ACTUARIAL STUDY REQUEST FOR PROPOSAL

The North Dakota Insurance Reserve Fund (NDIRF) is seeking proposals from qualified firms to provide an actuarial report, including a reserve review and rate level adequacy study, as of September 30, 2002, and December 31, 2002.

GENERAL BACKGROUND

The NDIRF was formed in 1986 as a government self-insurance pool. It is a nonprofit corporation, owned by the approximately 2400 political subdivisions that purchase coverage and is governed by a representative board of directors. Member entities include cities, counties, school districts, park districts, townships, fire districts and numerous other types of special districts. Approximately ½ (1200) of the NDIRF members are townships but they account for only 5% of annual written premium volume. Cities and counties each account for approximately 33% of annual premium volume, with school districts adding an additional 16%. The remainder is made up of the various special districts.

Coverage lines offered by the NDIRF include general liability, professional liability, auto liability, auto physical damage, inland marine and scholastic injury. Approximately 4000 policies are issued annually. Coverage limits are offered up to $2 million with no annual aggregate. The NDIRF has never participated in an excess or reinsurance program. Written premium for all lines in 2001 totaled approximately $7.0 million.

PURPOSE

The purpose of the actuarial services being requested is to provide the following information:

  1. Calculation of an indicated Incurred But Not Reported (IBNR)

reserve for accident years January 1, 1986 through December

31, 2002, using data as of December 31, 2002. The valuation

date for estimated IBNR reserves is as of December 31, 2002.

  1. Provide indicated funding and rate level changes for the 2003

policy year.

  1. Provide estimates of confidence levels for required funding.
  2. Make projections of future loss payments for claims incurred

through December 31, 2002.

  1. Make projections of IBNR reporting for claims incurred through

December 31, 2002.

  1. Allocate IBNR as of December 31, 2002, by member type.

SCOPE

The scope of the work to be performed should be defined in the proposal and should include the following:

  1. Using September 30, 2002 data, project historical losses on an occurrence basis by accident year and line of coverage, to ultimate levels, based on the NDIRF’s historical retentions.
  2. Estimate ultimate losses, IBNR and outstanding losses on both

a discounted and undiscounted basis.

  1. Compare the latest estimates of ultimate loss with prior projections.
  2. Project expected losses for accident year 2002.
  3. Project cash flow outgo and changes in IBNR over the course of

future years using estimates of projected 1986-2002 losses.

  1. Calculate an Unallocated Loss Adjustment Expense reserve.
  2. Estimate appropriate deviations for the 2003 policy year from

current manual rates by line of coverage on both a discounted

and undiscounted basis.

  1. Provide estimates of funding requirements at confidence levels

of 70%, 80%, 90% and 95%.

  1. Allocate IBNR reserves by NDIRF member entity-type (i.e. cities,

counties, school districts, townships, and fire districts).

  1. Produce a preliminary draft report, including information as described in paragraph 11, below, by December 1, 2002, using September 30, 2002 data. As soon as 2002 year-end data is available, review the IBNR reserve and 2003 rate deviations to determine necessary adjustments in view of fourth-quarter 2002 loss development.
  2. Provide a final actuarial report including an executive summary (two bound copies and one unbound copy) documenting data used, conclusions, methodology and assumptions, by February 15, 2003.
  3. Provide assistance to the NDIRF’s outside financial auditor and

the North Dakota Insurance Department regarding questions

they may have on the reserve review and rate adequacy study.

INFORMATION TO BE PROVIDED

The information necessary to complete the work described herein should be identified in the proposal. The NDIRF maintains a risk management information system using the POINT software program developed for the IBM AS400 by Policy Management Systems Corporation (now Computer Sciences Corporation) of Columbia, SC.

ADDITIONAL REQUIREMENTS

In addition to the above, information should be included in the proposal regarding the identity, qualifications and experience of the individuals who will be responsible for and actually conduct the study and prepare the report. References should be provided identifying other government self-insurance pools or like organizations for which similar work has been performed by the persons who will be conducting the study and preparing the report.

ESTIMATED FEE

An estimated fee for professional services, including a maximum “not-to-exceed” amount, should be provided (including estimated travel or other expenses). In addition to the estimated fee and expenses for one annual actuarial study and report as described above, please also provide an estimated fee and expenses for performing this work under a three-year agreement with the NDIRF.

DEADLINE

Six (6) copies of the proposal should be received by the NDIRF no later than 5:00 P.M.,August 5th, 2002. The NDIRF reserves the right to accept or reject any proposal, in its sole discretion, and to award a contract based solely on the NDIRF’s determination of the best proposal considering all of the circumstances.

Questions regarding this Request For Proposal should be directed to Mr. Robert Tonolli, Chief Financial Officer of the NDIRF, at (701)-224-1988; (701)-224-0609 (FAX); or (E-mail).

T:\Word\AGRIP\Information Requests\ActuaryRFP\12402NDIRF.doc