INSURANCE COVERAGE HISTORY for the
UNITED METHODIST CHURCH CONNECTION
GCFA CHURCH INSURANCE COVERAGE HISTORY
The General Conference first required the General Council on Finance and Administration (GCFA) to make available a “church-wide [property and liability] insurance program” in 1976. (See Par. 907.13, 1976 Book of Discipline.) The need for action in 1976 is most likely represented by one or more of the following concerns:
Some number of local churches were inadequately insured. Some were missing key coverages. Others had inadequate limits or couldn’t afford certain coverages. Still other churches were in physical locations where catastrophic property coverage wasn’t consistently available.
One of the key concerns that matter to the General Conference is the trust clause which has been part of the Book of Discipline since 1797. In addition, United Methodists have a stewardship responsibility to:
rebuild for ministry a building lost to fire or adverse weather.
ensure that parishioner dollars given for ministry aren’t used to pay uninsured liability settlements, judgments or verdicts.
ensure that real and personal property given for perpetuating United Methodist ministry are preserved for that singular purpose and not sold to pay uninsured liabilities. And, we have a Christian responsibility to adequately provide for those who are harmed by the Church.
GCFA assumed the responsibility because the agency was at the time and remains today the sole member of the Board of Trustees of The United Methodist Church, Inc. (See Par. 803, 2008 Book of Discipline.) GCFA’s church-wide responsibility for insurance is codified at Par. 807.22.
General Conference revisited the issue of property and liability insurance in 1992, when for the first time, local church boards of trustees were required to do the following:
[R]eview annually the adequacy of property, liability, and crime insurance coverage on church-owned property … The board shall include in its report to the Charge Conference the results of its review and any recommendations it deems necessary. (See Par. 2533.2, 1992 Book of Discipline)
The need for the General Conference to act, presumably, is based on a belief that local churches continued to be uninsured or under-insured and something more was required. Statistical information as the result of a local church survey revealed the following facts about local United Methodist churches:
More than 40% don’t have worker’s compensation insurance
More than 70% don’t have sexual misconduct liability (SML) insurance
More than 90% of those with SML have $500,000 or less in limits
More than 60% don’t have Director’s and Officer’s liability insurance
More than 50% don’t have employment practices liability insurance
Even annual conferences that have adopted conference-wide insurance programs (a/k/a “mandatory”) outside of GCFA-sponsored initiatives have inadequate sexual misconduct limits and, in many cases, do not include employment practices liability insurance in their offering. Despite an aggressive commercial market; more than 35 years of GCFA-sponsored insurance programs; and despite a specific challenge to local church trustees in Par. 2533.2, the need which General Conference initially addressed in 1976 persisted into 2011 and 2012.
The United Methodist Insurance Program (UMIP)
From 1976 through 2004, GCFA’s vehicle for fulfilling its General Conference mandate was The United Methodist Insurance Program. UMIP was not a separately incorporated entity, but rather a loosely-organized purchasing group. Participating annual conferences, local churches, and agencies pooled their premium to try to lower the cost of insurance. Over time, the pooling of premium alone did not consistently deliver the affordable, comprehensive, and widely available coverage embedded in the concept of “trust clause-related stewardship”.
After much study, it was clear that although pooling premium was a factor in reducing the cost of insurance, it is insufficient alone to achieve it. In addition to pooling premium, retaining risk would also be necessary if the 1976 General Conference vision was to be realized over time.
United Methodist Property and Casualty Trust (UMPACT)
After 29 years of UMIP, GCFA formed the United Methodist Property and Casualty Trust (UMPACT) in 2005.
Between 2005 and late 2011, UMPACT was GCFA’s vehicle for fulfilling its General Conference mandate. UMPACT was a non-profit, captive reinsurance company owned and capitalized by the annual conferences and agencies that participated. This group-owned captive retained significant risk on the major lines of insurance (property, commercial general liability, crime, workers’ compensation, and auto liability). The group captive provided for the pooling of premium and risk retention, which its predecessor had not. UMPACT, a risk bearing entity, was responsible for paying claims within its retention.
