Resolution Trust Corporation:

Immediate Action Is Needed to Control Insurance Costs

GGD-91-119: Published: Sep 20, 1991. Publicly Released: Sep 20, 1991.

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GAO examined the Resolution Trust Corporation's (RTC) insurance-related policies, procedures, and initiatives, focusing on: (1) RTC actions to control insurance costs; and (2) the amount spent on inefficient and unneeded policies.

GAO found that: (1) although RTC has taken steps to assess its overall condition in relation to insurance, develop a long-term insurance plan, and hire contractors with risk management expertise, more could be done to control insurance premium costs; (2) RTC has spent more than a year developing the self-insurance program, but its plans are still incomplete; (3) between February and August 1991, RTC could have saved $10.5 million on insurance premiums by raising policy deductibles to $100,000; and (4) RTC missed opportunities to save on insurance cost because it delayed getting the self-insurance programs started, did not make greater use of blanket policies, and did not cancel policies it no longer needed.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The RTC Refinancing, Restructuring and Improvement Act of 1991 restructured RTC and the Oversight Board. As a result, the Oversight Board is no longer required to approve RTC policies. However, RTC began implementing its self-insurance program in March 1992.

    Recommendation: The RTC Oversight Board should direct RTC to move aggressively to finalize the implementation plans for the self-insurance program and present them to the RTC board of directors as soon as possible.

    Agency Affected: Resolution Trust Corporation: Oversight Board

  2. Status: Closed - Not Implemented

    Comments: RTC, in March 1992, decided to self-insure all assets and not to rely on private insurance coverage for any of the assets.

    Recommendation: If the plans call for continuing some types of private insurance, the RTC Oversight Board should require RTC to: (1) set standards for liability coverage limits, deductibles, and policy terms and conditions for those types of coverages; and (2) develop the information systems needed to effectively manage those policies.

    Agency Affected: Resolution Trust Corporation: Oversight Board

  3. Status: Closed - Not Implemented

    Comments: The TRC Refinancing, Restructuring and Improvement Act of 1991 restructured RTC and the Oversight Board. As a result, the Oversight Board is no longer required to approve RTC policies. However, RTC began implementing its self-insurance program in March 1992.

    Recommendation: The RTC Oversight Board should ensure that RTC has procedures in place to monitor the implementation of both the interim policies issued in August 1990 and August 1991 and the long-term self-insurance program when it is finalized.

    Agency Affected: Resolution Trust Corporation: Oversight Board

  4. Status: Closed - Implemented

    Comments: During March 1992, the RTC Executive Committee approved the implementation of a self-insurance program. RTC field offices implemented the program shortly thereafter.

    Recommendation: RTC should review practices to ensure consistency throughout the Corporation.

    Agency Affected: Resolution Trust Corporation

 

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