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CITY OF ROSEVILLE, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2023 Note 4 OTHER INFORMATION A.Risk management The City is exposed to various risks of loss related to torts; theft of damage to, and the destruction of assets; errors and omissions; injuries to employees and natural disasters. During the fiscal years of 1980 and 1987, the City established a Workers' Compensation Fund and a Risk Management Fund, respectively (internal service funds) to account for and finance its uninsured risks of loss. For the year 2023, the WorkerÓs Compensation Fund provided coverage up to a maximum of $500,000 for each occurrence. The City purchases excess loss coverage from the Workers' Compensation Reinsurance Association, a nonprofit organization established by Minnesota State Statutes. The Risk Management Fund provides comprehensive general liability and comprehensive automotive liability up to the statutory maximum of $2,000,000. The City retains the risk of the first $100,000 of each occurrence with an annual maximum exposure of $200,000. Liabilities of the fund are reported it is probable that a loss has occurred, and amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNRs). The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claim settlement trends (including frequency and amount of pay-outs), and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. Estimated recoveries, for example from salvage or subrogation, are another component of the claimÓs liability estimate. The City purchased commercial insurance for claims in excess of coverage provided by the Risk Management Fund and for all other risks of loss. Settled claims have not exceeded this coverage in any of the past four fiscal years. There were no significant reductions in the City's insurance coverage in 2023. Enterprise fund charges and the property tax levy are based on a management estimate of claims history and the amount necessary to maintain catastrophic reserves. The reserves as of December 31, 2023, were $405,940 and $597,463 for the Workers' Compensation Fund and Risk Management Fund, respectively. The claims liability of $177,033 and $176,891, respectively, reported in both funds at December 31, 2023 are based on the requirements of Governmental Accounting Standards Board Statement No. 10. 64 Qbhf!96!pg!494