UMPACT was limited to conference level selling and could not add individual churches as insureds. Adding a conference resulted in a large gain of premium and churches. Conversely, losing a conference resulted in a large loss of premium and churches. The captive was limited to reinsuring a direct insurer (Zurich in this case).
Initially, the program was reinsured by Zurich with UMPACT retaining $250,000 and a prorate share of loss adjustment expense for workers compensation, general liability, automobile liability, automobile physical damage, crime, and inland marine. In 2010, pastoral counseling liability was added as a product line. For each year, an aggregate retention was determined for the program year for UMPACT as well as excess reinsurance above the captive’s retention. Letters of credit and loss reimbursement funds were established as security and UMI continues to maintain security on behalf of Zurich for the losses still open and incurred but not reported losses for the period from 2005 to 2010.
United Methodist Insurance (UMI)
After further study and analysis, it was clear that a single member captive insurance company could deliver additional savings and flexibility to benefit local churches, annual conferences, and general agencies. This, in turn, would provide new opportunities for growth and still fulfill the 1976 General Conference vision over time. As a result, GCFA formed United Methodist Insurance (UMI) in April 2011 as successor to UMPACT. From October 1, 2010 to October 1, 2012 no coverage was provided for churches through any GCFA program.
The process for seeking regulatory approval to operate UMI as a captive insurance company was complete by August 2011. The company began retaining risk in October 2011 on selected lines of coverage. UMI took over the assets and liabilities of UMPACT, expanded its risk retention, and launched the various cost saving initiatives and flexibility in coverage and operations that were the rationale for its creation.
Like its commercial counterparts, United Methodist Insurance retained risk, issued policies, collected premium, paid claims, and was subject to federal and state regulation. Also like its commercial counterparts, actuaries and financial experts helped determine the amount of risk UMI should retain; the company then purchased excess and stop-loss insurance to pay covered losses that exceeded its retention up to the policy limits. However, unlike its commercial counterparts, UMI represents a vision of stewardship ministry that was designed by United Methodists for the exclusive benefit of United Methodists.
United Methodist Insurance Program (UMIP) and United Methodist Insurance Agency (UMIA)
In 2018, GCFA and the board of directors of UMI determined that ongoing operational losses and a need for significant addition of capital made it necessary to discontinue the use of UMI as a captive insurance company. UMI entered into an agreement with AmVenture Insurance Agency to provide coverage to churches on a fully insured basis using A.M. Best A-rated insurance companies.
In 2018, the United Methodist Insurance Agency (UMIA) was formed to facilitate the operation of the UMI Program. A portion of the policy premiums written through the UMI Program are retained by UMIA as marketing royalties for UMI’s support of the program. On January 1, 2019 AmVenture began insuring churches through the newly formed United Methodist Insurance Program (UMI Program). As a result, UMI no longer has exposure to underwriting risk and has no current need to raise capital to fund its captive insurance company.
Continuing the Stewardship Legacy
The availability of GCFA-sponsored insurance programs has laid the foundation for a new understanding of insurance as a tool for living out “trust-related stewardship.” We have, in turn, set a new standard for the commercial insurance market with these initiatives:
UMI offered limits and coverages previously unavailable, forcing the commercial insurance market to improve their offerings to match ours.
UMI has involved several annual conferences and GCFA in establishing minimum levels of insurance required for local church boards of trustees to use in evaluating whether a church had adequate insurance.
UMI’s presence in the property and liability insurance market benefits the entire denomination.
In order to be of service to as many churches as possible, the UMI Program plans to expand the number of carriers it represents. The carriers will include those dedicated to serving the church market and other carriers providing specialty coverage for difficult to place risks and specialty lines of coverage. With the elimination of the risk of underwriting losses, UMI will be better positioned to provide additional services and resources to local churches, annual conferences, and general agencies.