Treasury Managed Fund
General Information about TMF
TMF Cover
History
Treasury Managed Fund
The Treasury Managed Fund (TMF) is a self-insurance scheme owned and underwritten by the NSW Government. It provides a full range of insurance covers and services for all participating Agencies. TMF's overall purpose is to provide structure and services that will assist Agencies in reducing the impact of risk exposures and maximise resources available to support their core business.
The NSW Government achieved it fiscal objective of full funding of the General Government sector’s self-insurance scheme in 2003. The Treasury’s managed fund’s assets now exceed the fund’s gross liabilities. Consequently, net assets of the Treasury Managed Fund were $296 million (unaudited) as at 30 June 2003, compared with net liabilities of $401 million as at 30 June 2002. This significant strengthening of the scheme’s financial position was achieved because of an additional contribution of $824 million by the Crown in 2002-03.
The scheme’s outstanding claims are also now fully backed by liquid financial assets. Investment securities and cash (amounting to $3,695 million) exceed the scheme’s outstanding claims (amounting to $3,666 million). The measure of the scheme’s outstanding claims incorporate claims incurred but not yet reported.
The General Government sector’s self-insurance scheme is expected to remain fully funded in the future provided that normal equity returns are achieved. Treasury Managed Fund’s investment return was 4 per cent in 2002-03. The fund’s assets are allocated to 60 percent bonds, 40 percent shares.
topTMF Cover
The TMF provides the following areas of cover for member agencies:
- Workers Compensation
- Property
- Public Liability
- Comprehensive Motor Vehicle and
- Miscellaneous Risks
Miscellaneous Risks include any other insurance risk (excluding financial risks) that Agencies may have, with the exception of Compulsory Third Party motor vehicle cover. QBE have been contracted to provide CTP motor vehicle cover to the Government motor fleet.
Cover is unlimited and applied to all insurance exposures. This insulates the New South Wales Budget from additional funding requests that were a feature of the previous unfunded arrangements. TMF performs a role similar to that of a 'Captive Insurer' to a large corporate.
History
TMF was established following a review of Government insurance arrangements in 1988. The review was prompted by rapidly increasing costs of insurances and/or losses. The review also came at a time when significant changes were being made to workers' compensation legislation, an audit commission had criticised existing arrangements, and perhaps most importantly when the Government was striving to improve Public Sector management generally.
The review found that the existing mixture of approaches was inadequate. There was no clear responsibility and accountability of individual managers for their claims experience and no incentive to reinforce a professional approach.
The Review Committee proposed the adoption of a systematic and coordinated approach to risk management and insurance, including the adoption of a managed fund philosophy involving self-insurance for State entities, with the possibility of limited reinsurance. The major features of the approach are:
- Individual Departments have primary responsibility for identifying risks and developing strategies to address these in a cost-effective manner
- Premiums are set on a fully funded basis so that today's managers are responsible for today's costs
- Proper financial incentives are provided to motivate management
- A professional fund manager was appointed to manage the fund, providing claims management, insurance, information and some risk management services
- Incentive for the fund manager's performance is included in the manager's fee structure
- All General Government budget dependant entities were included in the fund while non-budget dependant entities had the choice of participation
- Risk management was, and remains, a high priority and
- Reinsurance is affected for individual losses above approved limits
From 1 July 1995 the TMF was restructured with a revised incentive scheme. Since then, funding for budget dependent agencies has been based on benchmark premiums, an industry-based best practice standard. Conversely, deposit premiums payable by agencies are influenced by claims experience.