· School journey - travel for staff/ members

· Engineering inspection

3 Reasons for Self Insurance

3.1 Self Insurance means there is a direct relationship between actual claims and the amounts paid out. The County Council is therefore protected to an extent from external influences affecting the insurance market.

3.2 There are a number of other advantages in self insurance, these include:

· Self insurance means that claims can be handled in-house which enables more control over the way they are dealt with

· More control regarding decisions about the risks it wants to carry, for instance those community type events where lower levels of insurance cover are accepted on the basis that the County Council will share the risk might not be possible if we insured externally, without a large deductible.

· An added incentive for good risk management from knowing that we have to bear the cost of claims

3.3 The main risk with self insurance is that the County Council could be faced with a catastrophic loss claim. The decision was therefore taken to self insure up to a certain limit and then take out catastrophic loss cover above that amount.

4 Review Arrangements

4.1 Ensuring that the County Council operates the most effective insurance arrangements is monitored in a number of different ways:

· All external policies are tendered on a regular basis (normally every 3 or 5 years). This exercise is currently taking place for all policies for cover commencing on 1 April 2007 with the exception of school journeys and engineering inspections

· The County Council is part of the South East Insurance Officers Group and takes part in benchmarking exercises. It is difficult however to make like for like comparisons between premiums due to differences in the size of excesses.

· The arrangements for schools is subject to a service level agreement with schools having the option to purchase their cover elsewhere. When the SLA's were last negotiated in 2005, 97% of schools signed up to the arrangements which included a number of schools buying back into the County Council's arrangements having previously insured externally.

5 Conclusions

5.1 Insurance is a complex area and subject to a high degree of market volatility. Operating a mixed economy and developing effective risk management achieves a good balance between protecting the County Council from the vagaries of the market whilst ensuring it is not exposed to `catastrophic losses.'