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Home My WebLink About04.e. Renew insurance coverages for FY 2011-12Central Contra Costa Sanitary District /Jai ' BOARD OF DIRECTORS ' POSITION PAPER Board Meeting Date: June 2, 2011 subject. AUTHORIZE GENERAL MANAGER TO RENEW INSURANCE COVERAGES FOR FISCAL YEAR 2011 -12. Submitted By. Shari Deutsch, Safety & Risk Management Administrator Initiating Dept ✓Div.: Administration, Safety & Risk Management REVIEWED AND RECOMMENDED FOR BOARD ACTION: ISSUE: The District purchases commercial insurance to cover general and auto liability, pollution legal liability, and employment practices liability losses. Current insurance policies expire on June 30, 2011 and renewal pricing must be reviewed prior to binding renewal coverage. RECOMMENDATION: Review and approve renewal pricing and authorize the General Manager to bind renewal coverage as follows: Policy Type Retention Coverage Limit Premium Change Excess Liability $1,000,000 $15,000,000 None Pollution Legal Liability (HHW) $50,000 $10,000,000 <1% Employment Practices Liability $15,000 (gap coverage) $1,000,000 10.8% FINANCIAL IMPACTS: The impact of the proposed recommendation is an increase of $1525 in these insurance premiums from $302,161 in fiscal year 2010 -11 to $303,686 in fiscal year 2011 -12. ALTERNATIVES /CONSIDERATIONS: „The alternatives to the recommended action are to purchase coverage from other insurance companies that provided quotes to Alliant or to adjust the District's retention on these policies. Although alternative markets were approached for all three lines of insurance, we only received one additional quote for our Employment Practices Liability (EPL) coverage. Staff has reviewed this alternate proposal but does not recommend it. BACKGROUND: The District's favorable loss history has continued through fiscal year 2010 -11. However, given the ongoing weak economy and the continued reduction insurance companies have seen in investment income, staff anticipated moderate rate increases in all lines of liability coverage. At this time, only the cost of Employment Practices Liability insurance has gone up. Our broker advised that this premium S. Deutsch graves . James Kelly, General anager ISSUE: The District purchases commercial insurance to cover general and auto liability, pollution legal liability, and employment practices liability losses. Current insurance policies expire on June 30, 2011 and renewal pricing must be reviewed prior to binding renewal coverage. RECOMMENDATION: Review and approve renewal pricing and authorize the General Manager to bind renewal coverage as follows: Policy Type Retention Coverage Limit Premium Change Excess Liability $1,000,000 $15,000,000 None Pollution Legal Liability (HHW) $50,000 $10,000,000 <1% Employment Practices Liability $15,000 (gap coverage) $1,000,000 10.8% FINANCIAL IMPACTS: The impact of the proposed recommendation is an increase of $1525 in these insurance premiums from $302,161 in fiscal year 2010 -11 to $303,686 in fiscal year 2011 -12. ALTERNATIVES /CONSIDERATIONS: „The alternatives to the recommended action are to purchase coverage from other insurance companies that provided quotes to Alliant or to adjust the District's retention on these policies. Although alternative markets were approached for all three lines of insurance, we only received one additional quote for our Employment Practices Liability (EPL) coverage. Staff has reviewed this alternate proposal but does not recommend it. BACKGROUND: The District's favorable loss history has continued through fiscal year 2010 -11. However, given the ongoing weak economy and the continued reduction insurance companies have seen in investment income, staff anticipated moderate rate increases in all lines of liability coverage. At this time, only the cost of Employment Practices Liability insurance has gone up. Our broker advised that this premium POSITION PAPER Board Meeting Date: June 2, 2011 subject AUTHORIZE GENERAL MANAGER TO RENEW INSURANCE COVERAGES FOR FISCAL YEAR 2011 -12. increase reflects an adjustment in the carrier's rating formula and should not be construed as an indication that the District's exposure has changed.. The following table shows expiring and renewal premiums for each insurance policy. Policy Form Retention /Limit Expiring Renewal $$ % Premium Premium Change Change Excess Liability Occurrence $1 mil / $15 mil $207,097 $207,097 - - Pollution Occurrence $50k / $10 mil $78,657 $78,408 -$253 EPL Claims Made $15k / $1 mil $16,407 $18,181 $1,774 10.8% $302,161 $303,686 $1,525 t----<10/0 Staff recommends renewing coverage at the above pricing and retentions with the expiring insurance companies. Other Insurance - Property: The District purchases property insurance through the California Sanitation Risk Management Authority ( CSRMA). CSRMA offers the coverage through a group purchase program of over 1,300 participating public entities and between 35 and 40 different insurance and reinsurance companies in any given year. Since Alliant has not yet received renewal quotes from all participating insurers, renewal pricing is not yet available. Most US property insurers are increasing rates to offset catastrophic loss costs and continued reductions in investment income. With this in mind, staff has budgeted for a 15% increase in the property insurance premium. At this time, staff recommends renewing the property coverage through CSRMA's Public Entity Property Insurance group purchase program with a rate increase not to exceed 15% or a maximum of $125,000. Other Insurance — Workers' Compensation: The District is a member of CSRMA's Workers' Compensation insurance pool. Renewal pricing for this coverage depends on the cost of the pool's excess insurance and individual members' experience modifiers. In 2009 -10 the District's experience modifier rose to .97 to reflect increases in both the frequency and severity of the District's Workers' Compensation claims over the preceding two years. In 2010 -11 that factor decreased to .90. With the addition of another relatively low -loss year, the District's experience modifier has been reduced from .90 down to .75. While this demonstrates a positive trend, a reduced experience modifier is still only one factor in the District's overall price. Alliant Insurance Services is HAInsurance \BoD Ins Renewal Materials \Insurance Renewal Position Paper 1112.doc POSITION PAPER Board Meeting Date: June 2, 2011 subject AUTHORIZE GENERAL MANAGER TO RENEW INSURANCE COVERAGES FOR FISCAL YEAR 2011 -12. anticipating a 10% increase in the excess Workers' Compensation premium for 2011- 12. As a result, we anticipate Workers' Compensation premium increases up to 10% over the expiring premium of $587,768. Renewal rates and any applicable dividends from prior years must be approved by the CSRMA Board of Directors before members receive final renewal premiums. As in the past, staff will report the final Workers' Compensation premium to the Budget and Finance Committee as soon as it becomes available. The Budget and Finance Committee reviewed this item at the May 30, 2011 meeting. Any recommended changes by the Committee will be discussed with the Board prior to action taken on the Consent Calendar. RECOMMENDED BOARD ACTION: Authorize the General Manager to renew insurance coverage for excess liability, pollution (HHW) liability, and employment practices liability as quoted with expiring terms and conditions, to renew property coverage at rates not to exceed a 15% increase or $125,000 and to renew and report final Workers' Compensation premiums to the Budget and Finance Committee upon receipt. HAInsurance0ol) Ins Renewal MaterialsMnsurance Renewal Position Paper 1112.doc