Missouri Petroleum Storage Tank Insurance Fund Review of ...

Missouri Petroleum Storage Tank Insurance FundReview of Liabilities and Loss ProjectionsPerformed by: Kerper and Bowron LLC1. Executive SummaryThis report makes an actuarial estimate of liabilities at June 30, 2007 of 111,175K for theMissouri Petroleum Storage Tank Insurance Fund. Details of the operation of the fundare noted in Section 4. This would include a 71,266K of case reserves and a pointestimate of IBNR of 39,909K.Projections were also made on a fiscal year cash flow basis from 2008 until 2017.Projections include anticipated revenue from transport load fees and expected expensesand claims payments. Claims payments are projected for both existing claims and newclaims reported in the future. The program sunsets on December 31, 2010, and norevenue is authorized after this date. This cash flow analysis consists of 2 separatescenarios:‣ First, it was assumed that the program would sunset and no revenue would beavailable after this date.‣ Second, it was assumed that the program would be reauthorized in its currentform. However, the transport load fee was assumed to drop from $40 to $25 onJanuary 1, 2009.The variance of these forecasts in the outlying years was analyzed and found to be large.This is due to the high amount of loss development on this program, and uncertainty inthe future years on the frequency, severity and payout pattern of the fund. We took theadditional step of modeling this uncertainty to construct a range around the possibleoutcomes.Our simulations show that the range of possible outcomes increases the further into thefuture we perform projections of fund balances.Projection “A” (Fund Sunsets on December 31, 2010)• The fund balance on the sunset date is projected to be approximately $105million.• We would expect that the fund would be solvent in 2017.• We expect the fund balance to be depleted sometime after 2017, though there is a25% chance that the fund could be sunsetted without additional funding.• In 2017, there is an 80% chance that the fund balance will be between $12.8million and $39.0 million.