Course Introduction

2. Course Introduction Welcome! • Introductions • Icebreaker • Housekeeping • Agenda

3. Course Introduction • Housekeeping • Ground Rules • Be on time • Listen to and show respect for the opinions of others • No disruptive side-conversations • Cell Phone and PDAs off • Facilities • Breaks • Lunch • Parking Lot

4. Course Introduction Professional Management Development Program (PMDP) • M-100 Essentials of Community Association Management • M-201 Facilities Management • M-202 Association Communication • M-203 Community Leadership • M-204 Community Governance • M-205 Risk Management • M-206 Financial Management

5. Course Introduction Course Materials • Participant Guide • Lessons • Activities • Course Evaluation Forms • Course Exam • CD-ROM • M-205 Website • GAP: Risk Management

6. M-205 Website Samples, articles, resources and much more

7. Course Introduction Focus of Course • Developing risk management awareness. • Developing the habit of thinking • beyond maintenance, beyond property • to include liability, net income, and personnel concerns, as well.

8. Course Introduction Importance of Course • Risk management—including a sound insurance program—is a key aspect of preserving and protecting an association’s assets. • It demonstrates management’s ability to manage both assets and crisis situations.

9. Course Introduction Speak as an association or a member • Just because you maintain something, doesn’t necessarily mean you own it or insure it. • Just because you insure something, doesn’t necessarily mean you own it or maintain it.

10. Course Introduction Examples: • In some homeowner associations, member owns the building, but the association maintains and insures it. • Condominium associations often insure unit interiors, which may include real property owned and maintained by members.

11. Module 1: Risk Management

12. Risk Management Focus: How to apply the risk management process to community association  using property as the primary example of exposures to possible loss.

13. Risk Management Module Objectives • Conduct an initial inventory of an association’s current risk management situation. • Use appropriate resources to identify an association’s exposures to possible loss. • Recognize and respond to exposure to possible loss that requires immediate attention.

14. Risk Management Module Objectives • Analyze an association’s exposures to possible loss. • Identify roles in developing a risk management program. • Identify alternative risk management techniques.

15. Risk Management Why Risk Management Awareness? • Can’t take chance of your association suffering a loss • If a loss is perceived as an accident that couldn’t have been anticipated, you’re lucky. • If you anticipate and then prevent or prepare for an accidental loss, you’re perceived as valuable—not just lucky

16. Lesson 1: Risk Inventory

17. Risk Inventory Lesson Objective • Conduct an initial inventory of an association’s current risk management situation.

18. Risk Inventory Why is an initial inventory necessary? • Crisis • Claim

19. Risk Inventory Activity # 1: Conduct an Initial Inventory Purpose: To develop the ability to do an initial assessment of an association’s current risk management situation.

20. Risk Inventory Directions for working in groups. 1. Choose a leader. This person is responsible for helping the group move through the steps in an activity, keeping the group focused, and getting everyone involved. 2. Choose a timekeeper. This person is responsible for keeping the group posted on how much time it has left to complete an activity. 3. Choose a recorder when appropriate. This person is responsible for recording a summary of the group’s ideas – and presenting it to the rest of the class, when appropriate.

21. Lesson 2: Exposure to Loss

22. Exposure to Loss Lesson Objectives • Recognize and respond to exposure to possible loss that requires immediate attention. • Use appropriate resources to identify an association’s exposures to possible loss. • Analyze an association’s exposures to possible loss.

23. Exposure to Loss Ability to recognize depends on: • Managerial experience. • Risk management expertise. • Available time.

24. Exposure to Loss Insurance Terms Related to Exposure to Loss • Advertising Injury (Al) • Bodily Injury (BI) • Directors’ & Officers’ Liability (D&O) • Employment Practices Liability • Liability Exposure • Net Income Exposure • Personnel Exposure • Personal Injury (PI) • Property Damage (PD) • Property Exposure • Wrongful Acts

25. Exposure to Loss Types of Exposure to Loss: • property • net income • liability • personnel

26. Exposure to Loss Example of Exposure to Loss: An increase in expenses as a net income loss: Any expenses associated with another type of loss, such as legal expenses or the extra expenses to set up an office at another location if the current site is damaged.

27. Exposure to Loss Immediate Treatment • Delays • Deficiencies • Defects

28. Exposure to Loss Response time depends on: • Authorization • Resources • Schedule or timing

29. Exposure to Loss Activity #2: Exposure to Possible Loss that Require Immediate Attention Purpose: To develop the ability to recognize and respond to exposures to possible loss that requires immediate attention.

30. Lesson 3: Risk Management Roles

31. Risk Management Roles Objective Identify roles in developing a risk management program.

32. Risk Management Roles A manager is responsible for: • Planning, • Organizing, • Leading, and • Controlling Risk Management Process

33. Risk Management Roles A manager should… • Review exposures. • Communicate issues to the board. • Manage insurance program.

34. Risk Management Roles Community Association Insurance Agent: • Historically the agent represented the carrier and the broker represented the insured. • These distinctions don’t always hold today.

35. Risk Management Roles What an agent ought to … • Suggest insurance policy coverage. • Obtain premium quotations. • Arrange coverage placement. • Arrange premium financing. • Provide loss runs in a timely fashion.

36. Risk Management Roles Agent may assist with… • Reporting claims. • Identifying and analyzing exposures. • Valuation of exposures. • Compliance with legal requirements for insurance. • Development and implementation of disaster planning.

37. Risk Management Roles What an agent may do depends on… • Legal constraints under state statutes and licensure. • Contract with the insurance carrier. • Contract with the association, if any. • Knowledge of the community association.

38. Risk Management Roles Activity #3: Identify Insurance Agent Roles Purpose: To identify the roles of an insurance agent.

39. Risk Management Roles Agent should not … • Offer advice outside area of expertise. • Assume responsibility for association risk management and insurance program. • Become involved in internal association disputes. • Estimate damage. • Collect assessments. • Contact other insurance carriers or agents.

40. Lesson 4: Risk Management Techniques

41. Risk Management Techniques Objective • Identify alternative risk management techniques.

42. Risk Management Techniques Next Steps • Analyze an association’s exposure to possible loss. • Review alternative risk management techniques.

43. Risk Management Techniques Risk Management Discussion • What’s the difference between loss frequency and loss severity? • What’s the difference between loss prevention and loss reduction?

44. Contractual Transfer Risk Financing Risk Control

45. Risk Control Risk control involves the following five techniques: 1. Exposure avoidance 2. Loss prevention 3. Loss reduction 4. Segregation of exposures Duplication Separation 5. Contractual transfer a. Legal and fiscal responsibility

46. Risk Financing Risk Retention: Pay for Yourself Risk Transfer: Find Someone Else to Pay Transfer to a commercial insurer Contractual transfer Hold harmless and indemnification agreement • Current expensing • Unfunded reserve for loss • Funded reserve for loss • Borrowing

47. Risk Management Techniques Activity #4: Applying Alternative Risk Management Techniques Purpose: To practice applying the risk management process to a specific exposure to loss.

48. Risk Management Techniques Select Appropriate Technique • Association Obligation • Association Need • Owner Expectation

49. Risk Management Techniques Examples • Obligation— The governing documents require the association to maintain certain coverage. • Need— Type and condition of association assets involve certain exposures to loss. • Owner expectations— May vary in terms of how high a deductible they think the association should assume.

50. Risk Management Techniques Activity #5: Risk Management Techniques for Exposure to Loss Purpose: To practice preparing a risk management report to a board of directors.