REVISED RMTB ANNUAL CLAIM TRENDS REPORT 2025-26_CORRECTED.DOCX

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Date:
April 23, 2026
To:
Mayor & City Council
From:
Chris Hansen, Risk Manager 
Through:
 Risk Management Trust Board
Subject:
Risk Management Trust Board - Annual Claim Trends Report
Background
City Code, Section 2-505(b) requires the Risk Management Trust Board (RMTB) to “submit an annual report to 
the City Council through the City Manager relating to the status of the trust fund and making other 
recommendations as the Board deems necessary.” This report fulfills this requirement and was reviewed by 
the Risk Management Trust Board on April 22, 2026.
The Risk Management Trust Board is established through Article VII, Division I of the Tempe City Code. This 
section establishes the Risk Management Trust Fund, which provides “for the payment of benefits, losses and 
claims as set forth in A.R.S. § 11-981(A) which shall include legal defense costs, administrative costs, claims 
adjusting costs, losses (including those related to workers' compensation, personal injury or property damage), 
reserves for anticipated losses and lawsuits, insurance costs (including premiums), external audit and other 
expenses related to the operation of the city's self-insurance program.”
Currently, two operational funds are established to account for the Risk Management Program activities: 1) the 
Risk Management Fund and 2) the Workers’ Compensation Fund.  Each program is structured as self-insured 
with excess insurance, providing protection against large individual losses and adverse or unexpected claim 
trends.
1)
The Risk Management Fund accounts for costs associated with the City’s casualty and related self-insurance 
programs, including general liability, automobile liability, property, aviation, cyber, fiduciary, crime, pollution 
liability, and foreign travel coverages. Actual claim costs are directly allocated to the responsible department. 
Administrative costs, including insurance premiums, safety program expenses, legal defense, and program 
administration, are allocated based on each department’s historical claims experience. At fiscal year-end, all Risk 
Management Fund expenses are recovered through departmental chargebacks to the appropriate department or 
fund, with corresponding budget adjustments. These chargebacks are recognized as revenue to the Risk 
Management Fund.
2)
The Workers’ Compensation Fund accounts for costs associated with medical and wage benefits for City staff who 
are injured or become ill due to work-related causes. Actual workers’ compensation claim costs, including medical 
expenses, wage replacement benefits, and legal expenses, are directly allocated to the responsible department. 
Administrative costs and revenues, such as insurance premiums, program administration, and reimbursements, 
are allocated based on each department’s historical claims experience. Similar to the Risk Management Fund, all 
costs are recovered through departmental chargebacks to the appropriate department or fund, except for interest 
earnings, which remain in the fund. These chargebacks are recognized as revenue to the Workers’ Compensation 
Fund.

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Program Summary
The chart below summarizes total Risk Management Fund and Workers’ Compensation Fund expenditures 
(claims, excess insurance premiums, and program administration) and the departmental chargebacks 
(contributions or revenues to the funds) based on those expenditures. Please note that program earnings 
somewhat offset the chargebacks to departments.
Fund Activity
The table below summarizes total program expenditures for the past five fiscal years and year-to-date 
expenditures through December 31, 2025, for the current fiscal year. 
FY25-26 Total Risk Management Program year-to-date expenditures through December 31, 2025, for risk

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management and workers’ compensation activities are $7.9 million or 95% of the annual budget. In FY24-25, 
Total Risk Management Program expenditures totaled $10.1 million, an increase of $1.6 million over the prior 
year.
FY25–26 Risk Management claim expenditures total $2.5 million year-to-date through December 31, 2025, 
representing 131% of the adopted annual budget. This variance is primarily attributable to a significant auto 
liability claim involving the wrongful death of an unborn child. In FY24–25, total claim expenditures were $1.9 
million, reflecting an increase of $1.4 million over the prior fiscal year. Historically, annual claim expenditures 
have generally ranged between $1.0 million and $2.0 million. However, in FY21–22, expenditures increased to 
$4.4 million, $2.8 million higher than the prior year, due to multiple high-severity claims, including two general 
liability cases (wrongful death and unlawful detention) and two auto liability incidents (a police pursuit and a 
rear-end collision). 
FY25–26 Workers’ Compensation expenditures total $1.4 million year-to-date through December 31, 2025, 
representing 52% of the adopted annual budget. In FY24–25, total expenditures were $3.7 million, a modest 
decrease of $75,000 compared to the prior fiscal year. Notwithstanding this slight reduction, overall program 
costs continue to trend upward, driven by the increasing frequency and severity of cancer presumption claims, 
an aging workforce, and sustained escalation in medical treatment costs.
Insurance premiums increased by 97.1% in FY21–22, driven by coverage corrections and a hardening insurance 
market. Since that time, premium growth has generally stabilized, with modest changes in FY22–23 (-3.4%) and 
FY23–24 (2.5%), followed by a higher increase in FY24–25 (22.9%) and a more moderate 6.7% increase in FY25–
26. Overall, premium trends have normalized and are now more closely aligned with prevailing market 
conditions.
The table below summarizes departmental chargebacks allocated to each department, which are recognized 
as revenue to the Risk Management Program. Variances between total chargebacks and program 
expenditures reflect the presence of additional program-specific revenues. The table presents activity for the 
prior five fiscal years, along with the first six months of the current fiscal year.
FY25–26 year-to-date chargebacks total $8.3 million through December 31, 2025, representing 99% of the 
adopted annual budget. This concentration in the first half of the fiscal year is primarily attributable to the 
allocation of annual insurance premiums during this period as well as the auto liability claim.

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In FY24–25, approximately 65% of total chargebacks were allocated to the Police and Public Works 
departments. Police Department chargebacks are primarily driven by workers’ compensation, general liability, 
and automobile liability claims, while Public Works charges are largely associated with general liability and auto 
liability exposures.
Risk Management staff conduct monthly workers’ compensation claim reviews with the Police and Fire 
Medical Rescue departments to identify cost-containment opportunities, address emerging issues, and 
support timely and effective claim resolution.