HomeMy WebLinkAbout17 - Excess Workers Compensation InsuranceCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 17
February 27, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Human Resources, Lauren Farley, Risk Manager, (949) 644 -3302,
fadey@city.newport-beach.ca.us
SUBJECT: Excess Workers Compensation (WC) Insurance Renewal
Issue:
Should the City Council authorize the expenditure of $413,210 for the excess workers
compensation insurance renewal?
Recommendation:
Approve the renewal. of the excess workers compensation coverage for a twelve month
policy with a self- insured retention (SIR) of $1 million with statutory coverage limits and
premium outlined below.
Coverage Limits
Carrier SIR WC & Employers Liability Premium
AIG $1 million Statutory Limits /$1 million $413,210
.. Employers Liability
Background:
The City is self insured for workers compensation and purchases excess workers
compensation insurance as a risk - financing tool to protect against catastrophic loss. In
addition to the City purchasing excess workers compensation insurance, legislative
reforms over the past ten years have provided assistance to the City in lessening the
monetary impact.of its .workers compensation claims. The most recent reform (SB 899) 1. in April of 2004 reduced medical costs and some permanent disability ratings and
settlements. As with any reform in the workers compensation arena, new legislation is
continuously introduced to change the recent reform, but we continue to see savings in
our claims costs in both these areas. The League of California Cities and the state's
Public Risk Managers Associations are closely monitoring any potential new legislation
that would alter the SB 899 reform.
Excess Workers' Compensation Renewals
Council Agenda — February 27, 2007
Page 2
Renewal Quotation:
The City's workers compensation program is viewed by the insurance carriers as an
excellent risk (during this policy period we did not have a single claim that exceeded our
self insured retention limit of $1 million), thereby providing the City with very competitive
renewal quotes. The renewal proposal with AIG offers the greatest protection while
allowing the workers compensation internal service fund to retain a certain level of risk
within its financial. capacity. ,Therefore, staff recommends the renewal policy from AIG
as outlined below:
Carrier SIR
AIG $1 million
Funding Availability:
WC & Employers Liability
Statutory Limits /$1 million
Employers Liability
Premium
$413,210
Funds which cover the recommended expenditure are in the Internal Services Budget —
Insurance Reserve Fund 6010 -8638. The renewal premium of $413,210 is $118,690
less than the anticipated amount of $531,900 in the FY 06/07 budget and represents a
24% budget savings. $51,561 in savings will be transferred to 6010 -8721 to pay for
increases in property insurance premiums.
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