HomeMy WebLinkAboutS19 - Excess General Liability Insurance RenewalCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item S19
February 22, 2005
To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
From: Human Resources, Lauren F. Farley, Risk Manager, 949 - 644 -3300
IfarleyCa)city. newpo rt- beach.ca. us
Subj: Excess General Liability Insurance Renewal
------------------ - - - - --
Issue
Does the City Council authorize the expenditure of $803,728 for the excess
general liability insurance renewal?
Recommendation
The City Council approves the renewal of the excess general liability insurance
coverage for a twelve month policy with a self- insured retention (SIR) of
$500,000 and a $1 million SIR for Employment Practices Liability Insurance —
EPLI as outlined below.
SIR Coverage Limits Annual Premium
$500,000/ $26 million $803,728
($ 1 million SIR for EPLI)
Background
The City purchases excess general liability insurance through its insurance
broker, Brown & Brown. The broker of record establishes relationships with
insurance markets to find the best coverage for the least amount of premium.
Mark Zahoryin is our account representative with Brown & Brown and has been
associated with our excess general liability insurance program for the last
thirteen years. The renewal process begins approximately ninety (90) days prior
to the expiration of the insurance coverage. This process can continue right up
to the expiration of the existing coverage (March 15t ) depending on the
availability of the markets, the underwriters need to clarify and obtain more
information on our application and our broker continuing to press for the best
possible premium for the new policy.
Page 2
The City's history for excess general liability coverage is exhibited in the chart
below. It reflects a period of self insurance and a period of eight (8) years of
relative stability in the market. Beginning in FY 02/03, the catastrophic loss of
9/11 combined with a tightening of underwriter standards, increased exclusions
of specific types of coverage, paid losses exceeding earned premium and the
impact of investment losses saw excess liability renewals for local governments
skyrocket.
The premium for this coverage from 7/1/02 through 3/1/04 was the most volatile
for the City and is reflected in the severe increase for that time period. With the
staff recommendation, the City Council decided at that time to maximize its
position in the market by strategically selecting a March 1st renewal date going
forward.
General Liability Excess Insurance Limits and Premium History
Policy Period SIR /Coverage Limits Annual Premium
FY 85/86 to FY 93/94
FY 94/95
FY 95/96
FY 96/97
FY 97/98
FY 98/99
FY 99/00
FY 00/01
FY 01/02
FY 02/03 (6 mos.)
Self Insured
$1 million /$10 million
$1 million /$10 million
$1 million /$20 million
$750,000/$25 million
$500,000/$25 million
$500,000/$25 million
$500,000/$25 million
$500,000/$25 million
$500,000/$21 million
1/1/03 to 3/1/04 (14 mos.) $500,000/$21 million
3/1/04 to 3/1/05 $500,000/$26 million
($ 1 million SIR for EPLI)
Self Funded
$343,606
$358,355
$337,915
$299,800
$255,000
$260,000
$268,000
$331,000
$475,997
$829,940
(Premium
Annualized for 12
mos. is $711,377
$799,166
Page 3
Renewal Quotation:
The excess general liability market continues to stabilize since last year. We
were successful in negotiating the inclusion of Big Canyon Reservoir in the full
$26 million limits with only a $4,562 net increase over last year's premium. As in
previous years, we felt that the quote below was inclusive of a broad coverage
form affording the City the insurance protection needed to perform our daily
operations and provide the services to our community. The insurance
companies chosen meet or exceed the City's minimum standards for financial
strength and solvency with an AM Best rating or A —, VII or greater.
Policy Period
1911011.Y1011y
Funding Availability:
SIR /Coverage Limits
$500,000/$26 million
($ 1 million SIR for EPLI)
Annual Premium
$803,728
Funds which cover the recommended expenditure are in the Internal Services
Budget — Insurance Reserve Fund, # 6020 -8720 and the FY 04/05 budgeted
figure is $839,124. This expenditure recommended encumbers 96 % of this
budgeted amount.
PrP.narP.rl hv-
Submitted by:
Diana Axley, HR