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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