HomeMy WebLinkAbout08 - Excess General Liability Insurance RenewalCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item $
February 28, 2006
To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
From: Human Resources, Lauren F. Farley, Risk Manager, 949 - 644 -3300
Ifarley(a)city. newport- beach.ca.us
Subj: Excess General Liability Insurance Renewal
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Issue
Should the City Council authorize the expenditure of $800,115 for the excess
general liability insurance renewal?
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. This policy has a self- insured
retention (SIR) of $500,000 and a $1 million SIR for Employment Practices
Liability Insurance (EPLI).
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
fourteen 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 15`). This depends on the availability
of the markets and the need for the underwriters to clarify and obtain information
on our application and our broker continuing 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 94/95 the city was self
insured and the first eight (8) years of purchasing excess insurance reflects a
relative stable insurance marketplace.
Page 2
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 1" 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 1S` renewal date allows us the
opportunity to review the market trends of both the July and January traditional
dates providing us with a market edge for our renewal date.
General Liability Excess Insurance Limits and Premium History
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 01/02
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 3/1/06
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)
The excess general liability market continues to remain stable within the public
sector reflecting slight decreases to slight increases in premium renewals. 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. 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.
Page 3
Carrier SIR Coverage Limits Annual Premium
Ins. Co. of the $500,000 $11 million excess $442,440
State of Penn. of $500,000 SIR
(15` Layer)
Lexington $15 million excess $357,675
(2nd Layer) of $11 million
Total Premium $800,115
Funding Availability:
Funds which cover the recommended expenditure are in the Internal Services
Budget — Insurance Reserve Fund, # 6020 -8720. The renewal premium of
$800,115 is less than the anticipated amount of $864,000 in the FY 05/06 budget
rand- represents a 7% budget savings.
Prepared by:, -� Sub ted by:
Lauren F. Farley, Ris c Manager Barbara Ramsey, HR Direc[o