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Home My WebLink About10/17/2001 - STAFF REPORTS (12) DATE: October 17, 2001 TO: City Council FROM: Risk Manager via Director of Procurement & Contracting INSURANCE RENEWALS FOR THE CITY'S EARTHQUAKE/FLOOD AND MULTI- MEDIA INSURANCE RECOMMENDATION: It is recommended that the City Council adopt a Resolution approving the City's Earthquake/Flood Insurance renewals effective November 1, 2001 and Multi-Media Insurance renewal effective November 9, 2001. SUMMARY: Although property insurance costs have been increasing over the past two years, and the catastrophic losses resulting from the September 11, 2001 terrorist attacks have placed many companies in a "reserve position", the City's new Broker contacted thirty-five insurance companies and was able to aggressively market our account. We expected and budgeted for a 30 to 35 percent increase in premiums, yet the most competitive quotes we received reflect a 17 percent increase. The less than anticipated increase allows us to stay within our budgeted allocation while purchasing additional coverage for building ordinance replacement costs, and increasing our coverage limits from $50,000,000 to $76,000,000. BACKGROUND: The City of Palm Springs contracted with Davis & Graeber Insurance Services, Inc. on October 3, 2001, to perform services as the City's Insurance Broker of Record to solicit insurance proposals from qualified carriers upon renewal of insurance policies. The November 1, 2001 renewals are excess layers of earthquake/flood insurance. The former Broker of Record, Aon, renewed the City's $2,500,000 primary level of earthquake/flood insurance on July 1, 2001, at a premium of $98,150. Due to limits in earthquake insurance capacity and premium costs over the years, the City has purchased varying policy coverage limits during the past decade. In 1997, the City was able to quadruple its limit for a 19% increase in premium. In 2000, the limit was reluctantly reduced from $86,803,000 to $50,000,000 because of escalating premium costs and declining competition in the property insurance marketplace. $189,685 is available in Earthquake Insurance (5905-48655) and $5,689 is available in Multi-Medial Professional Insurance (5904-43820). Purchase of earthquake/flood insurance at limits higher than $76,000,000 will require a budget amendment. NANCY JO M NIFOSH, ARM, MPA Risk Manager E�/ C. HAROLD E. GOOD, CPPO Director of Procurement & Contracting APPROVED:-� •=- r City Manager Attachments: Davis & Graeber Marketing Report Resolution REVIEWED BY DEPT.OF FINANCE O,, HISTORICAL SUMMARY OF EARTHQUAKE/FLOOD INSURANCE Year Property Schedule Insurance Limit Deductible Premium 1993 $135,680,486 $20,000,000 10% $ 98,075 1994 $137,130,461 $20,000,000 10% $158,790 1995 $141,071,896 $20,000,000 10% $120,410 1996 $142,521,871 $20,000,000 10% $147,717 1997 $144,302,534 $86,803,070 5% $175,922 1998 $147,823,510 $86,803,070 5% $156,772 1999 $149,650,839 $86,803,070 5% $143,868 2000 $152,729,810 $50,000,000 5% $186,462 2001 $175,042,804 $50,000,000 5% $234,612 2002 $182,071,385 To be Determined 5% Per Resolution Following are placement costs last year compared with quotations received this year. Earthquake/ Limit of Aon Aon D&G D&G Accumulated Flood Insurance Rate Annual Rate Annual Premium Placement per Spread Premium Spread Premium sub-total Million 2000-01 2000-01 2001-02 2001-02 2001-02 At Risk $175,042,804 $182,071,385 $10 x$2.5 mil $12.5 mil 7,067.28 $70,672.80 $7,971.60 $76,716.00 $79,716.00 $2.5 x$12.5 mil $15 mil $4,888.88 $12,222.00 $5,938.52 $14,846.30 $94,562.30 $10 x$15 mil $25 mil $1,984.94 $19,849.40 $2,964.96 $29,649.60 $124,211.90 $5 x$25 mil $30 mil $2,874.00 $14,370.00 $138,581.90 $10x$30 mil $40 mil $1,395.23 $20,928.38 $1,444.30 $14,443.00 $153,024.90 $10 x$40 mil $50 mil $1,278.96 $12,789.57 $25 x of$40 mil $65 mil $1,06-0 00 $25,000.00 $178,024 90 $11xof$65mil $76mil $1,032.50 $11,357.50 $189,382.40 Cost per mil 50 mil $2,873 Cost per mil 76 mil 1 $2,492 The City Manager requested quotations be presented to the Council for the City's full limit of property losses. The following schedule contains insurance rates for the higher levels of excess insurance up to and including 180,000,000. Earthquake/ L urmt of Aon Aon D&G D&G Accumulated Flood Insurance Rate Annual Rate Annual Premium Sub- Placement per Spread Premium Spread Premium Total Million 2000-01 2000-01 2001-02 2001-02 2001-02 At Risk $175,042,804 $182,071,385 $9 x 76 $ 85 mil $1,032.50 $9,292.50 1 $198,674.90 $15 x$85 mil $100 mil 1 $ 880.00 $13,200.00 1 $211,874.90 $80 x$100 mil $180 mil $1.000.00 $80,000.00 $291,874.90 Cost per mil $180 mil $1,664.37 DAVIS & GRAEBER INSURANCE