The URL can be used to link to this page

Home My WebLink About14 - General Liability Excess Insurance RenewalJuly 10, 2001 Agenda Item 14 City of Newport Beach Human Resources Department Memorandum To: Mayor and Members of the City Council From: Lauren F. Farley, Risk Manager Subj: General Liability Excess Insurance Renewal Background The city purchases excess general liability insurance through its insurance broker. The broker establishes relationships with insurance markets to find the best coverage for the least amount of premium. Our broker, Cal Surance has been the broker of record for the city for the past twenty years and our account executive, Mark Zahoryin, has been associated with our insurance program for the last eleven years. In regards to general liability coverage, the city was uninsured for this coverage for a period of eight years (FY 85/86 through FY 93/94). Beginning FY 94/95 the city purchased $10 million dollars of excess coverage with a $ 1 million dollar self- insured retention (SIR) with the Insurance Company of the West (ICW). General Liability Excess Insurance Limits and Premium History The following chart reflects the coverage limits and premium history of the city's general program with ICW since 7/1/94: Policy Period SIR/Coveracie Limits Annual Premium FY 94/95 $1 million /$10 million $343,606 FY 95/96 $1 million /$10 million $358,355 FY 96/97 $1 million /$20 million $337,915 FY 97/98 $750,000/$25 million $299,800 FY 98/99 $500,000/$25 million $255,000 FY 99/00 $500,000/$25 million $260,000 FY 00/01 $500,000/$25 million $268,000 Page 2 Renewal Quotation Unfortunately, ICW decided to withdraw from the municipal excess general liability market due to a loss of reinsurance and even with our unchanged exposures (risks), stable loss history (no claims above the SIR) and 7 years of good experience with ICW, the market has become less favorable in all areas. Our broker was able to secure the following quote from Royal Indemnity Company at an increase of 21.4% including loss control services: Policy Period SIR/Coverage Limits Annual Premium FY 01/02 $500,000/$25 million $331,000 Our broker was only able to receive two other indications (preliminary quotes) from AIG and Coregis. These indications were in excess of $400,000 for the annual premium for the FY 2001/2002. Recommendation The City Council approve the renewal of the excess general liability insurance coverage with Royal Indemnity for FY 01/02 for $331,000 in annual premium. Appropriate funds exist in the budget (# 6020 -8720) to cover the expenditure. 691111 M PI 3 ARE POA 401.110, tool MARKETING RESULTS FOR ALL RISK PROPERTY AND DIFFERENCE IN CONDITIONS POLICY INCLUDING EARTHQUAKE AND FLOOD ALL RISK PROPERTY COVERAGE EXCLUDING PIERS Zurich has been insuring the Cities property insurance excluding earthquake and flood for over 7 years and they have been consistently the most competitive in both pricing and coverage's. Discussion started in early April with Fireman's Fund, CGU and Royal on quoting the 2001/02 renewal. By May it was clear that Zurich had the best proposal with a modest increase especially since we did not receive any interest from the other markets at the premiums we were targeting. ALL RISK PROPERTY COVERAGE FOR NEWPORT AND BALBOA PIERS Zurich's renewal premium was excessive at $300,000 and at a $250,000 deductible. In April the marketing searched started on finding a replacement. The difficulty is that the piers Do Not Have Sprinklers And We Received Many Declinations. Westchester Fire Insurance Company who is covering some of the cities earthquake exposure was willing to offer a quote at $35,875 and did not require sprinklers to be installed. DIFFERENCE IN CONDITIONS COVERAGE INCLUDING EARTHQUAKE & FLOOD FOR ALL CITY PROPERTIES MARKETS THAT DECLINED: 1. General star indemnity Company -- declined because of average age of construction. 2. Associated – declined due to high liquefaction. 3. Essex — declined because of high liquefaction. 4. Insurance Company of the West —declined due to average age of buildings and because of the Newport/Inglewood fault exposure. 5. Scottsdale--declined due to average age of construction. 6. Westport- -- declined due to average age of construction. 7. Axa Re Property & Casualty—declined to due average age of construction. INDICATIONS THAT WERE TOO HIGH TO PROCEED WITH FORMAL QUOTES: 1. American Empire Fire & Marine— indicated $10,000,000 excess of $5,000,000 @ $60,000. (This is $20,000 higher then we obtained through Westchester). 2. Clarendon Insurance Company - -- indicated same as American Fire & Marine. 3. Lexington Insurance Company - -- indicated minimum premium of $50,000- $60,000 per million of limit. 4. Royal Insurance Company--declined earthquake due to Newport/Inglewood fault. mztSmWAOC 1 (OM) QUOTES RECIVED: 1. RLI - Quoted primary $2,500,000 at $96,000. (Pacific was lower at $85,000). Quoted $2,500,000 excess of $2,500,000 at $55,000. (Lowest quote). Quoted earthquake of piers at $2,500,000 primary at $18,682. (Lowest quote). 2. Pacific Insurance Company — quoted primary $2,500,000 at $85,000. (Lowest quote). Quoted piers $2,500,000 excess of $2,500,000 at $12,500. (Lowest quote) 3. Westchester Fire Insurance Company — quoted $10,000,000 excess of $5,000,000 at $40,000. (Lowest quote). 4. Great American - -- quoted $20,000,000 excess of $15,000,000 at $27,500. (Lowest quote). 5. Agricultural / Greenwich — quoted $15,000,000 excess of $15,000,000 at $37,500. (Great American's quote had higher limits for less). 6. Royal Insurance Company — quoted flood on piers for $28,200. (Lowest quote). MMO Fiscal Year 01/02 Insurance Renewal Comparison by City Three-year rate guarantee with an SIR of $2 million. OCCRMA is ajoint powers authority (JPA) and consists of the following cities: Irvine, Laguna Beach, Tustin, Brea, Cypress, Westminster, Los Alamitos, Sea] Beach, Orange, San Clemente, Yorba Linda and Stanton. General Liability 'i Property Insurance % Change i % Change Newport Beach + 21.4% + 20% Costa Mesa 1+10% + 64% Huntington Beach .+30% +60% Garden Grove + 10% +35% Santa Ana ,+70% 1+40% Orange County Cities Risk Management 1 Authority (OCCRMA) 1 No increase due to super funding 1 status. 1+60% Three-year rate guarantee with an SIR of $2 million. OCCRMA is ajoint powers authority (JPA) and consists of the following cities: Irvine, Laguna Beach, Tustin, Brea, Cypress, Westminster, Los Alamitos, Sea] Beach, Orange, San Clemente, Yorba Linda and Stanton.