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Home My WebLink About15 - City Insurance RenewalsQ �EwPpRr CITY OF O rt z NEWPORT BEACH <,FoP City Council Staff Report June 28, 2016 Agenda Item No. 15 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Barbara Salvini, Human Resources Director - 949-644-3300, bsalvini@newportbeachca.gov PREPARED BY: Sheri Anderson, Risk Manager — sanderson@newportbeachca.gov PHONE: 949-644-3307 TITLE: City Insurance Renewals ABSTRACT: The City purchases insurance coverage through the joint powers authority CSAC — Excess Insurance Authority (CSAC-EIA), under its risk management program. The coverage the City purchases includes but is not limited to: excess general liability coverage and excess workers' compensation coverage. Property insurance coverage is also purchased to cover all risk, earthquake & flood through a joint purchase property program, Public Entity Property Insurance Program (PEPIP). The City's insurance provides the City with a broad coverage base to protect its monetary, real and personal property assets. RECOMMENDATION: a) Determine that the action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because it will not result in a physical change to the environment, directly or indirectly; and b) It is recommended the City Council approve premium renewals with a) CSAC-EIA for excess general liability coverage and excess workers' compensation in an amount not to exceed $1,091,465 for the period of July 1, 2016, through June 30, 2017 and b) PEPIP for all risk property, earthquake and flood coverage in an amount not to exceed $821,485 for the period of July 1, 2016, through June 30, 2017. It is important to note that although negotiations for final premiums continue through July 1, 2016, the final premium figures will meet or come in below the total amount being requested. 15-1 City Insurance Renewals June 28, 2016 Page 2 FUNDING REQUIREMENTS: The current adopted budget includes sufficient funding for this purchase. It will be expensed to the Insurance Reserve Funds accounts in the Human Resources Department, 75000750 and 7517510. DISCUSSION: Insurance Application Process: Every October, the insurance renewal process begins. Completed applications are provided to the City's insurance broker, Alliant Insurance Services, Inc. ("Alliant") by Risk Management staff for submission to the underwriters for analysis. The applications contain statistical and demographic information regarding the City's operations and risks. In order to appropriately assess the City's risk, the carriers are provided with the City's Schedule of Values ("SOV"), loss runs for liability and workers' compensation claims, and financial documents. As part of its efforts to obtain broad coverage with low Self -Insured Retentions ("SIR"s) and competitive premium pricing, the Risk Management Division strives to make the City's portfolio desirable to insurance carriers. For example, the risk management staff is continually reviewing and seeking ways to improve its programs (safety and loss control, training and compliance), strengthen relationships with brokers and vendors, and assure quality claims reporting and administration and accurate statistical reporting. Additionally, the Risk Management Division minimizes risk exposure by monitoring trends and implementing change in a proactive manner. Insurance Market: In March, Alliant releases the City's applications for coverage to insurance carriers and starts negotiating coverage and premiums. The City's coverage criteria include broad coverage terms, various policy limits and SIRs combined with stable premium costs. Alliant accessed competitive -market insurance carriers as follows: Excess General Liability Coverage — Nine (9) Excess Workers Compensation Program — Nine (9) Property, Earthquake and Flood Coverage — Twenty-six (26) In order to provide the City with the most competitive renewal quotes, Alliant marketed the City's coverage to joint purchase plans and any stable, pooled insurance programs. The results of the marketing revealed CSAC-EIA and PEPIP continue to best meet the City's criteria for coverage. 15-2 City Insurance Renewals June 28, 2016 Page 3 Renewal Quotes: On June 14, 2016, Alliant provided staff the quotes for the coverage listed above. The information provided included the SIR amounts, coverage limits, insured limits, deductible amounts (applicable to property insurance only), coverage forms and policy periods. The total proposed renewal premium results in an overall increase of 10.674% from FY 15/16. The coverage type, insurance carrier(s), SIR or deductible, policy limits and preliminary premium costs are outlined below and in Attachment A: This property renewal provides for certain enhancements at no additional charge. These include increasing notice requirements under the automatic acquisition sub -limit for properties $25 Million to $100 Million; increasing the sub -limit for cost of construction by $25 Million to $50 Million; and expanding the radius of access to a damaged covered location from 10 miles to 20 miles (ingress/egress coverage). 15-3 Annual 2016 Annual 2017 Insurance Insurance Carrier and Carrier and Premium Premium Excess General CSAC EIA CSAC EIA Liability, $500,000 SIR $569,727 $685,762 $50 million limits Excess Workers' CSAC EIA CSAC EIA Compensation, $355,817 $405,703 $500,000 SIR (Statutory Limits Primary Property Total Insured Value (TIV) $435,128,049 — Property deductible $10,000, PEPIP/ PEPIP/ including Earthquake & Multiple Multiple Carriers Flood Carriers $821,485 Deductible 10% of $802,911 EQ Insured Value of $400,970,178 ($50 million limits) Total Annual Total Annual Premium $1,728,455 $1,912,950 Increase 10.674% This property renewal provides for certain enhancements at no additional charge. These include increasing notice requirements under the automatic acquisition sub -limit for properties $25 Million to $100 Million; increasing the sub -limit for cost of construction by $25 Million to $50 Million; and expanding the radius of access to a damaged covered location from 10 miles to 20 miles (ingress/egress coverage). 