SERVICES, INC. Marketing Report for Earthquake/Flood (DIC) Coverages October, 2001 Market Best Response Layer per Rate per Rating million million Affiliated FM A+XV Current primary $2.5 mil $2.5 $39,260.00 primary Great American Assur AXII Proposed 1" layer(sharing) $10 x$2.5 $7,971.60 Greenwich Insurance A+XV Pacific Ins A+IV Proposed 2otl layer $2.5 x $5,938.52 $12.5 Westchester Fire AXIII Proposed 3rd layer(sharing) $5 $10 x$15 $2,964.96 mil Essex Insurance AIX Proposed 3rtl layer(sharing) $5 $10 x$15 $2.964.96 Company mil Westport Ins Corp A++XV Proposed 41" layer$5 mil $5 x$25 $2,874.00 Clarendon National AVIII Proposed 51h layer(sharing) $5mil $10 x$30 $1,444.30 Ins Co of the West AVIII Proposed 611 layer(sharing) $10 $45 x$40 $1,000.00 mil Empire Fire& Marine A+VIII Proposed 61" layer(sharing) $5 $45 x $40 $1,000.00 mil Clarendon National AVIII Proposed 611 layer(sharing) $5 $45 x$40 $1,000.00 mil Essex Insurance AIX Proposed 6"layer(sharing) $10 $45 x$40 $1,032.50 Company mil Westchester Fire AXIII Proposed 611 layer(sharing) $10 $45 x$40 $1,032.50 mil RLI AIX Proposed 611 layer(sharing) $5 $45 x$40 $1,000.00 mil Great American Ins AXII Optional Additional 71h layer $15 x $85 $880.00 Lloyds of London Optional Additional 811 layer $80 x$100 $1,000 00 Allianz Underwriters A++XV Moratorium mp" $200,000.00 Commonwealth Ins AXII Declined has a $100.000 mp mp' $100,000.00 Fulcrum Ins Co AIX Out of business General Star A++XV Declined due to age of bldgs SSA M Northshore Can only participate above$40 x of$40 mil $2,000.00 Management mil layer American National AXII Can participate at $10 x 2.5 $7,971.00 Fire/ AXI American Custom Royal Ins A+XIV Can participate at 5 x 12.5 $25,000.00 First State B+VI mp TIG Ins AXII Need $30,000 per mil 10 x 2.5 Travelers/Gulf A+XV Declined due to high FILM (Probable Maximum Loss) Vikco/AXA Re Need $75,000 mp 5 x5 Western Re Can participate at$2,000 per mil 10 x 30 $2,000.00 Lexington/AIG A++XV Is not writing any Calif DIC Caliber One/ AVI Sherwood would not quote w/o Specialty Surplus exclusive `mp = minimum premium required 4A RESOLUTION NO. OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING INSURANCE RENEWALS FOR THE CITY'S EXCESS DIFFERENCE IN CONDITION (EARTHQUAKE/ FLOOD) INSURANCE AND MULTI-MEDIA INSURANCE. WHEREAS the City's Excess Difference in Condition (Earthquake/Flood) Insurance coverage expires at midnight on October 31, 2001; and WHEREAS the City's Multi-Media insurance coverage expires at midnight on November 8, 2001; and WHEREAS the City of Palm Springs contracted with Davis & Graeber Insurance Services, Inc., a California Corporation, on October 3, 2001, to perform services as the City's Insurance Broker of Record to solicit insurance proposals from qualified carriers upon renewal of these policies, and WHEREAS the City of Palm Springs received insurance quotations on these renewals on October 5, 2001. NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm Springs, approve the following insurance coverage renewals: Earthquake/Flood Net of Commission $2,500,00 Primary Renewed Premium on 711/01 $98,150.00 Excess 1111101 through 10/31/02 Quake/Flood First Excess Layer $79,716.00 Insurance Companies Great American $10,000,000 excess of$2,500,000 Greenwich Insurance Best's Rating A XII,A+XV Limit of Coverage $10,000,000 Quake/Flood Second Excess Layer $14 846.30 Insurance Company Pacific Insurance $2,500,000 excess of$12,500,000 Best's Rating A+IV Limit of Coverage $2,500,000 Quake/Flood Third Excess Layer $29e 649.60 Insurance Companies Westchester Fire $10,000,000 excess of$15,000,000 Essex Insurance Co Best's Rating A XIII,A IX Limit of Coverage $10,000,000 Quake/Flood Fourth Excess Layer $14 370.00 Insurance Company $5,000,000 excess of$25,000,000 Westport Insurance Co. Best's Rating A++XV Limit of Cover a a $5.000.000 6 Quake/Flood Fifth Excess Layer $14,443 Insurance Company Claredon National $10,000,000 excess of$30,000,000 Best's Rating AVIII Limit of Coverage $10,000,000 Quake/Flood Sixth Excess Layer $36,357.50 Insurance Companies Insurance Company of the West $36,000,000 excess of$40,000,000 Empire Fire&Marine Clarendon National Essex Insurance co Westchester Fire RLI Best's Rating AVIII,A+VIII,AVIII,AIX,AXIII,AIX Limit of Coverage $36,000,000 Total of Excess Earthquake/Flood November Renewal Premiums $189,382.40 Multi-Media Insurance 1119101 through 1118102 Multi-Media Insurance Premium $5,349.54 Insurance Company American International Specialty Lines Insurance Company Best's Rating A+XV Limits $1,000,000 TOTAL Earthquake and Multi-Media $194,731.94, ADOPTED this 17th day of October, 2001, AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED &APPROVED AS TO FORM