Risk Retention Philosophy

 

Columbia University seeks to balance its use of outside financing sources against our ability to retain and absorb the financial impact of fortuitous events. Long and short term strategic goals tempered by annual budget and capital allocation constraints all contribute to the analysis underlying the chosen risk retention plan.

Our primary objective is to create an acceptable, enterprise-wide retention level for the university operations as a whole. The enterprise-wide retention philosophy is reflected in the blend of self-insurance (funded and unfunded), policy deductibles within the various commercial insurance coverages, and certain alternative sources of capital for catastrophic type events.

Understanding that individual schools and administrative departments have different financial capacities to retain risk, we have also constructed an internal financing scheme to smooth and spread the effects of any single loss event across other parts of the organization. Specifically, for certain loss events that fall within the definition of ‘hazard risks’, CURM has established an appropriate internal per-event retention or deductible based on a careful review of loss potential (frequency, severity and time to impact). For FY2005 through FY2007, that deductible was $1,000 per occurrence. In FY2008 through FY 2013, the deductible is $2,500 per occurrence. Qualifying losses below the commercial insurance policy retentions are funded from this special reserve account, subject to specific reporting and reimbursement terms.

Accordingly, losses exceeding the internal deductible layer come under the purview of the external commercial insurance contracts and therefore are subject to the particular terms and conditions of those policy documents.

Columbia University neither accepts nor supports the expenditure of University funds for the purchase of commercial insurance covering operational activities or special projects unless they are directly related to the University's educational or research mission. Risks are more efficiently managed via self-insurance where the financial impact is readily predictable and not considered significant. Where a particular risk exposure is common across many different University functional areas, the collective purchase of commercial insurance is warranted to take advantage of cost economies and establish a common set of contractual terms.

The University may purchase separate or single-purpose insurance to limit its risk whenever the University's funds can be exposed to loss resulting from activities with volatile and highly unpredictable risk characteristics or which enhance revenue generation inuring to the benefit of affiliated organizations. When these types of special insurance policies are justified, the Risk Management Department may charge the cost of the policy to the appropriate organization or department.