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).
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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.
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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