QC
FEATURE
INSURANCE
Keys to Safety and Prevention Risk management: You need a partner – not just a vendor by Robert Inzer
I
n the magazine’s last issue, I explained council’s risk management role and, more importantly, its responsibility. No one expects you to be an expert on risk management, but you are ultimately responsible if there is a problem. Your job is to provide oversight, ensure that the government has the policies and programs in place to adequately protect your city and monitor those policies and programs to make sure they are regularly reviewed, updated and followed. WHAT DOES RISK LOOK LIKE?
Risk comes in many forms. There are risks associated with your regulatory activities. For example, cities were very involved in regulatory risk during the COVID-19 pandemic when deciding how best to manage the risk for your citizens and employees. You also assume risk when you invest your funds. These risks relate to credit risk and interest rate risk. You can also assume risk in how you manage your debt such as the amount of outstanding debt you have and how much of it is fixed versus variable. But the risk you are probably most aware of is property and liability risk. Property losses are generally caused by fire, a water leak, falling limbs or trees or damage caused by a hurricane or other weather event. Unfortunately, your opportunity to manage these risks is limited. When an event occurs, the city has two objectives. First, get the facility back in operation as quickly as possible so there 60 QUALITY CITIES | THIRD QUARTER 2021
is minimal disruption in services. Second, minimize the damage and related costs. A building that is damaged or has a major water leak that is not addressed quickly will develop mold, and the damage will multiply. Liability claims run the gamut from falls to false arrests. Some result from negligence to maintain infrastructure or legal issues such as not following your policies in terminating employees. Aggressively managing these exposures and claims can save you significantly on your future premiums. Unlike the risks mentioned in the last issue, you can transfer the risks noted above to another entity by purchasing insurance or participating in a pooled liability program. HOW TO PROTECT YOUR CITY FROM RISK
Most cities in our state protect themselves from these risks by participating in the Florida Municipal Insurance Trust (FMIT). FMIT is large enough to distribute risk and avoid concentration risk. The large asset base gives it the flexibility to retain more risk than other pooled programs, thereby reducing the cost of purchasing reinsurance. More than twice as many Florida cities participate in FMIT than any other provider. There are many reasons why most cities choose FMIT, but the most important reason is that FMIT is your risk management partner and not just your insurance provider. Let me say that again since this DROGATNEV/ISTOCK/GETTY IMAGES PLUS/GETTY IMAGES
