Mark G. Forbes writes:

The RRG funding has two parts; the capital campaign to provide its
base funding, and annual premiums charged to USHPA, PASA, the Foundation and
schools. The $2 million capital base should never be touched if things go even
slightly ok. The annual premiums cover the operating costs. Right now those
premiums total about $900,000 per year. USHPA is currently paying about $500,000
per year for insurance, and that was expected to go up to around $650,000 next
year. That's what our dues increase was partly based on. The remainder comes
from commercial insurance for schools and instructors teaching for hire, as well
as from the Foundation policy (but that one's very small).

If things go well, here's the plan:

- We work on risk management and cut down the number of claims that are
happening.

- We assign reasonable values to reserves for future claims.

- We take an aggressive approach to any claims by a participant (a pilot or
student) that tries to sue in violation of their promise not to on our waiver.

- We promptly handle any legitimate claims to minimize expense and avoid
unnecessary lawsuits and conflict.

With what we hope to earn as profits in the RRG, we pay off any loans as soon as
we've accumulated enough capital surplus to get approval. We then retire any
letters of credit, which are essentially loan guarantees backed by assets like
the Foundation's investments, and the USHPA office building equity. Once we've
accumulated equity to pay off LOCs and all the loans are paid off, then we can
back off the premium rate that the RRG charges to USHPA and the schools to a
level that sustains our expenses and earns a small profit. The RRG is required
by law to be profitable, but we can use the profits to decrease premiums in
future years.

This means that premiums will be high for a while, but if we all do our part to
minimize risk and cut down the number of incidents and claims, we'll see the
savings sooner. Our long term goal is to have a stable source of insurance for
our sport, not to extract the maximum possible cash from it. It's never going to
be "free"; we still have to pay for a reinsurance contract, and there are
actuary, audit and legal expenses as well as fees for the management contract
and all of the regulatory filings. Running an insurance company, even on a
shoestring budget, still costs serious money. In the long term, we hope it will
cost less than what we have been paying, and more importantly WE control it so
it's not going to suddenly go away because of a decision by somebody outside of
our sport.

Our premium rate is set by independent actuaries, who look at our history and
project an estimate forward. Right now, our history looks lousy and our future
premium rate is high. We're betting that we can beat that, and show a healthy
profit for a few years. As we do that, the actuaries will re-compute their
estimates each year. If our claims come down and we don't have huge costs, then
the future premiums will decrease too. That will reduce the amount USHPA has to
pay for insurance, and hence the cost that it has to pass on to members as dues.
When and how much is unknown…it all depends on how well we do as a group to
minimize accidents and claims.

It has always been the case, but I'm hoping that it will be more clear to
everyone…this is OUR money we're spending, every time somebody screws up and
gets hurt, or hurts somebody else. It's not some far-away insurance company.
It's ALL OF US, and we should all understand that. If you see somebody about to
do something dumb/sketchy/marginal…call them out on it! Their screw-up is going
to cost YOU money. Take ownership! Don't wait for an accident to happen to say
"I told you so". If there's a problem brewing, head it off before it costs us
all a fortune. We need to own the problems, and deal with them. That's how we're
going to save money on insurance.