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Date
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June 23, 2008
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Agenda
Item No. 27 Roll
Call No. 08- Communication No. 08-373 Submitted by: Allen McKinley, Finance Director |
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AGENDA HEADING:
Annual Insurance Renewal for July 1, 2008 - Property and
Casualty Insurance
SYNOPSIS:
Recommend approval of the attached Schedule of Insurance. The total premium for the July 1, 2008 renewal of property and casualty insurance coverages is $1,048,951. This represents an increase of $23,456, or 2.3 percent, over last year’s renewal of $1,025,495.
To provide an incentive to insurance carriers to competitively quote City insurance coverages, the City annually markets about one-third of its property/casualty insurance coverages through Jester Insurance Services, Inc. and maintains coverage with those carriers for about three years. This year, the City marketed Excess Workers Compensation and Enterprise Fund Automobile Liability Insurance coverages. In addition, the City is renewing its Property Insurance, Excess Liability Insurance, Crime Insurance, Flood Insurance, HazMat/Mutual Aid Occupational Injury Insurance and Airport Liability Insurance coverages (descriptions of each are included below). These coverages will remain with the current carriers.
FISCAL IMPACT:
Amount:
$ 1,048,456
Funding
Source: 2008-2009 Operating Budget:
- Tort Fund – Tort Liability GE005
FIN940500, Page 149.
- Parking Operations Fund – T&T
Parking Administration EN051 ENG100701, Page 124.
- Solid Waste Operations Fund – Solid
Waste Collection EN151 PWK100101, Page 296.
- Solid Waste Operations Fund –
Curbside Recycling EN151 PWK100119, Page 298.
- Solid Waste Operations Fund –
Compost EN151 PWK100104, Page 297.
- Sanitary Sewer Operations Fund –
- Storm Water Utility Operations Fund
– Des Moines- Storm Sewer Maintenance EN301 PWK071600, Page 300.
- Golf Operations Fund – Golf –
- Golf Operations Fund – Golf –
Waveland EN201 PKS010707, Page 251.
- Golf Operations Fund – Golf – A.H.
Blank EN201 PKS010701, Page 249.
- Des Moines Public Housing Agency
Fund – Housing Services – Administration SP350 HSG029000, Page 176.
- Airport Operations – Building
Maintenance EN002 AIR040400, Page 64.
- Special Revenue Funds – Other
Employee Benefits SP451 HRS961000, Page 187.
The
proposed renewal premium of $1,048,951 is $59,308 less than the $1,108,259
budgeted to fund this renewal. Of the
$1,048,951 in total renewal premium, $1,007,281 is allocated between General
Fund and Enterprise Fund operations. The
remaining $41,670 represents policies specific to the General Fund. Of the $1,007,281 that is allocated,
$561,872, or 55.8 percent, is allocated to Enterprise Funds and $445,409, or
44.2 percent, to the General Fund. The insurance coverage provided to the WRA by
28E Agreement is allocated on the same basis as if the WRA were an Enterprise
Fund of the City. The WRA’s portion of
the $561,872 is estimated to be $140,405, or 25.0 percent. A “Premium Comparison” chart on page 7 shows
the FY08 and FY09 allocation by Enterprise Fund and the General Fund.
ADDITIONAL INFORMATION:
On
December 22, 2003, by Roll Call No. 03-2906, the City Council approved a
professional services agreement with Jester Insurance Services, Inc. Under the provisions of this agreement,
Jester Insurance Services, Inc. competitively markets about one-third of the
City’s insurance coverages annually.
Jester Insurance Services, Inc. has contacted various insurance markets
for the July 1, 2008 renewal.
