Local Government Insurance Trust (LGIT)
The Local Government Insurance Trust (LGIT) is a non-profit Trust created, owned and governed by Maryland local governments and endorsed by MACo to provide various liability and property insurance and health benefits coverages.
History of LGIT
Since 1987, many local government entities in the State of Maryland have covered their primary and excess liability, auto, environmental, property, boiler and machinery through the Local Government Insurance Trust (LGIT). LGIT was founded by the Maryland Association of Counties (MACo) and the Maryland Municipal League (MML) in answer to difficulties towns, cities and counties then faced in securing affordable insurance.
LGIT is a member-owned association authorized by state law, wholly owned and managed by its local government members. The Trust’s main purpose is to provide joint self-insurance programs or pools for towns, cities and counties in the State of Maryland. The concept is simple - rather than paying premiums to buy insurance from an insurance company, local governments contribute those premiums into a jointly owned fund. The money in that fund is used to pay for the members’ claims, losses, and expenses.
Why Was LGIT Created?
The private insurance market runs in hard and soft cycles. During a soft cycle, insurance is relatively cheap and easy to acquire. During a hard cycle, insurance is very expensive and hard to obtain because insurance companies tend to view local government losses as risks that are undesirable or unpredictable. In the hard cycle of the late 1980s, a majority of Maryland towns, cities and counties suffered from the high cost of insurance premiums and loss of insurance coverage. Because of the existence of LGIT, Maryland local governments know they now have coverage available to them at stable rates and predictable costs - regardless of private insurance industry cycles.
How Does LGIT Differ from an Insurance Company?
In some ways, LGIT functions like an insurance company. Maryland local governments pay a premium to LGIT, LGIT gives the member government a coverage document that looks like an insurance policy, and LGIT pays claims and losses on the member’s behalf. However, there are a few important differences.
LGIT is owned and managed by its member local governments. Its purpose is to meet local government risk management needs - not to make a profit by selling insurance. Because LGIT is a nonprofit organization, if the Trust’s income from fees and investments is more than is needed to pay for losses and expenses, the excess funds may be returned to the members.
How Safe & Secure Is LGIT?
To ensure that LGIT is able to meet its responsibility to pay claims, LGIT’s Board of Trustees has always ensured that the Trust is strong and financially sound. To achieve this goal, LGIT takes a conservative approach to rates and reserves, spreads risk via reinsurance with the strongest re-insurers and conducts regular actuarial reviews to make sure the Trust is on solid ground.