HomeMy WebLinkAbout19 - General Liability and Fiduciary Insurance RenewalCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item 19
February 27, 2007
To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
From: Human Resources, Lauren F. Farley, Risk Manager, 949 -644 -3300
Ifarley(cacity. newport- beach.ca. us
Subj: Excess General Liability Insurance and Fiduciary Liability Insurance
Renewals
Issue
Should the City Council authorize the expenditure of $703,901 for the excess
general liability and fiduciary liability insurance renewals?
Recommendation
Approve the renewal of the excess general liability insurance coverage for a
twelve month policy with The Insurance Company of the State of Pennsylvania
(an AIG Company) and Lexington Insurance for $675,781 in premium and
$28,120 in premium for fiduciary liability with RLI Insurance.
Background
The City purchases excess general liability insurance through its insurance
broker, Brown & Brown. The broker of record establishes relationships with
.insurance markets to find the best coverage for the least amount of premium..
Mark Zahoryin is our account representative with Brown & Brown and has been
associated with our excess general liability insurance program for the last fifteen
years. The renewal process begins approximately ninety (90) days prior to the
expiration of the insurance coverage and continues right up to the expiration of
the existing coverage (March 1S). The conclusion of the process depends on the
availability of the markets and the need for the underwriters to clarify and obtain
information on our application. In addition, our broker continues to press for the
best possible.premium.for the new policy.. The City's history for excess general
liability coverage is exhibited in the chart below. Prior to FY 94195 the city was
self insured and the first eight (8) years of purchasing excess insurance reflects a
relative stable insurance marketplace.
General Liability Excess Insurance Renewals
Council Agenda= February 27, 2007
Page 2 of 3
However, the years following the World Trade Center catastrophe beginning with
FY02 /03 reflects .a much harder insurance market. To adjust to the severe
premium increases, the City took the opportunity to maximize its position in the
market by strategically selecting a March 1st renewal date. Typically, public
agencies choose either a January or July 1st renewal date to coincide with either
the calendar year or their fiscal year. Our March 1st renewal date allows us the
opportunity to review the market trends of both the July and January traditional
dates providing us with a continuing market edge for our insurance renewals.
General Liability Excess Insurance Limits and Premium History
Self Insured Retention
Policy Period (SIR) /Coverage Limits Annual Premium
FY 94/95
FY 95/96
FY 96/97
FY 97/98
FY 98/99
FY 99/00
FY 00/01
FY 01/M
FY 02/03 (6 mos.only)
1/1/03 to 3/1/04 (14 mos.)
3/1/04 to 3/1/05
3/1/05 to 3/1106
3/1/06 to 3/1/07
Renewal Quotation
$1 million /$10
million
$343,606
$1 million /$10
million
$358,355
$1 million /$20
million
$337,915
$750,000/$25
million
$299,800
$500,000/$25
million
$255,000
$500,000 /$25
million
$260,000
$500,000/$25
million
$268,000
$500,000/$25
million
$331,000
$500,000 /$21
million
$475,997
$500,000/$21
million
$829,940
(Premium
Annualized for 12
mos. is $711,377)
$500,000/$26 million $799,166
($1 million SIR for EPLI)
$500,000/$26 million $803,728
($1 million SIR for EPLI)
$500,000/$26 million $800,115
($1 million SIR for EPLI)
The excess general liability market continues to remain stable in the public sector
risk area reflecting what is considered to be a soft market in the insurance
industry. The quote below continues our commitment to obtaining the broadest
policy coverage at the best possible premium to provide the protection needed to
perform our daily operations and provide the services to our community.
General Liability Excess Insurance Renewals
Council Agenda — February 27, 2007
Page 3 of 3
The insurance companies chosen meet or exceed the City's minimum standards
for financial strength and solvency with an AM Best rating of A -, VII or greater.
Carrier SIR
Ins. Co. of the $500,000
State of Penn.
(Vt Layer)
Lexington
(2 "d Layer)
Coverage Limits
$11 million excess
of $500,000 SIR
$15 million excess
of $11 million
Total Premium
Annual Premium
$353,952
321,829
$675,781
The fiduciary liability policy covers the City's financial responsibility for the
deferred compensation benefit plan and the new medical expense retirement
plan (MERP). This policy is renewing for the same premium of $28,120 with RLI
Insurance Company with an SIR of $25,000 and $10 million dollar limits.
Funding Availability:
Funds which cover the recommended expenditure are in the Internal Services
Budget — Insurance Reserve Fund 6020 -8720 — General Liability Excess. The
renewal premium of $675,781 is less than the budgeted amount of $854,000 in
the FY 06/07 budget and represents a budget savings of $178,219 or 20 %.
Funds for the Fiduciary Liability Insurance are also in the Insurance Reserve
Fund 6020 -8730 and the budgeted amount of $28,120 equals the renewing
premium.
Prepare Submitted by:
Chn�
ELauren F. , Manager Barbara Ramsey, HR Director