Based on Jester Insurance Services, Inc.’s recommendations, a Schedule of
Insurance is provided below indicating each line of coverage being renewed, the
insurance carrier being recommended by staff, a comparison of last year’s
premium to this year’s premium and the plus or minus difference between the
two. The following is a brief
description of this year’s renewal highlighting coverages and changes that have
most significantly impacted the coverage being provided and the premium being
charged:
1. Excess Workers Compensation Insurance:
The City
purchases Excess Workers Compensation Insurance to cover losses that exceed the
City’s $450,000 per claim self-insured retention. This policy covers the indemnity (lost time
wages and non-medical expenses) and medical expenses related to occupational
injuries incurred by City employees, with the exception that only medical
expenses are covered for sworn Police and Fire Department employees. Only medical expenses are included for Police
and Fire because their indemnity expenses are covered under Chapter 411 of the
Code of Iowa. Indemnity losses are
funded through the Municipal Fire & Police Retirement System of Iowa to
which the City is required to make financial contributions equal to a
State-mandated percentage of salaries paid sworn Police and Fire personnel.
This year,
Jester Insurance Services, Inc., the City’s Insurance agency, solicited premium
quotes from six insurance carriers:
Safety National Insurance Company (SNI) (the City’s current carrier),
Liberty Mutual Insurance Company, Ace Insurance (ACE), Employers Mutual
Casualty Company (EMC), Travelers Insurance Company and American Insurance
Group (AIG). EMC and Travelers declined
to quote this coverage indicating that their pricing would not be competitive
with Safety National Insurance Company.
However, Safety National, Liberty Mutual, AIG and ACE did submit quotes
for this coverage:
SNI
LMI AIG ACE
Self-insured Retention:
Police/Fire Employees: $450,000 $250,000 $500,000 $1,000,000
All Other Employees: $450,000 $250,000 $500,000 $ 500,000
Excess Limits: Statutory $100 million Statutory Statutory
Premium: $147,256 $503,347 $950,000 $314,036
As can be seen from the above comparison, the quote received from the
Safety National Insurance Company is the most competitive. For claims filed since July 1, 2002, the City
has 53 open claims for which the total outstanding reserves (the total
estimated cost over the anticipated life of the claim) exceed $50,000. Of those 53 claims, none have a reserve level
that exceeds $250,000. Therefore, the
Safety National quote is the most competitive since no current claim would
trigger the insurance coverage proposed by Liberty Mutual but the City would
pay an additional $356,118 annually in premium.
Safety National is also more competitive than AIG and ACE based on a
comparison of premium and self-insured retentions. In addition, Safety National has offered to
reduce the City’s annual premium by $2,678 to $144,578, if the City enters into
a two-year commitment.
In addition, the City asked Jester Insurance Services, Inc. to test the
market as to what the City’s total cost for Workers Compensation Insurance
would be if the City were to insure the first $450,000 per occurrence,
including claims administration, rather than self-insure. Of the same four insurance carriers contacted,
only Liberty Mutual offered a response.
The total cost quoted was $3,942,838.
This compares to the City’s current self-insurance/excess insurance
program, including claim administration, of $2,065,210.
This year’s renewal has confirmed that the City’s current Excess Workers
Compensation Insurance carrier is the most competitive available and that the
City’s current self-insurance/excess insurance is the most cost effective approach
to financing the City’s Workers Compensation exposure.
2. Airport Liability Insurance:
The City carries Airport Liability Insurance to cover all Airport
operations, except off-premise vehicle use which is covered under the City’s
Excess Liability policy, as described below.
The policy currently has a per occurrence and aggregate limit of $250,000,000
with a $10,000 deductible. This limit
was increased from $200,000,000 at last year’s renewal. On June 3, 2008, the Airport Board received
and voted to recommend approval of the July 1, 2008 renewal of this policy.
3.
