HomeMy WebLinkAboutS18 - Excess Workers Compensation Insurance RenewalFebruary 22, 2005
Agenda Item S18
City of Newport Beach
Human Resources Department
Memorandum
To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
From: Human Resources, Lauren F. Farley, Risk Manager, 949 - 644 -3300
Ifarley@city.newport-beach.ca.us
Subj: Excess Workers Compensation (WC) Insurance Renewal
Issue
Does the City Council authorize the expenditure of $443,251 for the excess
workers compensation renewal?
Recommendation
The City Council approves the renewal of the excess workers compensation
coverage for a twelve month policy with a self- insured retention (SIR) of $1
million, statutory coverage limits and premium outlined below for FY 05/06.
Appropriate funds exist in the budget (# 6010 — 8638) to cover the expenditure.
Coverage Limits
Carrier SIR WC & Employers Liability Premium
ACE American $1 million Statutory Limits /$1 million $443,251
Employers Liability
Background
The city purchases excess workers compensation insurance as a risk - financing
tool to protect against catastrophic loss in this area of its benefit obligations. This
coverage has been purchased since1995. In addition to purchasing financial
protection via insurance, legislative reforms over the past ten years have
provided some assistance to the city in lessening the monetary impact of its
worker compensation claims. However, the most recent reform (SB 899) in April
of 2004 has not been completely implemented or the benefits fully realized for
local governments to determine its true impact on the cost of their claims or the
cost of excess workers compensation insurance. Again, as in the past reforms,
the League of California Cities will work with Public Risk Managers to assess the
benefits of this new reform and to assist in any future clean up legislation.
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Renewal Quotation
During this renewal process, insurance carriers who had left the California
workers compensation market in previous years due to the spiraling medical
costs have returned to at least provide some additional competition in the quoting
process. In addition, of the carriers willing to provide quotes in California, a very
limited number of them are willing to consider the reinstatement of statutory
limits. This is good news for workers compensation insurance in the state of
California and the city was successful in obtaining a very solid quote for statutory
limits with a self- insured retention (SIR) limit of $ 1 million dollars and that is the
reason for the increase between the expiring policy and renewal policy. The
chart below reflects the expiring policy as compared to the renewal quote.
Coverage Limits
Carrier SIR WC & Employers Liability
AIG $ 1 million
(Expiring Policy)
ACE American $1 million
(Renewal Policy)
Funding Availability:
$100 Million Limits /$1 million
Employers Liability
Statutory Limits /$1 million
Employers Liability
Premium
$434,679
$443,251
Funds which cover the recommended expenditure are in the Internal Services
Budget — Insurance Reserve Fund, # 6010 — 8638 and the FY 04/05 budgeted
amount is $576,385 and this expenditure encumbers 77% of this amount.
Prepared by: /
Lauren F. Farley; sk Manage
Submitted by:
Diana Axley, HR Director