HomeMy WebLinkAbout6/19/2002 - STAFF REPORTS (18) Date: June 19, 2002
To: City Council
From: Director of Human Resources
INSURANCE RENEWAL FOR EXCESS COVERAGE FOR WORKERS'
COMPENSATION INSURANCE
RECOMMENDATION:
It is recommended that City Council adopt a Minute Order approving the Citys Excess
coverage for Workers' Compensation Insurance Policy renewal with Employers'
Reinsurance effective July 1, 2002.
SUMMARY:
The proposed renewal is for a $500,000 SIR (sell-insured retention) for a cost of
$59,546.00. Although the July 1, 2002, renewal reflects an increase over last year's
premium of $31,415.00 and an increase in the SIR from $300,000, the Citys Broker of
Record did a comprehensive search for coverage in the market, and found that Employers
Reinsurance is still the best buy at this time.
BACKGROUND:
In marketing the Excess Workers' Compensation Insurance this year, the Citys Broker of
Record, Ross Jones of Davis & Graeber, ran into several issues that contributed to the
increased costs in this coverage:
1. Since open rating went into effect, most Workers' Compensation Insurance
companies have been attempting to increase their market share, thereby writing
business for less than what they were paying out in losses in the investment market.
Since the stock market has been down for two years, there has been no income
from their investments. As a result, insurance carriers are increasing premiums to
cover their losses.
2. The 9111 losses hit the reinsurance market hard. Employers Re, our current carver,
was one of the companies who paid out about $3 billion in the WTC loss. All
reinsurance companies have increased their cost of excess insurance, as wen as
increasing the self retention levels (SIR), so that they can position themselves in a
higher layer and reduce their loss exposure.
3. Some Excess Workers' Compensation markets have backed off and are only willing
to write accounts that have payrolls of$200,000,000 or more.
4. The Workers' Compensation industry is now reporting losses that are approaching
catastrophic levels. These include ergonomic issues, industrial diseases, and some
new stress claims. The excess markets are taking a very conservative position
because these claims show potential catastrophic payments in both lifetime medical
and indemnity benefits. I
5. As reported in June 2001, seven major workers' compensation insurance carriers
went into Receivership, drastically impacting workers' compensation insurance
premiums.
SUSAN E. MILLS
Director of Human Reso
APPROVED:
City Manager
ATTACHMENTS: 1. Quotation and Marketing Summary
2. Minute Order
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Excess Workers Compensation
Named Insured: City of Palm Springs
Policy Term: July 1, 2002 to July 1, 2003
Insurance Carrier: Employers Reinsurance Corporation (A++ XV) Admitted
Coverages: Specific Excess Workers Compensation
Limits: $25,000,000 W.C. Limit Each Accident
$5,000,000 Employers Liability Each Accident
$500,000 Retention Each Accident
Conditions: Covered States: California
Coverage is subject to any state required endorsements, plus S-45;
SC-77 & S-78
Note: Employers Re is no longer able to offer statutory limits on Workers Compensation.
Their maximum limit is $25,000,000.
Premium: $59,546.00 (Rate: Adjusted at a rate of .2346 per $100 of payroll on
estimated payroll of$25,384,484)
Marketing Summary:
Carriers: 1. Employers Reinsurance Corporation - Quoted
2. AIG - Declined - Minium attachment point is $200,000,000 payroll.
3. Genesis - Minium premium is $100,000 w/$750,000 SIR
4. Hartford- declined must have a Hartford approved TPA.
S. Alea North American Insurance - Not filed for excess in California
6. Midwest Employers Casualty - needed more information, complete
their own questionnaire.
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MINUTE ORDER NO.
APPROVING THE CITY'S EXCESS
WORKERS' COMPENSATION INSURANCE
RENEWAL EFFECTIVE JULY 1,2002
1 HEREBY CERTIFY that this Minute Order, approving the Citys Excess coverage for
Workers' Compensation Insurance policy Renewal with Employers' Reinsurance effective
July 1, 2002, was adopted by the City Council of the City of Palm Springs, California, in a
meeting thereof held on the 19'h day of June 2002.
PATRICIA A. SANDERS
City Clerk
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