As indicated above, Solid Waste Collection and Recycling, Sanitary
Sewers, Storm Water Utility, Airport vehicles when driven off Airport premises,
WRA and Housing Services are covered by a $2,000,000 Automobile Liability
Insurance policy with a per occurrence deductible of $3,000. This
year, Jester Insurance Services, Inc. solicited premium quotes from four
insurance carriers: St. Paul Travelers
Insurance Company (the City’s current carrier), Cincinnati Insurance Company,
Chubb Insurance Group and Employers Mutual Casualty Company (EMC). EMC and Chubb declined to quote this coverage
indicating that their pricing would not be competitive because of the limits
involved. However, St. Paul Travelers
and
4. Excess Liability Insurance:
Currently, the City’s Excess Liability Insurance coverage provides for a per
occurrence limit of $10,000,000 and an aggregate (policy maximum) limit of $10,000,000. The City’s per occurrence self-insured
retention is $2,000,000 for all operations other than the following Enterprise
Fund operations: Solid Waste Collection
and Recycling, Sanitary Sewers, Storm Water Utility and for Airport vehicles when
driven off Airport premises. The WRA and
Housing Services are also covered by this policy and premiums are allocated to
each accordingly. Each of these
Enterprise Funds carries a $2,000,000 Automobile Liability Insurance policy
with a per occurrence deductible of $3,000.
The General Liability exposure of these funds is subject to the City’s
$2,000,000 self-insured retention.
However, because the Wastewater Reclamation Facility and Solid Waste
facilities have restricted access to the public, the sanitary and storm sewers
are primarily underground infrastructure and the Airport coverage is strictly
for automobiles while being driven off of Airport premises, the General
Liability exposure is sufficiently low that self-insuring has been deemed an
appropriate and cost effective risk financing technique.
The City also tested the market to determine what the additional cost
would be to increase the City’s Excess Liability policy aggregate limit from
$10,000,000 to $20,000,000. The premium
quoted for this additional $10,000,000 in coverage was $68,150. Staff considered the cost of adding this
coverage and chose not to recommend this change at this time.
5. HazMat/Mutual Aid Workers
Compensation Insurance:
The distinction between the HazMat/Mutual Aid Occupational Injury Insurance
and the Excess Workers Compensation Insurance policies is that the
HazMat/Mutual Aid Insurance covers Fire Department personnel when they respond
to mutual aid requests. This coverage
extends from the time Fire Department personnel leave their station to the time
they return. For HazMat services, the
cost of this coverage is apportioned to those counties having 28E Agreements
with the City for these services. Therefore,
this coverage is cost-neutral to the City.
The City’s Excess Workers Compensation Insurance covers Fire Department
personnel when responding to City HazMat and Fire service needs within the City’s
limits.
6. Property Insurance:
An 8.4 percent increase in the Property Insurance premium is due to an
estimated $1.3 million claim related to the fire at the Solid Waste Vehicle
Storage Facility earlier this year, the addition of a three percent
across-the-board increase in the replacement value of all property to account
for inflationary pressure on construction costs and improvements or additions made
to the following facilities: Crivaro,
Bates, Sargent, Sayers and Riley Parks, Principal Park, all Aquatic Centers,
the Airport TSA Offices, Fire Station No. 8, Glendale Cemetery, Blank Park Zoo,
a Skywalk addition and WRA facilities.
The total replacement value of City property increased from $742,617,128
last fiscal year to $784,032,080 this fiscal year, or $41,414,952. The City has a per occurrence deductible of
$100,000, with the exception of locations affected by the “Flood of ’93” and that
are located on the City’s levy system. The per occurrence deductible is
$500,000 for these facilities.
7. Flood Insurance:
To cover the additional per occurrence Property Insurance deductible of
$500,000 for the facilities described above, the City purchases flood insurance
through the National Flood Insurance Program.
The premium increased this year primarily because the replacement values
at these facilities were updated to reflect the City’s current estimate of
replacement value.
8. Crime Insurance:
To cover potential losses due to employee theft, computer fraud, robbery,
etc., the City purchases Crime Insurance with a limit of $1,000,000 per
occurrence and a $25,000 per occurrence deductible. The City also asked what the additional
premium would be to increase the per occurrence limit to $2,000,000. The additional premium quoted the City was
$1,641, but the carrier also required increasing the per occurrence deductible
to $50,000. Based on the City’s crime
loss history and the fact that the City would expose itself to twice the
deductible, staff does not recommend any change to this coverage.
Staff’s Recommendation:
Staff recommends Council approval of the following Schedule of Insurance:
Schedule of
Insurance:
FY
07-08 FY 08-09 +(-)
.
