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Pools in America

The following is a description of how pools were formed and how they currently operate. Resources include the
Connecticut Law Journal, the Association of Government Risk Pools (AGRIP) September 2017 Survey, AGRIP
Operations Manual, National League of Cities Mutual Insurance Company data and personal interviews with
pool executive directors.

In the 1980’s public entities faced an insurance crisis. Rates were sky-rocketing and some governmental
agencies were cancelled completely. When it was determined that there were limited insurance carriers
and products available to public entities across the United States many state legislatures passed laws to
allow governmental entities to insure themselves by partnering with other public agencies.

In states where public pools were allowed, many public agencies including schools, counties, cities, park
districts, water districts, sewer districts, natural resource districts and a myriad of other government
entities pooled their resources to manage their risks. Some of these pools were sponsored by state
organizations including the League of Cities, County Associations, or School Board Associations of those
states. Others were formed through partnerships of independent organizations.

The pool concept has proven quite successful with pools across the nation providing lower premiums,
better coverage and enhanced services to their members. It is estimated that, in 2017, where state
legislation allows them, there are over 500 public entity pools in the U.S. now in existence providing
coverage, in some form, for approximately 75,000 of the estimated 91,000 governmental entities. Of
these pools, there are about 220 pools that are made up of mostly cities, villages, K-12 schools and
counties.

About 180 of the nation’s 500 pools are in the state of California and over 30 pools exist in the state of
New Jersey. Of the pools in the state of California few are associated or sponsored by a statewide group.

About 35% of the 220 pools made up mainly of municipalities, K-12 schools and counties were started
by and still have an affiliation with a parent organization or sponsor. The relationship between the pool
and the sponsor is different for every pool. A pool may be a division of the sponsor with its staff
employed by the sponsor. In most cases, the pool has a separate board, staff, budget and operations.
Some pools, though a distinct and separate organization, work with the sponsor on projects such as
conferences and training but.

Pools have differing administrative operations—39% of pools have their own employees, 35% are
staffed by third party administrators of varying sizes and 26% are administered by association
employees. A blend of pool staff and third party administrators is in use by more than 50% of pools
nationwide.

It is estimated that between 60% to 70% of all public entity pools nationwide operate with no
sponsorship or primary endorsement from a statewide association or group. These pools may work with
and seek endorsements from various groups while still maintaining their independent operational
status. In some cases they may pay a fee to a state organization for their endorsement.

Pools, like insurance carriers, obtain reinsurance for those exposures that are too great to retain.
In 1986, the National League of Cities created the NLC Mutual Insurance Company (NLC MIC) with the
help of six league sponsored insurance pools. Its purpose was to be a re-insurer for the pools to insure