By way of introduction, I am executive director of the Inland Empire Schools Insurance Authority, a Joint Powers Authority (JPA) that provides self-funded insurance programs for 60 school districts and operates on revenue of approximately $100,000,000 annually. I am also president of the California Assn. of Joint Powers Authorities (CAJPA), an association of 90 risk-pooling JPAs serving public entities in California.
I read with some concern your article that appeared in the Oct. 24 issue of the Metro/South Bay edition of the Los Angeles Times regarding the City of Gardena's venture into the mutual insurance arena. In the article you attribute to Mr. Kenneth Landau a statement to the effect that most of the states' pools are poorly managed and that "Pools are totally unregulated and the deposit premiums are not based on sound actuarial studies."
With all due respect, Mr. Landau's opinions appear to be based more upon intuitive thinking than on fact. Regulation does not ensure the solvency of a pool or an insurance company--in fact, far more insurance companies subject to regulation have become insolvent than have pools. Furthermore, no JPA operating in California has become insolvent. Most if not all JPAs in the state conduct extensive, independent actuarial studies to determine the adequacy of their premiums. Additionally, the Government Accounting Standards Board Statement 10 (GASB 10), to which all risk-sharing pools are subject, requires all such pools to reflect their liabilities in the year in which they are incurred. The annual independent financial audits required for all such California pools by the Government Code must reflect these liabilities. Any unfunded liabilities would be readily apparent from a review of these audits.
R. VINCENT SANGUINET
\o7 Sanguinet is risk manager and executive director of Inland Empire Schools Insurance Authority\f7 .