15-3 City Insurance Renewals June 28, 2016 Page 4 It is important to note that while the account rate for primary property decreased, the overall Total Insured Value (TIV) increased by approximately 5% as a result of adding additional locations on the schedule, such as Marina Park. This in turn resulted in a slight increase in the property premium. General liability premium rates are based on the City's estimated 2016/17 exposure, as provided in the renewal application, as well as the City's loss experience. The City currently has 14 claims reported to its excess carriers. Workers' compensation premium rates are based on the City's payroll and rating group. The City's rating group is "High -Safety." The High -Safety rating group is for entities with safety payroll constituting 40% or more of the entity's overall payroll. This is a new methodology that is being phased in over a 3 -year period. One-third of the City's premium was rated at the new higher rating group and two-thirds was rated on the existing methodology. ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A - City of Newport Beach Schedule of Coverage 15-4 Attachment A City of Newport Beach 9 Schedule of Coverage July 1, 2016 to July 1, 2017 �4/liant TYPE OF COVERAGE TERM CARRIER POLICY LIMITS DEDUCTIBLE/ NUMBER SELF-INSURED RETENTION Pro e — 7/1/16-7/1/17 Various TBD $1,000,000,000 Limit for Property Damage $10,000 Per Occurrence. Public Entity Property Insurance Including Auto Physical Damage Program (PEPIP) $50,000 All Flood Zones Excluding Flood $25,000,000 Earthquake Shock Per Occurrence Zones A&V. Total Insured Value: $435,128,049 $25,000,000 Flood Limit Per Occurrence 2% per unit of insurance subject to a $1,000,000 minimum Per Occurrence for Sub -limit: Flood Zones A&V (inclusive of all 100 $5,100,000 Wavewash for Newport and Balboa Piers year exposures) and locations in Flood Zones A & V (inclusive of all 100 year exposures) 10% per unit of insurance subject to minimum of $100,000 Earthquake Shock. $5,000,000 Seawalls $100,000 Wavewash for Newport and $2,000,000 per member Cyber Liability, subject to Balboa Piers $25,000,000 Program Aggregate $250,000 Seawalls. Additional Sub -Limits as disclosed on Summary and Policy $10,000 Auto Physical Damage Boiler and Machinery — 7/1/16-7/1/17 Various TBD $100,000,000 Limit Boiler Explosion and Machinery $10,000 Per Occurrence except as shown Public Entity Property Breakdown. for Specific Objects or Perils. Insurance Program (PEPIP) Additional Sub -Limits as disclosed on Summary and Policy Excess DIC — Difference In 7/1/16-7/1/17 Various Various $25,000,000 excess of $25,000,000 Any one occurrence and in the aggregate separately as respects $25,000,000 provided by PEPIP subject to deductibles as shown above. Conditions earthquake and flood Total Insured Value: $400,970,178 Alliant Insurance Services, Inc. 1301 Dove Street, Suite 200, Newport Beach, CA 92660 PHONE (949) 756-0271 FAX (949) 756-2713 • www.alliantinsurance.com • License No. OC36861 1 15-5 9 City of Newport Beach Schedule of Coverage July 1, 2016 to July 1, 2017 �4/liant TYPE OF COVERAGE TERM CARRIER POLICY LIMITS DEDUCTIBLE/ NUMBER SELF-INSURED RETENTION Excess Liability 7/1/16-7/1/17 CSAC Excess TBD $ 4,500,000 Per occurrence, offense or wrongful $500,000 Per Occurrence or CSAC EIA Excess Insurance Insurance Authority act as respects Products/Completed operations Wrongful Act. Authority (CSAC EIA) excess of self-insured retention. $10,000,000 Per occurrence, offense or wrongful act as respects Product/Completed operations excess of $5,000,000 - Reinsurance $10,000,000 Per Occurrence and Aggregate where applicable Excess of $15,000,000 - Reinsurance $25,000,000 Total Limit Inclusive of Self Insured Retention Optional Excess Liability 7/1/16-7/1/17 Lloyds TBD Layer 1:25,000,000 each occurrence, offense OEL $ 10,000,000 each occurrence in excess of or wrongful act Great American the retained limit $ 10,000,000 annual aggregate as respects Allied World completed operations Layer 2• 5,000,000 each occurrence in excess of Layer 1, excess of the retained limit $ 15,000,000 annual aggregate as respects completed operations *layer 1 (50/50 quota share between Lloyd's and Great American) -Limits apply per member in excess of the Underlying Limits noted below Workers' Compensation 7/1/16-7/1/17 CSAC Excess TBD Workers' Compensation — Statutory $500,000 Each Accident and Each CSAC Excess Insurance Insurance Employer's Liability - $5,000,000 Employee for Disease Authority (CSAC-EIA) Authority Alliant Insurance Services, Inc. 1301 Dove Street, Suite 200, Newport Beach, CA 92660 PHONE (949) 756-0271 FAX (949) 756-2713 • www.alliantinsurance.com • License No. OC36861 2 15-6 ►kAffiant 4City of Newport Beach r' Schedule of Coverage July 1, 2016 to July 1, 2017 BROKER: Alliant Insurance Services, Inc. Newport Beach, California Gordon DesCombes, Executive Vice President (949) 660-8115 Direct Line gdescombeskalliant.com Renee McRaven, Account Manager (949)660-5932 Direct Line Rennetta Poncy, Senior Vice President Courtney Ramirez, Vice President (949)660-8107 Direct Line (949)660-8133 Direct Line rponcy&alliant.com cramirezng,alliant.com Alliant Insurance Services, Inc. 1301 Dove Street, Suite 200, Newport Beach, CA 92660 PHONE (949) 756-0271 FAX (949) 756-2713 • www.alliantinsurance.com • License No. OC36861 4 15-7