Illinois Public Risk Fund: Protecting the Public from Financial Catastrophes

Understanding the Illinois Public Risk Fund

The Illinois Public Risk Fund (IPRF) is a state-run insurance program that provides coverage for catastrophic financial losses caused by natural disasters, terrorism, and other unforeseen events. Established in 2013 by the Illinois Legislature, the IPRF is designed to protect the state's finances and ensure the continuity of essential services in the aftermath of major incidents.

Key Features of the IPRF

• Provides coverage for a wide range of financial risks, including:
• Property damage
• Business interruption
• Revenue loss
• Catastrophic health expenses
• Offers flexible limits of coverage to meet the unique needs of state agencies and institutions
• Operates on a "claims-made" basis, meaning coverage is only provided for losses reported during the policy period
• Leverages risk-sharing mechanisms to spread the cost of potential losses across the participating state entities

Financial Strength and Performance

The IPRF has a robust financial foundation, backed by:

• Annual contributions from participating state agencies and institutions
• Reinsurance agreements with highly rated commercial insurers
• Investment earnings on fund reserves
• As of June 30, 2022, the IPRF had a total fund balance of $1.5 billion, providing a significant buffer against potential losses.

Coverage Scope and Exclusions

The IPRF provides coverage for a comprehensive range of risks, but certain types of losses are excluded, including:

• Losses caused by willful or intentional acts
• Losses covered by other insurance policies
• Losses incurred outside the state of Illinois
• Losses related to nuclear energy or hazardous waste

Applications and Benefits

The IPRF offers numerous benefits to participating state agencies and institutions, including:

• Financial protection against catastrophic losses, ensuring the continuity of essential services
• Reduced reliance on external insurance markets, leading to potential cost savings
• Enhanced creditworthiness, as the IPRF coverage can improve bond ratings and reduce the cost of borrowing
• Access to specialized risk management expertise and support from the IPRF administration

Innovative Uses of the IPRF

In addition to its traditional role as a financial safety net, the IPRF can also be used to address emerging risks and provide innovative solutions for the public good. One such application is the use of IPRF funds to:

• Foster resilience and sustainability: By investing in mitigation measures to reduce the impact of natural disasters, the IPRF can help protect critical infrastructure and communities.
• Promote economic development: The IPRF can provide coverage for new or expanding businesses, encouraging investment and job creation within the state.
• Provide a safety net for the most vulnerable: The IPRF can be leveraged to establish social welfare programs that provide financial assistance to individuals and families impacted by catastrophic events.

Data and Statistics

• In 2021, the IPRF paid out $35 million in claims, primarily related to property damage caused by tornadoes.
• The IPRF has provided coverage for over 500 state agencies and institutions, covering approximately 90% of the state's budget.
• The average annual premium paid by participating entities is approximately 1.5% of their operating budget.

Effective Strategies for Utilizing the IPRF

• Conduct a thorough risk assessment: Identify and prioritize the risks that your agency or institution faces.
• Choose appropriate coverage limits: Determine the level of coverage that is necessary to protect your organization from financial catastrophe.
• Review the policy terms and conditions carefully: Understand the scope of coverage and any exclusions that may apply.
• Collaborate with the IPRF administration: Engage with the IPRF team to discuss your needs and develop tailored risk management solutions.

Frequently Asked Questions

1. Who is eligible to participate in the IPRF? All state agencies and institutions that are required to maintain insurance coverage are eligible to participate in the IPRF.
2. How are premiums calculated? Premiums are based on the risk profile of each participating entity, as well as the amount of coverage selected.
3. What is the claims process like? Claims are typically filed through the IPRF administration, which provides guidance and support throughout the process.
4. Can the IPRF cover losses caused by human error? The IPRF does not provide coverage for losses caused by gross negligence or willful misconduct.
5. Does the IPRF provide coverage for cyber-attacks? The IPRF does not currently provide coverage for cyber-attacks, but the administration is exploring options to address this emerging risk.
6. How can I get more information about the IPRF? Contact the IPRF administration at [email protected] or visit the IPRF website at www.illinois.gov/iprf.