LMCIT returning $25 million property/casualty dividend for 2016
The League of Minnesota Cities Insurance Trust (LMCIT) Board of Trustees is happy to announce the return of $25 million to members of the property/casualty program for 2016. The dividend, along with a detailed explanation of the dividend formula and calculation, will be distributed mid-December to those who are property/casualty members as of Dec. 1, 2016.
Largest dividend in LMCIT history
Members of the property/casualty program will share in a $25 million dividend this year, bringing the total amount of returned dividends since 1987 to $320 million.
Factors driving the 2016 dividend
This year’s dividend amount is largely driven by three factors:
- After a thorough actuarial evaluation of projected loss costs, it was determined LMCIT could decrease its estimates for outstanding liabilities on old claims that were incurred before May 31, 2015. The decrease is due primarily to favorable claim development in recent years for property claims (fewer weather-related events) and liability claims (especially in the areas of land use and employment liability).
- The cost of new property, auto liability, and general liability (the most significant being liability for police, land use, and sewer backups) claims that were incurred after May 31, 2015, is less than what LMCIT projected when it set premium rates last year. That good experience is reflected in this year’s dividend.
- For the past couple years LMCIT has been dealing with a large number of claims alleging violation of the Drivers’ Privacy Protection Act (DPPA). Because there are so many of these claims and because they involve some complex legal issues, there’s a lot of uncertainty about what these claims might ultimately cost. Because of this, LMCIT has been holding some additional funds as a hedge against what they might ultimately cost. However, some favorable court decisions and the fact that very few new DPPA claims have been submitted means that the uncertainty of these claims has lessened. This in turn means that LMCIT is now able to release some of the extra funds. When these claims are ultimately resolved, LMCIT hopes to be able to return the rest to cities too.
In any given year, the dividend amount is really looking at members’ claim experience (and other factors) for past years, while the rates LMCIT sets is really looking at what it projects claim experience will be in the future. LMCIT sets rates with a cushion, or margin, to make sure it can cover losses even if they turn out to be more than projected. When loss experience is good, that cushion isn’t needed and can be returned to members.
For 2016, members should be very proud of their continued dedication toward controlling expensive losses. The LMCIT Board weighs lots of factors when deciding how much dividend to return, all while ensuring LMCIT remains fiscally responsible to its members. Members will receive a check for their share of the $25 million dividend mid-December.