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. Since September 1, 2017, GCA’s workers’ compensation, general liability, automobile liability, and other insurable risks have been 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 2018 and 2017, we performed both an actuarial review and an actuarial update, as described below. As a result of these studies, we increased our reserves for claims related to prior periods by $10.2 million and $22.0 million during 2018 and 2017, respectively.

Insurance Reserve Adjustments

Actuarial Studies Performed During 2018

During 2018, 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, 2017 and ending April 30, 2018 for all policy years in which open claims existed.

The actuarial studies indicated the changes we have made to our risk management program have reduced the frequency of claims; however, we are experiencing adverse developments that impact claim costs relating to prior periods. Claim management initiatives include programs to identify claims that have the potential to develop adversely earlier in the claims cycle and ensure the establishment of reserves consistent with known fact patterns. However, with respect to claims related to certain prior fiscal years, the actuarial studies showed unfavorable developments in our estimates of ultimate losses related to general liability, property damage, workers’ compensation, and automobile liability claims, as described below.

The actuarial studies related to our general liability program indicated the total number of claims continues to show a pattern of decreasing losses, particularly with bodily injury claims. However, we experienced adverse developments with respect to claims related to certain prior fiscal years that are largely attributable to adjustments for certain alleged bodily injury claims and to losses for property damage.

Due to increases in projected costs and severity of claims in certain prior fiscal years, in 2018 we increased our estimate of ultimate losses for workers’ compensation claims. Statutory, regulatory, and legal developments have also contributed to the increase in our estimated losses. Our workers’ compensation estimate of ultimate losses was primarily impacted by increases in projected costs for a significant number of prior year claims in California.

Our automobile liability program covers our fleet of passenger vehicles, service vans, and shuttle buses, which are associated with our various transportation service contracts. Claim frequency and severity associated with our fleet operations developed unfavorably versus actuarial expectations, consistent with insurance trends exhibited in the broader insurance book of claims.

Based on the results of the actuarial studies performed during 2018, which included analyzing recent loss development patterns, comparing the loss development against benchmarks, and applying actuarial projection methods to estimate ultimate losses, we increased our total reserves for known claims as well as our estimate of the loss amounts associated with IBNR Claims for prior periods by $10.2 million during 2018. This adjustment was $11.8 million lower than the total adjustment related to prior year claims of $22.0 million in 2017.

Insurance Related Balances and Activity



(in millions)	October 31, 2018		October 31, 2017
Insurance claim reserves, excluding medical and dental	$	501.4	$	485.6
Medical and dental claim reserves	8.9		9.8
Insurance recoverables	73.7		73.1

At October 31, 2018 and 2017, 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)	2018			2017			2016
Net balance at beginning of year	$	412.5		$	348.2		$	312.7
Change in case reserves plus IBNR Claims — current year	131.4			112.2			104.5
Change in case reserves plus IBNR Claims — prior years	10.2			23.1			35.8
Claims paid	(126.5		)	(105.2		)	(104.8		)
GCA acquisition	0.1			34.1			—
Net balance, October 31⁽¹⁾	427.7			412.5			348.2
Recoverables	73.7			73.1			69.7
Gross balance, October 31	$	501.4		$	485.6		$	417.9

⁽¹⁾ Includes reserves related to discontinued operations of approximately $3 million for 2018, $10 million for 2017, and $12 million for 2016.

Instruments Used to Collateralize Our Insurance Obligations



	As of October 31,
(in millions)	2018		2017
Standby letters of credit	$	144.1	$	137.6
Surety bonds	89.2		77.5
Restricted insurance deposits	0.6		11.2
Total	$	233.9	$	226.3