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Home My WebLink About11/3/2004 - STAFF REPORTS (4) DATE: November 3, 2004 TO: City Council FROM: Director of Human Resources EXCESS EARTHQUAKE/FLOOD (DIC) INSURANCE RENEWALS RECOMMENDATION: It is recommended that the City Council adopt a Resolution approving the City's excess Earthquake/Flood (DIC) insurance renewals. SUMMARY: On July 1, 2004, the City purchased the primary layer of coverage for earthquake/flood (DIC) in the amount of $2,500,000. The City's Insurance Broker, Ross Jones, provided the attached proposals for an additional $82,500,000 of coverage. If purchased, this would provide for a cumulative total insurance coverage of $85,000,000. Staff is recommending Proposal No. 2 at a total cost of $358,225.00. This renewal is $4,392.00 less than the previous year's premium for the same coverage amount. BACKGROUND: The City Council approved the current $2,500,000 in primary earthquake/flood (DIC) coverage on June 16, 2004 at a cost of $128,110. This renewal was $14,690 less than the previous year's premium for the same coverage amount. On November 19, 2003, the City Council approved the purchase of $32,500,000 in additional earthquake/flood (DIC) coverage. In addition, the City Council approved the purchase of an additional $50,000,000 On December 17, 2003, providing for a total cumulative coverage of$85,000,000. Because these coverages currently renew a month apart, Lloyds of London has agreed to pro-rate the $50,000,000 layer and reissue with the 11/20/04 effective date. This will allow us to synchronize and combine all of our excess layers so that in the future they can be renewed at the same time. The City will receive a pro-rata premium credit for the 28 days under the existing policy. The table below represents the premium cost for each excess layer of coverage that can be purchased. The City Council has the option of purchasing the first layer and any additional layer(s) of coverage. These insurance proposals do not include terrorism coverage. Excess levels of insurance over rima covera e of$2.5 million Earthquake/ Flood Cumulative Premium for Cumulative Placement Insurance each Level Cost of Coverage Insurance First layer= $5 million $7.5 million $95,000 $95,000 Second layer = $25 million $32.5 million $154,838 $249,838 A Third layer= $52.5 million $85.0 million $108.387 $358,225 H:user/riskadmin/staffreports/staff report&ResNov2004.doc Following is a summary of earthquake/flood insurance purchased over the last ten years: Year Property Insurance Deductible Schedule Limit 1995 $141,071,896 $20,000,000 10% 1996 $142,521,871 $20,000,000 100% 1997 $144,302,534 $86,803,070 5% 1998 $147,823,510 $86,803,070 5% 1999 $149,650,839 $86,803,070 5% 2000 $152,729,810 $50,000,000 5% 2001 $175,042,804 $50,000,000 5% 2002 $182,071,385 $73,500,000 5% 2003 $195,186,338 $82,500,000 50% 2004 $199,9 11,459 $85,0 00,000 5% 2005 $222,639,694 Sufficient funds are available in Earthquake Insurance (5905-48655) to cover the premium for all recommended layers. SUSAN E. MILLS Director of Human Resourc APPROVED: City Manager H:user/riskadmin/staffreports/staff report&ResNov2004.doc City of Palm Springs Earthquake/Flood (DIC) Placement and Proposed Placement 2004 Excess levels of insurance over primary coverage of$2.5 million Earthquake/Flood Cumulative Premium for ;$Mi per Cumulative Placements Insurance ; each Level ion Cost of Coverage Insurance First layer= $5 million $7.5 million $95,000 000 $95,000 Second layer= $25 million $32.5 million $154,838 $6,194 $249,838 Third layer= $52.5 million $85.0 million $108,387 $2,065 $358,225 Proposed DIC coverage, including taxes and fees for all layers. Marketing Report: Proposal No. 1 - $82,500,000 excess coverage 1. $5 million - Great American/Greenwich $86,000 2. $2.5 million - Mt Hawley $44,542 3. $25 million - Lloyds of London $134,193 4. $50 million - Lloyds of London $103,225 Total premium of$367 960 Proposal No. 2 - $82,500,000 excess coverage 1. $5 million - Great American/Greenwich $95,000 2. $25 million - Lloyds of London $154,838 3. $52.5 million - Lloyds of London $108,386 Total premium of$358 225 H:user/riskadmin/staffreports/DIC Markets 2004 Other markets have responded as follows: 1. James River-indicated 2.5 mil excess 7.5 mil for$30,000. Total pricing including them was higher and their rating is not as high as some other carriers. 2. Landmark-pending. 3. Redland Ins. Co. -can't participate in lower layer due to PML. 4. Arch-indicated 7.5 mil excess 2.5 mil for around $200,000 and 2.5 mil excess 7.5 mil for around $50,000. 5.Western Re-pending. 6. General Star-pending. 7. ICW-pending. 8. Great American (for higher excess layers) -needs to be higher in the placement. 9. Essex-pending. 10. Northshore-best pricing for 2.5 excess 7.5 is $78,000. 11. Pacific Ins. Co. -decline due to PML. 12. Clarendon- decline due to pricing. 13.Axis Specialty-indicated 7.5 mil excess 2.5 mil for$240,000. 14. United States Fire -pending. 15. Westchester- decline due to PML. RESOLUTION NO. - leek OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING THE CITY'S EXCESS EARTHQUAKE/FLOOD (DIFFERENCE IN CONDITION) INSURANCE RENEWALS. WHEREAS the City of Palm Springs contracted with Davis and 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 NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm Springs, approves the following insurance coverage renewal: Earthquake/Flood Difference in Condit!2nL Premium 11/20/04 through 11/20/05 Excess of$2,500,000 Primary Net of Commission First Layer Excess of$2.5 Million $95,000 Insurance Company Great American/Greenwich Best's Rating A XII Limit of Coverage $5,000,000 Second Layer Excess of$7.5 Million $154,838 Insurance Company Lloyds of London Best's Rating N/A Limit of Coverage $25,000,000 Second Layer Excess of$32.5 Million $108,387 Insurance Company Lloyds of London Best's Rating N/A Limit of Coverage $52,500,000 Total $358,225 ADOPTED this 3rd day of November, 2004. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA By City Clerk City Manager REVIEWED & APPROVED AS TO FORM H:user/riskadmin/staffreports/staff report&ResNov2004.doc