How It All Began
The availability and affordability of insurance is cyclical. In the mid 1980’s, the cycle hardened. Government agencies across the country were experiencing incredible rate increases or were cancelled all together. This “hard market” was driven by unfavorable loss experience and a sour national/international economy.
This crisis hit Montana hard in the mid 1980’s. Many of our cities and towns were cancelled or unable to obtain affordable liability insurance. In response to this crisis, the Montana League of Cities and Towns Insurance Trust (MLCT) was created. Conventional insurance markets were unable to help. After researching the options, the evidence suggested pooling provided a device whereby government could take back control of the management of its insurance needs.
The Trust proposed to sell tax-exempt revenue bonds, backed by the taxing authority of participating cities and towns, to raise capital. Unfortunately, legislation in existence at the time precluded the sale of bonds for this purpose. Therefore, the Trust approached the 1986 special session of the State Legislature and within two weeks Senate Bill 2 was drafted and passed authorizing the issuance of program bonds. This legislation received almost unanimous support, passing both houses with only three dissenting votes. The legislation authorized Montana political subdivisions, either individually or jointly, to self-insure and incur debt to fund insurance reserves. Key features of this legislation included:
- Debt issued for insurance purposes may be issued over and above any pre-existing debt limitations; and
- Premiums, including those paid to service debt, may be levied as a property tax over and above any pre-existing levy limitation.
However, it was determined that the Trust could not statutorily, sell bonds. Therefore, to better facilitate financial opportunities, the Trust was transformed into the Montana Municipal Insurance Authority (MMIA) on July 1, 1986.
From this inauspicious beginning, the MMIA has become the leader in the management of municipal risks. With assets approaching $116 million, the MMIA is widely recognized as the authority for management of local government risks. The MMIA Programs provide broad forms of coverage with very competitive premiums and offer a broad range of risk management and related assistance to the membership.
Wanting to emphasize that MMIA is a member service organization and not an insurance company, the name was officially changed as of July 1, 2009 to Montana Municipal Interlocal Authority. The new name conveys the important role of the interlocal agreements with our member entities and removes the insurance connotation because MMIA is truly “The Insurance Alternative”. MMIA is a group of cities and towns collectively pooling resources to manage risk and reduce the costs for municipal tax payers. The name has changed, but the MMIA remains dedicated to providing service and stability.
Worker's Comp - 1986
The Trust/MMIA Workers’ Compensation Program started with limited offerings and 13 member entities from across the state. Within a few months the membership quadrupled to well over 50. In 1990 the Program was capitalized with the sale of $7.6 million of tax exempt revenue bonds and bolstered by a refunding bond issue in 1993. Each member of the program is responsible for their proportionate share of the bond issue.
Today, membership stands at 107 incorporated cities and towns across Montana from an eligible pool of 129. Annual revenues exceed $7 million and total assets are approaching $40 million. The Program provides coverage to an average municipal workforce of 6700. The Program has total net assets (member surplus) of over $8 million and has returned more than $12 million in dividends to the Program membership.
A portion of the proceeds from the sale of the bonds are utilized to financially support individual losses up to a maximum of $1 million per occurrence. Montana statute requires that claims be covered to the statutory obligated limits. The MMIA has accessed national and international excess and reinsurance markets to provide coverage above our attachment point to the statutory limits. Over the life of the Program, the attachment point has varied depending upon market conditions and price considerations. The current per claim attachment point is $750,000 per occurrence.
The Program operates on sound self-insurance principles, supported by annual actuarial studies and financial and independent claim audits. Members of the MMIA staff are active in the workers’ compensation self insurance industry, participating in numerous related organizations. In addition, members of staff actively lobby the Montana Legislature in support of positions that address issues pertinent to our workers’ compensation operations.
In Montana, the benefits paid to a workers’ compensation claimant are set in state statute, providing little latitude with respect to the provision of benefits. Among the keys to a successful WC Program are the prompt, effective management of claims and the effective management of provider services to the claimant. Challenges currently facing the Program include a steady growth in the number of claims and the continued inflation in medical and indemnity costs. The MMIA continues to provide coverage at rates substantially lower than those of our competitors.
Liability Program - 1986
The Trust/MMIA Liability Program started with 20 member entities and provided coverage with $500,000 per occurrence limits, with the self-insured organization retaining all of the exposure. In August 1986 the sale of $6.3 million of tax-exempt bonds, allowed the program to fund a catastrophic loss pool and expand liability coverage to the statutory limits of liability for Montana municipalities.
Today these limits are $750,000 per individual and $1.5 million per occurrence. The program has grown to a current membership of 123 cities and towns, from an eligible pool of 129. We service a broad range of members from Billings, the state’s most populous city, to Ismay, one of the smallest towns. The Program offers coverage for general liability, professional, public official’s errors and omissions, and vehicular exposures to the statutory limits of their exposures. In addition, the Program purchases excess or reinsurance to cover exposures not limited by the statutory tort caps.
In addition to standard liability coverage’s, members of the program can also receive an Employment Practices Liability Coverage (EPLC) endorsement if certain requirements are met. The EPLC will extend a member’s liability coverage to include defense costs for wrongful employment practices claims, which is otherwise excluded by the Liability Memorandum of Coverage. A member must submit various employment materials for review, along with an application for endorsement, to receive the EPLC. Currently 84 members of the program have completed the application process to receive the endorsement.
