HomeMy WebLinkAboutS12 - Excess General Liability and Property Insurance RenewalsCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. s12
February 23, 2010
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Human Resources, Lauren Farley, Risk Manager, (949) 644 -3302
IfarleyCcD.city. newport- beach.ca. us
SUBJECT: Excess General Liability and Property Insurance Renewals
Issue:
Does the Council approve the cost of $583,459 for expiring excess general liability and
$679,408 property insurance coverage for a total of $1,262,867 (for the period March 1,
2010 to February 28, 2011)?
Recommendation:
Approve the renewal of the excess general liability and property insurance program
coverage for amount not to exceed $1,262,867 in total premium (not including State
taxes and fees) from the Insurance Reserve Funds.
Background:
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 1'). The conclusion of the process depends on the availability of coverage in the
markets, the need for underwriters to clarify and obtain additional information on our
applications and final negotiations with carriers to obtain the best pricing available to the
City. The City purchases excess general liability coverage and five different types of
property insurance: Master Property (including boiler & machinery), Earthquake, Flood
(Difference in Conditions Coverage), Crime, Fiduciary and Watercraft. These types of
policies provide the City with a broad coverage base to protect the City's real & personal
property and its monetary assets.
In light of the City's current budget concerns, we requested that our broker of record,
Mark Zahoryin of Brown & Brown, be more aggressive in his marketing of the City's
insurance such as multi -year policies with rate guarantees, self insured retention (SIR)
options, different deductible levels, choice of coverage and any other variations that
may bring cost savings to the City.
Excess General Liability and Property Insurance Renewals
Council Agenda — February 23, 2010
Page 2 of 4
Excess General Liability Renewal Quotation:
The renewal quotes obtained for the excess general liability coverage did not provide
any premium savings when carving out some coverage areas such as auto liability,
public entity management (Errors and Omissions) or employment practices liability
insurance (EPLI). In addition, multi -year pricing was not available from the incumbent
carrier or any other markets quoting our municipal liability coverage, plus there was no
pricing relief for changing the City's SIR from $500,000 to $1 million. The only
premium savings available would be to reduce coverage limits from $50 million to
$25 million for a savings of $103,788 annually.
Our current carrier, Travelers Insurance, provided the best primary layer renewal quote
offer to the City and the pricing breakdown for the primary policy is as follows:
• * *Public Entity Liability (PEL)
$91,336
($1 million)
• * *Police Liability (PL)
$49,004
($1 million)
• * *Auto Liability (AL)
$15,035
($1 million)
• Errors & Omissions (E &O)
$44,892
$142,657
• Employment Practices (EPLI)
$51,853
$25M excess $25M
• Employee Benefits Liability
$ 87
($3 million sublimit)
• * *Umbrella Excess Liability
$84,807
($9M excess of $1M)
for coverage with asterisks
Total Premium $337,014
Carrier
SIR
Coverage Limits
Premium
Travelers
$500,000
$10,000,000
$337,014
To Be Determined
- --
$15M excess of $10M
$142,657
To Be Determined
--
$25M excess $25M
$103,788
The renewal premium of $583,459 is the same as the expiring premium and remains
lowest premium the City has experienced since FY 01/02. The insurance companies
above meet or exceed the City's minimum standards for financial strength and solvency.
Excess General Liability and Property Insurance Renewals
Council Agenda — February 23, 2010
Page 3 of 4
Property Renewal Quotation with Coverage Options:
The chart below reflects this year's renewal without any changes to coverage, limits and
deductible.
The best opportunity to reduce the City's overall premium cost is within the earthquake
and flood section of the property coverage. The areas where the pricing can be
reduced is to change the deductible from ten percent (10 %) to twenty percent (20 %) of
total insured value (TIV), excluding personal property, business interruption (BI), all
pump stations, plus eliminating property coverage including earthquake (EQ) and flood
coverage for both piers. Below is a synopsis of the savings in bold based on these
options; however, the attached represents these options in more detail.
All Property Excludina Piers
Option A - Increase the deductible to 20% of TIV = $86,867 in savings
Option B — 20% deductible, excl. personal property & BI = $99,935 in savings
Option C — Excluding personal property, pump stations & BI
10% deductible = $ 97,870 in savings
20% deductible = $146,397 in savings
Pier Coverage
Option D - Eliminating All Property Coverage for both piers = $153,326 in savings
2009
2010
% Difference
+19% due to
Master Property
$72,080
$86,110
increase in reported
values
Earthquake & Flood
$518,035
$528,938
2%
Watercraft
$40,456
$33,910
-16%
Crime
$30,450
$30,450
No Change
Total Premium
$661,020
$679,408
+2.7% overall
increase
The best opportunity to reduce the City's overall premium cost is within the earthquake
and flood section of the property coverage. The areas where the pricing can be
reduced is to change the deductible from ten percent (10 %) to twenty percent (20 %) of
total insured value (TIV), excluding personal property, business interruption (BI), all
pump stations, plus eliminating property coverage including earthquake (EQ) and flood
coverage for both piers. Below is a synopsis of the savings in bold based on these
options; however, the attached represents these options in more detail.
