HomeMy WebLinkAbout21 - City Insurance Renewals��W,oRr
CITY OF
NEWPORT
REACH
City Council Staff Report
Agenda Item No. 21
June 25, 2013
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Human Resources Department
Terri L. Cassidy, Deputy City Manager /Human Resources Director
949 - 644 -3303, tcassidy(a)newportbeachca.gov
PREPARED BY: Lauren Farley, HR/Risk Management Administrator
APPROVED: � L AI\I
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TITLE: City Insurance Renewals —July 1, 2013— June 30, 2014
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The City purchases insurance coverage under its risk management program including,
but not limited to: excess general liability coverage, excess workers' compensation
coverage, and property insurance covering all risk, earthquake & flood. This insurance
provides the City with a broad coverage base to protect its monetary, real and personal
property assets.
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Approve renewal of the following insurances: excess general liability, excess workers'
compensation and property insurance coverage for an amount not to exceed
$1,883,878 in total premium from the Insurance Reserve Funds. The term of the
renewal is for a twelve (12) month policy period, July 1, 2013 through June 30, 2014.
FUNDING REQUIREMENTS:
The adopted budget for the new fiscal year (FY) includes sufficient funding for this
purchase. It will be expensed to the Insurance Reserve Funds account in the Human
Resources Department, 6010 and 6020.
DISCUSSION:
Insurance Application Process:
The insurance renewal process commences in January each year with Risk
Management staff fulfilling the underwriter's requirements and providing the completed
applications to the City's insurance broker, Alliant Insurance Services, Inc. ( "Alliant ") for
thorough review.
City Insurance Renewals — July 1, 2013— June 30, 2014
June 25, 2013
Page 2
Early in the discussions with Alliant, staff was provided information about current
insurance market conditions necessary to determine early funding estimates for the
upcoming fiscal year budget. In 2013, we were notified that property insurance prices
had begun to increase with the January renewals based on market conditions. Further,
the addition of the new Civic Center complex to the property schedule in April 2013
increased the City's Total Insured Value (TIV).
To save premium costs under the Earthquake and Flood coverage, our broker
requested underwriting to remove the former City Hall site from that policy effective
711/13 and this could result in a possible savings in the future.
Insurance Market:
Alliant releases the City's applications for coverage to insurance markets in March. At
the City's request; the broker adheres to the following marketing criteria for its renewal:
broad coverage terms, various policy limits and self- insured retentions (SIR) with stable
premium costs.
Alliant accessed numerous competitive - market insurance carriers
Eighteen (18) primary excess general liability
Nineteen (19) secondary excess general liability
Six (6) for earthquake and flood coverage
Joint purchase plans and any stable, pooled insurance programs available were also
reviewed to insure the City with the best renewal quotes possible.
Renewal Quotes:
The City maintained a $500,000 self- insured retention (SIR) level for its general liability
program for the last 15 years. However, due to the increase in pricing of general liability
coverage and the City's recent loss experience, which included multiple employment
law claims, a death claim, and several serious injury claims, this SIR was not offered to
the City by any of the quoting insurance carriers. The City received a competitive
quote with a higher SIR of $1 million dollars from the current insurance carriers of
Ironshore, Arch and AWAC. However, in an effort to retain the City's lower SIR
($500,000), staff directed Alliant to obtain a quote from CSAC Excess Insurance
Authority (formally known as California State Association of Counties - Excess
Insurance Authority (CSAC -EIA), a joint powers general liability program (the City joined
CSAC -ETA's workers' compensation program in FY 11/12).
City Insurance Renewals — July 1, 2013— June 30, 2014
June 25, 2013
Page 3
CSAC -EIA's underwriting committee was able to tentatively offer the $500,000 SIR
renewal option, but their policy language does not include dams, and the City's Big
Canyon Reservoir is defined as a dam by the State of California, Division of Dam Safety
Inspection & Certification; and therefore, not covered under their policy. However, full
approval of the $500,000 SIR, including the Big Canyon Reservoir, from CSAC -EIA is
pending a final vote June 25, 2013, by the underwriting committee. If approved (and we
will know before the Council meeting), staff would recommend Option #2 with the lower
SIR of $500,000. However, should that option not be approved, staff would recommend
Option #1. Thus, staff is providing Council with both renewal options for the City's
excess general liability coverage in Attachment 1.
Alliant provided staff with the final excess workers' compensation and property
insurance quotes for review including the self- insured retention (SIR) amounts, policy
limits, deductible (applicable to property insurance only), coverage periods and forms.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will
not result in a direct or reasonably foreseeable indirect physical change in the
environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378)
of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it
has no potential for resulting in physical change to the environment, directly or
indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
Submitted by:
Deputy City Manager /H
Attachment 1 — Insurance Carrier & Premium Chart
City Insurance Renewals —July 1, 2013 to June 30, 2014
June 25, 2013
Attachment 1
Insurance Carrier & Premium Chart
Annual 2013
Annual 2014
%
Insurance
Insurance Carrier and
Difference
Carrier and
Premium
Premium
OPTION # 1
Ironshore, Arch & AWAC -
4,2 %°
$1,000,000 SIR
Excess General
Ironshore,
$561,829
Liability, $500,000
Arch and
or
SIR ($50 million
AWAC
OPTION # 2
limits)
$539,276
(Incl. Big Canyon Reservoir)
CSAC EJA & AWAC
$500,000 SIR
7.4%
$579,000
Excess Workers'
Compensation,
CSAC
CSAC EIA $334,215
12%
$500,000 SIR
$298,339
(Statutory Limits
Primary Property
PEPIP
PEPIP
(All Risk)
$170,165
$243,570
43.14%
Multiple
Multiple Carriers
Earthquake &
Carriers
$727,093
51%
Flood
$481,542
Deductible 10% of
Total Insured Value
(TIV) of
$378,534,526 ($50
million limits)
Option 1 - $1,866,707
Total Premium
$1,489,322
Or
Annual
Option 2 -
Total
$1,883,878