HomeMy WebLinkAbout16 - General Liability Excess Insurance RenewalJuly 25, 2000
Agenda Item 16
City of Newport Beach
Memorandum
To: Mayor and Members of the City Council
From: Lauren F. Farley, Risk Manager
Subj: General Liability Excess Insurance Renewal
Background
The city purchases excess general liability insurance through its insurance
broker. The broker establishes relationships with insurance markets to find the
best coverage for the least amount of premium. Our broker, Cal Surance has
been the broker of record for the city for the past twenty years and our account
executive, Mark Zahoryin, has been associated with our insurance program for
the last eleven years. In regards to general liability coverage, the city was
uninsured for this coverage for a period of eight years (FY 85/86 through FY
93/94). Beginning FY 94/95 the city purchased $10 million dollars of excess
coverage with a $ 1 million dollar self- insured retention (SIR) with the Insurance
Company of the West (ICW).
General Liability Excess Insurance Limits and Premium History
The following chart reflects the coverage limits and premium history of the city's
general program with ICW since 7/1/94:
Policy Period
SIR /Coverage Limits
Annual Premium
FY 94/95
$1 million /$10 million
$343,606
FY 95/96
$1 million /$10 million
$358,355
FY 96/97
$1 million /$20 million
$337,915
FY 97/98
$750,000/$25 million
$299,800
FY 98/99
$500,000/$25 million
$255,000
FY 99/00
$500,000/$25 million
$260,000
City Council authorized staff to purchase this coverage for annual premiums not
to exceed $260,000 in premium for the 2 year period beginning FY 98/99 and
ending FY 99/00.
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Renewal Quotation
With unchanged exposures (risks), stable loss history (no claims above the SIR)
and 6 years of experience with ICW, our broker was able to secure the following
renewal quote from ICW including loss control services:
Policy Period
FY 00/01
SIR /Coverage Limits
$500,000/$25 million
Annual Premium
$268,000
This quote for FY 00/01, from ICW included the intention of a rate guarantee with
the following terms and conditions:
➢ ICW will issue two (2) consecutive one -year policies.
➢ The rates in effect at the inception of the first policy year (FY 00/01) will be
adopted for the following one (1) policy year (FY 2001/2002) covered under
this agreement except as follows:
Loss ratio of 30% or lower: Maximum increase of 10% annually at
ICW's discretion;
Loss ratio in excess of 30 %: No limit on maximum increase
➢ City has the option to exercise its 60 day notice of cancellation prior to
renewal, if the ICW increase exceeds the other available market alternatives.
This means that, if the city's losses remain at the existing level of frequency and
severity, the maximum increase for the FY 2001/2002 renewal will not exceed
10% ($26,800) for a total annual premium of $294,800 or be renewed at the
existing premium of $268,000. The excess general liability market is beginning
to tighten and ICW is the only insurance carrier to provide the city with a rate
guarantee in its quote with this renewal. To compare this quote to the insurance
market, our broker only received two other quotes from Royal and Coregis.
These quotes are indicated below and were for only 1 year:
Policy Period
Royal FY 00/01
Coregis FY 00/01
SIR/Coverage Limits
$500,000/$25 million
$500,000/$25 million
Annual Premium
$265,201
Withdrew quote
prior to final
submittal
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Recommendation
The City Council approve the renewal of the excess general liability insurance
coverage with ICW for FY 00/01 for $268,000 in annual premium and for FY
2001/2002 for a total premium not to exceed $294,800 as indicated by the rate
guarantee.