State's cities, towns may get breather on paying off insurance cooperative's deficit

Hartford - The state Senate voted Wednesday to give municipalities more time to resuscitate a failing insurance purchasing cooperative, pushing back a statutory deadline that would have required the towns to begin paying off the agency's

$10 million deficit.

The Municipal Interlocal Risk Management Agency (MIRMA) was formed in 2002 by the towns of Chaplin and Willington to provide an alternative risk management pool through which towns and other public entities could buy workers' comp and other insurance.

But MIRMA has racked up deficits in every year since its formation and now teeters so close to insolvency that a recent report by an external auditor questioned how long the agency would continue to exist.

"These conditions raise substantial doubt about MIRMA's ability to continue as a growing concern," auditors for Saslow Lufkin & Buggy, LLP, wrote last year.

And while MIRMA has carried multimillion-dollar deficits in recent years, it was facing a major deadline on July 1. On that date, pursuant to earlier action by the legislature, MIRMA would have to begin complying with state statutes that require such organizations to maintain threshold contingency funds to cover their losses.

The price of closing that $10 million hole would have fallen squarely on the 65 towns and other MIRMA members that have learned only recently that the agency planned to recoup its liabilities by levying new surcharges into the hundreds of thousands of dollars.

But on Wednesday, the state Senate stepped in, voting 33-0 for a measure that postpones by six years the date when MIRMA must bring itself into compliance with the contingency fund requirements. The House of Representatives had earlier passed the bill by a vote of 145-2. The bill awaits action by Gov. M. Jodi Rell.

MIRMA's board of directors voted in August to assess its members' additional fees to cover the cumulative losses of its workers' compensation pool, which, according to its most recent audit, total more than $10 million.

Sponsors of the bill, including Rep. Marilyn Giuliano, R-Old Saybrook, and Sen. Joseph Crisco, D-Woodbridge, said it would enable the member towns in MIRMA more time to come up with the surcharges they could face from those charges.

"It simply extends out a repayment schedule" for towns, Giuliano said. "This just decompresses everyone's financial realities. We're going to need as many venues as possible to do that over the next year and 2011."

Rep. Stephen Fontana, D-North Haven, the co-chairman of the Insurance Committee, which raised the bill, said its designers envisioned the extension for MIRMA as a "guard rail" - keeping the organization from plunging into the abyss, but also a temporary aid on which the legislature would not let MIRMA permanently rely.

That argument carried the day in the legislature, but there were isolated notes of disagreement, including from Rep. Craig Miner, R-Litchfield. Miner supported the 2005 bill that first gave MIRMA a five-year reprieve from the capital requirements of Connecticut's insurance statutes, but wouldn't do so again this year, since he saw little change in the organization's approach.

MIRMA was launched as a competitor to the existing Connecticut Interlocal Risk Management Agency, at a time when fully private insurers were not often serving the municipal market, Miner said, noting that MIRMA's primary approach had been to try to beat CIRMA, its primary competition, on price.

"If they still just undercut the others to keep the business, there's no reason to think they'd do anything differently," Miner said. "If they're attempting to be super-competitive, they're never going to put any money in that contingency fund."

And, he added, "I just think sometimes a deadline's a deadline."

The state Department of Insurance takes a similar view of the legislation. The department opposed the bill, saying that MIRMA realistically had until June 30, 2011 - the end of the next fiscal year - to work out a fix, and that it believed the plan to have municipalities pay to close the deficit and assemble a sufficient contingency fund was appropriate.

"This bill is an illustration of the dangers of legislative carve-outs," Commissioner Thomas Sullivan said in a statement provided by a spokeswoman. "When companies are permitted to operate with less money than they need, the taxpayers in those towns could be asked to pay more money in taxes to keep the company afloat."

Representatives from MIRMA did not respond to a message seeking comment for this article.

t.mann@theday.com