All Property Excludina Piers
Option A - Increase the deductible to 20% of TIV = $86,867 in savings
Option B — 20% deductible, excl. personal property & BI = $99,935 in savings
Option C — Excluding personal property, pump stations & BI
10% deductible = $ 97,870 in savings
20% deductible = $146,397 in savings
Pier Coverage
Option D - Eliminating All Property Coverage for both piers = $153,326 in savings
Excess General Liability and Property Insurance Renewals
Council Agenda — February 23, 2010
Page 4 of 4
Funding Availability:
Funds which cover the recommended expenditures are in the Internal Services Budget
— Insurance Reserve Fund 6020 -8720 General Liability Excess Insurance and 6020-
8715, 8721 and 8726 Crime, Property, Watercraft & Insurance representing only.
Prepared by:
Aa; ZL
V
Sheri Anderson, Sr. HR Analyst
Submitted by:
erri L. Cassidy, HR Director
Lauren Farley, Risk Manager
City of Newport Beach
March 01, 2010 - March 01, 2011
Property Renewals
I. Difference In Conditions - Including Earthquake a Flood - Except Piers
OPTION - A
TIV: $ 188,166,664 Includes All Property Per Statement of Values
Carriers:
UW at Lloydsift
Max Specially
Empire Indemnity
TOTAL
Limit
FLOOD
LIMIT
Attachment
I Point
I Deduct
Premium
excl.
TRIA
Slate Tax a
I Fee 3 250%
TOTAL
10.000,000
20%
10.000.000
10.0%
233,789
55,000
7.598.14
1,787 50
S 241,387.14
1 56.787.50
51000,000
as
20.000.000
xs
15,000.000
1
1 75,000
1 2.437 50
15 77.437 50
35,000,000 S 363,789 S 375,812.14
OPTION - B
TIV: Real Property Only
ml
UW at Lloyds/Be:
Max Specially
Empire Indemnity
TOTAL
Limit
FLOOD
LIMIT
Attachment
I Point
Deduct
Premium
excl.
TRIA
State Tax a
F" 3.250%
TOTAL _
10.000.000
20%
10%
1 10.0%1
206,000
6.695 00
S 212,695.00
5,000.000
xs
10.000.000
43,000
1,397 50
S 44,397 50
20,000.000
xs
15.000,000
5132,500 f4,308
82,000
2,01500
$ 84.01500
35,000,000 $ 311,000 S 321,107.50
OPTION - C
TIV: RP $100K • excl. Pump Stations Including Business Income
Carriers:
UW at Lloyds/Bel
Max Specialty
Fmpre Indemnity
TOTAL
11 Piers
Limit
FLOOD
LIMIT
Attachment
Point
Deduct
Premium
excl.
TRIA
Stale Tax a
Fee 3.250%
TOTAL
10.000.000
20%
10%
10.0%
194,000
6.305 00
S 200.305.00
5,000,000
as
10.000,000
45,000
1,462 50
S 46,462 50
20,000,000
as
15,000.000
5132,500 f4,308
1 58,000
1,865.00
S 59.88500
35,000,000 S 297,000 S 306,652.50
Term Date. 03101/2010 03101/2011
TIV. S 14,850.000 ?All Risk; Wave Wash Eariblitu9e i Flddd
Axis
TOTAL
EO
LIMIT
FLOOD
LIMIT
AOP
LIMIT
Deduct
State Tax a
Fee 3 250%
TOTAL
6,078.48
5193.10848
20%
10%
1.30000
5 41.300.00
Flood
56,500
1,83625
EO
$ 283,530 S 292,744.73
AOP
10%
4,308
5136,806 25
5132,500 f4,308
5138,808.25
Flood
$10,00
$ 5.000.000
$ 5.000.000
14,850,000
0 AOP
4,826
153.326
14,850,000 S 4,828
153,326
Deduct
Premium
excl.
TRIA
State Tax
a Fee
3250%
TOTAL
20.0%
187,030
6,078.48
5193.10848
20%
40,000
1.30000
5 41.300.00
Flood
56,500
1,83625
S 58,336 25
$ 283,530 S 292,744.73
Deduct
Premium
excl.
TRIA
State Tax
a Fae
3150%
TOTAL
20.0%
175,000
5,68750
S 180,687.50
20%
38,000
1,235.00
$ 39,23500
Flood
54,000
1,75500
S 55.75500
$ 267,000 $ 275,677.50
Dsduc3.250%
State Tax
a Fes
TOTAL
20.O5,13500
E
S 163,13500
20%
1,13750
S 36,13750
Flood
1,625.00
I 5 51.625 00
S 2!3,000 S 250,897.50
Deduct
Premium
excl. TRIA
State Tax
a Fee
3 250%
TOTAL
20% EO
20%
Flood
510,000
AOP
132,500
4,308
5136,806 25
5132,500 f4,308
5138,808.25