Note X – Risk Management

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Note X – Risk Management

A template for this note is not available. See “Instructions to preparer:” for various disclosures that may be required.

Instructions to preparer:

A city/county/district should disclose:

  • a description of the types of risk the city/county/district faces and how it is handling those risks; and

  • any significant reduction in insurance coverage from the previous year (by risk category); and

  • an indication whether the total amount of settlements exceeded insurance coverage for each of the past three fiscal years.

If the city/county/district participates in a risk pool, it should describe that arrangement. The description should specifically address the rights and responsibilities of the government and the pool.

If a city/county/district retains some risk of loss, it should make the following disclosures:

1. a description of what the liability for unpaid claims represents and how it is calculated (this discussion should mention whether non-incremental claims adjustment expenses have been included as part of the liability for claims and judgments);

2. if the city/county/district exercises its option to discount claims liabilities or has entered into any structured settlements, the nondiscounted carrying amount of any liabilities reported at a discounted value and the range for interest rates used for discounting;

3. claims defeased through annuity contracts (unless beneficiaries have signed an agreement releasing the government from all further obligation, and the likelihood of further payments is remote); and

4. a tabular reconciliation of the claims liability for both the current fiscal year and the prior fiscal year, using the following format:

  • claims liability (beginning of year)

  • claims incurred during the year

  • changes in the estimate for claims of prior periods

  • payments on claims

  • other (for example, change in the methodology used to estimate claims)

  • claims liability (end of year).

For more information refer to the GASB Statement 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues.