INSURANCE

We use a combination of insured and self-insurance programs to cover workers’ compensation, general liability, automobile liability, property damage, and other insurable risks. For the majority of these insurance programs, we retain the initial $1.0 million of exposure on a per-occurrence basis, either through deductibles or self-insured retentions. Beyond the retained exposures, we have varying primary policy limits ranging between $1.0 million and $5.0 million per occurrence. To cover general liability and automobile liability losses above these primary limits, we maintain commercial umbrella insurance policies that provide aggregate limits of $200.0 million. Our insurance policies generally cover workers’ compensation losses to the full extent of statutory requirements. Additionally, to cover property damage risks above our retained limits, we maintain policies that provide per occurrence limits of $75.0 million. We are also self-insured for certain employee medical and dental plans. We maintain stop-loss insurance for our self-insured medical plan under which we retain up to $0.4 million of exposure on a per-participant, per-year basis with respect to claims. As of September 1, 2017, GCA’s workers’ compensation, general liability, automobile liability, and other insurable risks are covered under the ABM insurance policies.

The adequacy of our reserves for workers’ compensation, general liability, automobile liability, and property damage insurance claims is based upon known trends and events and the actuarial estimates of required reserves considering the most recently completed actuarial reports. We use all available information to develop our best estimate of insurance claims reserves as information is obtained. The results of actuarial studies are used to estimate our insurance rates and insurance reserves for future periods and to adjust reserves, if appropriate, for prior years. During each of 2017 and 2016, we performed both an annual actuarial evaluation and an actuarial review. As a result of these studies, we increased our reserves for claims related to prior periods by $22.0 million and $32.9 million during 2017 and 2016, respectively.

Insurance Reserve Adjustments

Actuarial Studies Performed During 2017

During 2017, we performed actuarial studies of our casualty insurance programs that considered changes in claim developments and claim payment activity for the period commencing May 1, 2016 and ending April 30, 2017 for all policy years in which open claims existed.

The actuarial studies indicated safety initiatives we have implemented have had a modest impact on our claim costs in the most recent years. However, there have been unfavorable developments in ultimate losses beyond our estimates for general liability and workers’ compensation claims related to prior years, as described below.

The actuarial studies indicated a decrease over the most recent years in the total number of reported claims related to our general liability program, particularly with respect to bodily injury claims, in addition to property damage claims. However, in prior year claims we experienced adverse developments that are largely attributable to adjustments related to certain bodily injury claims and to losses for property damage.

We are experiencing a reduced frequency of claims in our workers’ compensation program. However, due to increases in projected costs and severity of claims for a number of prior year claims in California and New York, we increased our estimate of ultimate losses for workers’ compensation. Statutory, regulatory, and legal developments have contributed to the increase in our estimated losses.

Based on the results of the actuarial studies performed during 2017, which included analyzing recent loss development patterns, comparing the loss development patterns against benchmarks, and applying actuarial projection methods to estimate the ultimate losses, we increased our total reserves for known claims as well as our estimate of the loss amounts associated with IBNR Claims for years prior to 2017 by $22.0 million during 2017. This adjustment was $10.9 million lower than the total adjustment related to prior year claims of $32.9 million in 2016.

Actuarial Studies Performed During 2016

During 2016, our actuarial studies showed unfavorable developments in ultimate losses that we estimated for general liability, workers’ compensation, and automobile liability claims. These studies indicated our risk management programs were yielding improvements, however these improvements had a modest impact on prior years and the impact was not occurring at the pace originally forecasted by the actuaries. The average claim cost was also unfavorably impacted by increases in legal fees, medical costs, and other claim management expenses necessary to adjudicate the claims with dates of loss prior to 2016. As a result, we increased our reserves for known claims as well as our estimate of the loss amounts associated with IBNR Claims for years prior to 2016 by $32.9 million during 2016.

Insurance Related Balances and Activity



(in millions)	October 31, 2017		October 31, 2016
Insurance claim reserves excluding medical and dental	$	485.6	$	417.9
Medical and dental claim reserves	9.8		5.9
Insurance recoverables	73.1		69.7

At October 31, 2017 and 2016, insurance recoverables are included in both “Other current assets” and “Other noncurrent assets” on the accompanying consolidated balance sheets.

Casualty Program Insurance Reserves Rollforward



	Years Ended October 31,
(in millions)	2017			2016			2015
Net balance at beginning of year	$	348.2		$	312.7		$	277.8
Change in case reserves plus IBNR Claims — current year	112.2			104.5			88.7
Change in case reserves plus IBNR Claims — prior years	23.1			35.8			40.1
Claims paid	(105.2		)	(104.8		)	(93.9		)
GCA Services acquisition	34.1			—			—
Net balance, October 31⁽¹⁾	412.5			348.2			312.7
Recoverables	73.1			69.7			65.9
Gross balance, October 31	$	485.6		$	417.9		$	378.6

⁽¹⁾ Includes reserves related to discontinued operations of approximately $10 million for 2017 and $12 million for both 2016 and 2015.

Instruments Used to Collateralize Our Insurance Obligations



	As of October 31,
(in millions)	2017		2016
Standby letters of credit	$	137.6	$	118.3
Surety bonds	77.5		57.2
Restricted insurance deposits	11.2		11.2
Total	$	226.3	$	186.7