Consideration of Insurance Renewal: Property/Casualty for Fiscal Year 2014.

Approval of the insurance renewal proposal will authorize staff to secure insurance protection for the July 1, 2013 to June 30, 2014 policy year and authorizes City Manager to execute necessary documents.

Premium will be paid from the City’s self insured trust (SIT) fund 600-8901-590-2304. Note premium includes additional 5% for mid term changes which may occur during the policy year.  Our current Self Insured Retention is $50,000.  Higher options on SIR are quoted at $75,000 and $100,000.  Expenditures for claims under the Self Insured Retention are also paid from the City's self insured trust (SIT) fund 600-8901-590-2304. 

11. Effective governance - The City purchases insurance coverage to transfer financial responsibilityfor liability and property losses exceeding the City’s selected retention in order to efffectively govern and appropriate resources.

No.

Travelers quoted three options:

SIR 50,000 (current) 
$1,315,380 premium plus 5% buffer for policiy changes= $1,381,149

SIR 75,000 (staff recommendation)
$1,256,093 premium plus 5% buffer for policy changes = $1,318,898

SIR 100,000
$1,222,832 premium plus 5% buffer for policy changes = $1,283,974

Willis of Arizona was selected as insurance broker through an RFP process in 2011 to provide risk management and brokerage services and to market City’s insurance renewal annually.

Willis’ market search for the next best insurance package yielded fractured results. (See Exhibit E) Of the five other markets approached to quote, one market responded with a quote on our liability coverages, but no home was found for our property insurance to join with this.  Increased Traveler’s package premium reflects the convergence of a hardening insurance market with the City’s negative loss experience.  Losses which have negatively impacted the City’s loss experience over the six-year loss-experience review period included two large property losses (Jay Lively ice rink and Wildcat wastewater treatment plant digester,) two officer involved shootings, an auto fatality and other significant claims, resulting in a negative loss history.  (See Exhibits A1 and A2)

This premium increase continues an upward trend which began in policy year 2010/2011. A historical review shows Travelers has been a stable market for the City and remains best choice for City.  Exhibits B, and C reflect the cost per million of coverage for both property and combined liability exposures over past years.  Auto liability is shown separately in exhibit D at cost per vehicle over past years.

The 50,000 SIR is the current level on the existing insurance policy.
The 75,000 SIR yields a cost savings of $59,287 from the 50,000 SIR level quote
The 100,000 SIR yields a cost savings of another $33,261 beyond the 75,000 SIR  quote
Diminishing premium savings are seen at the highest level of SIR 

SIR’s are like deductibles for defense and payments on liability claims.
 

Purchase of insurance will provide funding to pay for covered losses without disruption to the City’s budget.
 

Not Applicable.

06/18/2013 - EAB - Approved as recommended