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HomeMy WebLinkAbout08 - General Liability Excess Insurance RenewalJuly 9, 2002 Agenda Item 8 City of Newport Beach Human Resources Department Memorandum To: Mayor and Members of the City Council From: Lauren F. Farley, Risk Manager Subj: General Liability Excess Insurance Renewal Recommendation The City Council approves the renewal of the excess general liability insurance coverage with a self insured retention (SIR) of $500,000 with the options in coverage limits and for the corresponding premiums outlined below for FY 02/03. Appropriate funds exist in the budget (# 6020 -8720) to cover the expenditure under either option. Coverage Limits Premium Option 1 $ 21 million $944,107 - Option 2 $16 million $737,607 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 -one years and our account executive, Mark Zahoryin, has been associated with our insurance program for the last twelve 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). Page 2 General Liability Excess Insurance Limits and Premium History The following chart reflects the coverage limits and premium history of the city's general liability 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 FY 00/01 $500,000/$25 million $268,000 FY 01/02 $500,000/$25 million $331,000 Renewal Quotation This year's excess liability renewal has been the most volatile for all local governments since the insurance crisis of the 1980's wherein the insurance industry virtually stopped insuring local municipalities. These excess liability markets have been hit even harder this year than the property markets and for some of the same reasons, such as, tightening of underwriter standards, more exclusions of specific types of coverage, paid losses exceeding earned premium, investment losses and again, the catastrophic loss at the World Trade Center on September 11, 2001. Our broker's reputation in the industry is well respected and established which has greatly increased our ability to obtain a viable quote for this renewal. These quotes allows us to maintain our program at its existing self - insured retention (SIR) of $500,000, with a slight reduction in limits ($25 million to $21 million) and inclusive of the broadest coverage form affording the city the insurance protection we need to perform our daily operations and provide the services to our community. The insurance companies chosen must meet or exceed the cities minimum standards for financial strength and solvency with an AM Best rating or A —, VII or greater. All quotes received have met this requirement. Page 3 The following quotation is for the policy period of 7/1/02 to 7/01/03 corresponding with the city's fiscal year: Primary Layer Royal Indemnity — A, XV Secondary Layer River Rock — A, X Option 1: Third Layer Clarendon —A, IX Option 2: Third Layer Clarendon —A, IX Coverage Limits Premium $1 million excess $500,000 SIR $267,820 $10 million excess of $1 million $356,212 $10 million excess of $11 million $320,075 $5 million excess of $11 million $206,500