Annual revenues for the Program exceed $7 million. The Liability Program has total net assets in excess of $50 million and has returned $1.5 million to its membership in the form of dividends. Today we regularly handle approximately 700 claims each year. The main challenges facing the Liability Program are (1) the management of a claim portfolio that continues to increase in complexity and which has a direct impact on increasing average cost per claim, and (2) the increased number of litigated claims filed against members. Recently, annual claim counts have been around 700. The Program averages 250 litigated files at any given time. Two factors attribute significantly to these adverse claim trends:
Cities and towns are consistently being asked by their citizenry to provide expanded service while the monies to fund the necessary expansion have been restricted by the economy and legislatively applied restrictions on the growth of municipal budgets; and,
The expectations of local government from both its citizenry and a growing base of visitors and tourists who place increased demands on services and oftentimes bring with them increased expectations regarding the level of services provided by local government.
When the services or facilities do not meet the expectations and a third party is damaged, they frequently look to the municipality for redress.
Property Program - 1998
The MMIA Property Insurance Program was developed in response to membership requests for this form of coverage and began on July 1, 1998.
Coverage is provided under an MMIA memorandum of coverage that has been developed in conjunction with coverage provided by the Public Entities Property Insurance Program (PEPIP). PEPIP is the largest insurer of public entity property in the world. Each member of the Program has an individual per claim deductible. Above the deductible, the MMIA funds a layer of coverage, currently to an aggregate exposure of $350,000, and purchases reinsurance through GEM and the PEPIP program for limits up to $1,000,000,000 per occurrence. The Property Program funding differs from the Liability and Workers’ Compensation Programs in that it has not utilized bond proceeds as a form of funding for losses.
Up to $350,000
Up to $1,000,000
Up to $1,000,000,000
Our Program is unique in that it provides significant limits for earthquake and flood exposure as part of the regular policy. These coverage’s were not previously available to our members. In addition, the Program includes a number of benefits such as coverage for animals, art, property with historical significance, vehicles, and construction equipment.
All coverage, including vehicles and equipment, is written on a replacement cost basis, unless the member specifies otherwise. Billing is annual, based on property, equipment and vehicle schedules submitted during the annual renewal period. While members are required to report significant changes in their properties year round, ordinary changes need not be reported. There is no mid-policy premium collection for properties that are added. The Program provides $25 million of coverage for unreported exposure, eliminating the risk of a member not having coverage because a property was not on their “property list”.
The Property Program also offers two optional coverage forms -- Boiler and Machinery and Crime and Fidelity. The Program began with 21 member entities and today has 112 member entities. While the Property Program is relatively new, membership growth has been very rapid. The Program has annual revenues exceeding $1 million and provides coverage to properties valued in excess of $2 billion.
Benefits - 2004
The MMIA Employee Benefits Program is the newest program of the MMIA. It too is in response to member requests. The Montana League of Cities and Towns started the research process in the fall of 2003. After determining that a self insured group was possible, the MLCT requested that the MMIA take over the development of a program. The Board of Directors approved a resolution on May 21, 2004 authorizing the creation of an exploratory committee to further study the feasibility and development of a health care program. That committee then recommended that MMIA assume the customer service and administrative roles of a health care program. The Board of Directors approved that recommendation on August 27, 2004 to be effective October 1, 2004. The Employee Benefits Program was set up as a distinctly separate and financially independent program, just like the other programs of the MMIA.
The Program began with the 43 members from the original MLCT purchasing pool, growing to 60 by January 1, 2005. Today the program has 81 members providing benefits to over 2800 employees and their dependents. Dental and vision benefits and life insurance are also offered through the program.
As with the other Programs developed by the MMIA, emphasis will be placed on overcoming the challenges associated with health care insurance. The first and foremost is the stabilization of medical rates. Membership pooling will not eliminate the need for future rate increases, but it is the goal of the MMIA to provide quality benefits at the most affordable costs. The MMIA will continue to work to ensure the Employee Benefits Program is a stable, viable program.
The MMIA is governed by a 15-member Board of Directors. The state’s seven largest cities with a population over 20,000 have permanent seats on the Board. Seven seats are occupied by individuals representing communities with a population less than 20,000. All directors are elected or appointed for rotating two-year terms. The seated 14 Board members appoint an individual to occupy the at-large seat. No member may have more than one representative on the Board.
The MMIA originally started with a 13-member Board of Directors, but expanded to accommodate population growth within the membership on October 9, 2008. With the addition of one more Large City permanent seat, another seat was added for communities with less than 20,000 people.
The Board meets regularly, eight to ten times per year. They provide leadership for each of the Programs, which are funded and managed independently of each other.
The staff consists of 29 employees. The organization has five operational units: administration, risk management, liability/property claims, workers’ compensation claims and employee benefits. The MMIA conducts business as a full service risk retention entity and provides service exclusively to incorporated Montana cities and towns.
We are proud of our 27 years of experience addressing local government exposures and managing claims made against cities and towns. It has allowed us to develop a very specialized body of knowledge allowing us to assist our membership in ways not otherwise available. With our membership limited, we are able to focus our resources on the unique needs of Montana’s cities and towns.
Major challenges for the MMIA continue to be the diversity of our members, the size of the state and the diversity of the economy. Municipalities in eastern Montana struggle for stability, and municipalities in western Montana struggle to manage growth.
Participation in the MMIA
Application to the MMIA can be made at any time. The policy anniversary date for all coverage Programs is July 1st. All reporting and financial requirements are designed to coincide with the fiscal year July 1st to June 30th. A city or town can elect to join any or all of the coverage Programs, depending on their individual needs with one exception -- to participate in the Property Program a city or town must also be a member of the Liability Program.
If a city or town is interested in joining the MMIA, application should be made well in advance of the expiration of their current coverage. We will assist in walking you through the application process. The application process will include involvement of your governing body.
We can be reached at:
Montana Municipal Interlocal Authority
PO Box 6669
Helena, MT 59604-6669
(406) 443-0907 (800) 635-3089www.mmia.net