2004 Comprehensive Annual Financial Report

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CITY OF SOUTH BEND NOTES TO FINANCIAL STATEMENTS (Continued) L. Property Held For Resale The City,s Redevelopment Commission has purchased properties in blighted areas for redevelopment and subsequent resale. At December 31, 2004, the market value of these properties was not known. These properties are recognized as assets in the funds that purchased the property. IV. Other Information A. Risk Management The primary government is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; job related illnesses or injuries to employees; medical benefits to employees, retirees, and dependents; and natural disasters. The risks of torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters are covered by commercial insurance from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverage for the past three years. There were no significant reductions in insurance by major category of risk. Liability Insurance The primary government has chosen to establish a risk financing fund for risks associated with job related illnesses or injuries to employees, automobile liability, and comprehensive liability. The risk financing fund is accounted for in the Liability Insurance Premium Reserve Fund, an internal service fund, where assets are set aside for claim settlements. An excess policy through commercial insur- ance covers individual claims in excess of $250,000 per year for job related illnesses or injuries to employees, $50,000 per year for police autos and $100,000 for other autos' automotive liability, and $50,000 for comprehensive liability. Settled claims resulting from this risk did not exceed commercial insurance coverage in the past three years. A premium is charged to each fund based on a study of paid claims and based on the number of employees and percent of the total budget. Provisions are also made for unexpected and unusual claims. Claim expenditures and liabilities of the fund are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported (IBNRs). Claim liabilities are calculated considering the effects of inflation, recent claim settlement trends including frequency and amounts of pay outs and other economic and social factors. Changes in the balance of claim liabilities during the past two years are as follows: Unpaid claims, beginning of fiscal year Incurred claims and changes in estimates Claim payments Unpaid claims, end of fiscal year I% 2003 2004 343,876 $ 414,884 1,044,054 1,959,330 973,046 1.617.993 414,884 $ 756,221