1. Special Excess Liability Insurance $
190,780 $191,280 $ 500
*(Everest National Insurance Co.)
2. Auto Liability Insurance $
83,738 $ 75,855 ($ 7,883)
(Enterprise Funds listed above)
*(St. Paul/Travelers Insurance Co.)
3. Airport Liability Insurance $ 134,096 $
121,179 ($ 12,917)
*(AIG Aviation)
4. Property Insurance $ 432,825 $
469,144 $ 36,319
*(Chubb Group – Federal Insurance Co.)
5. Crime Insurance $ 5,245 $ 5,245
$ -0-
*(Travelers Insurance Co.)
6. Flood Insurance $ 20,815 $
26,759 $ 5,944
*(National Flood Insurance Program)
7. HazMat/Mutual Aid $ 14,854 $ 14,911
$ 57
*(American International Group – AIG)
8. Excess Workers Compensation Insurance $ 143,142 $ 144,578 $ 1,436_
*(Safety National Casualty Corp)
Total $1,025,495 $1,048,951 $ 23,456
* Recommended insurance carrier
PREVIOUS COUNCIL ACTION(S):
Date: June 18, 2007
Roll Call Number: 07-1177
Action: Annual Insurance Renewal for July 1, 2007
Property and Casualty Insurance with Jester Insurance Services, Inc.(Council Communication No. 07-380) Moved by Coleman to adopt. Motion
Carried 6-1.
BOARD/COMMISSION ACTION(S): AIRPORT BOARD
Date: June 3, 2008
Roll Call Number: Yet to be determined – copy to be
provided to Council prior to Council Meeting.
Action: A copy
of Airport Board Resolution to be provided to Council prior to Council Meeting.
ANTICIPATED ACTIONS AND FUTURE COMMITMENTS:
Annual Property
and Casualty Insurance Renewal for July 1, 2009.
For more information on this and other agenda items,
please call the City Clerk’s Office at 515-283-4209 or visit the Clerk’s Office
on the second floor of City Hall,
ATTACHMENT
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PREMIUM COMPARISON |
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Actual |
Quoted |
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Premium |
Premium |
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07-08 |
08-09 |
Diff |
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Description |
Total |
Total |
+ (-) |
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Allocated
Premiums: |
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Parking
Garages |
$
76,456 |
$
72,714 |
$
(3,742) |
|
Solid
Waste Collection |
$
37,592 |
$
36,573 |
$
(1,019) |
|
Solid
Waste Recycling |
$
14,995 |
$
15,091 |
$
96 |
|
Solid
Waste Compost |
$ 471 |
$
453 |
$
(18) |
|
WRA |
$
143,544 |
$
140,405 |
$
(3,139) |
|
Sanitary
Sewer |
$
21,989 |
$
21,092 |
$
(897) |
|
Storm
Sewer |
$
32,369 |
$
31,245 |
$
(1,124) |
|
|
$
1,244 |
$
1,203 |
$
(41) |
|
Waveland
Golf |
$
2,042 |
$
1,975 |
$
(67) |
|
Blank
Golf |
$ - |
$
- |
$
- |
|
Housing
Services |
$
11,880 |
$
10,381 |
$
(1,499) |
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Airport |
$
241,956 |
$
230,740 |
$
(11,216) |
|
Total EF |
$
584,538 |
$
561,872 |
$
(22,666) |
|
Total GF |
$
405,288 |
$
445,409 |
$
40,121 |
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TOTAL |
$
989,826 |
$ 1,007,281 |
$
17,455 |
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Separate
GF Policies: |
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Flood (6
bldgs) |
$
20,815 |
$
26,759 |
$
5,944 |
|
Haz Mat
(mutual aid) |
$
14,854 |
$
14,911 |
$
57 |
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Total |
$ 35,669 |
$
41,670 |
$
6,001 |
|
GRAND
TOTAL |
$
1,025,495 |
$ 1,048,951 |
$
23,456 |