Loading...
HomeMy WebLinkAbout04.h. Authorize renewal of insurance coverage for excess liability, etc.Central Contra Costa Sanitary District h ' BOARD OF DIRECTORS ' POSITION PAPER Board Meeting Date: June 7, 2012 Subject: AUTHORIZE GENERAL MANAGER TO RENEW INSURANCE COVERAGES FOR FISCAL YEAR 2012 -13. Submitted By Initiating Dept. /Div.: Shari Deutsch, Safety & Risk Administration, Safety & Risk Management Administrator Management REVIEWED AND RECOMMENDED FOR BOARD ACTION: S. Deutsch 0/-�- - Ann Farrell, General Manager ISSUE: The District purchases commercial insurance to cover general and auto liability and pollution legal liability. The District also purchases smaller policies to cover losses from employment practices, crime, claims for breach of fiduciary duties in administering employee benefit funds. Current insurance policies expire on June 30, 2012 and renewal pricing must be reviewed prior to binding renewal coverage. RECOMMENDATION: Review and approve renewal pricing and authorize the General Manager to bind coverage as follows: Poles Type Carrier Retention Limit Premium Change Excess Liability ICSOP (Chartis) $1,000,000 $15,000,000 +5% Pollution Legal Liability Aspen Specialty $50,000 $10,000,000 -14.5% FINANCIAL IMPACTS: The impact of this recommendation is a decrease of $878 in these insurance premiums from $285,505 in fiscal year 2011 -12 to $284,627 in fiscal year 2012 -13. 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. Alternative markets were approached for both lines of insurance. Since none of the other carriers approached for excess liability quotes were willing to remove their exclusions for inverse condemnation, there are no competitive quotes to review for this coverage. However, we received a quote from a new insurer for the Pollution Legal Liability (PILL) coverage for the Household Hazardous Waste program. Staff has reviewed the policy, coverage terms and conditions and determined that this new policy is at least comparable to the expiring policy. In some minor respects, coverage is actually POSITION PAPER Board Meeting Date: June 7, 2012 Subject AUTHORIZE GENERAL MANAGER TO RENEW INSURANCE COVERAGES FOR FISCAL YEAR 2012 -13. broader than that provided by the expiring policy. The new insurer, Aspen Specialty Insurance Company has quoted $19,582 less than the current carrier and $11,429 less than the expiring policy premium. BACKGROUND: The District's favorable loss history has continued through fiscal year 2011 -12. 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 the Excess Liability insurance has gone up. The following table shows expiring and renewal premiums for these insurance policies. Policy Form Retention /Limit Expiring Renewal $$ % Premium Premium Change Change Excess Liability Occurrence $1 mil / $15 mil $207,097 $217,648 $10,551 +5 Pollution Occurrence $50k / $10 mil $78,408 $66,979 - $11,429 -14.5 $285,505 $284,627 -$878 <1% Staff recommends renewing Excess Liability coverage at the above pricing and retention with Chartis and binding coverage with Aspen Specialty Insurance Company for the Pollution coverage. 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 Program (PEPIP) group 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 POSITION PAPER Board Meeting Date: June 7, 2012 Subject. AUTHORIZE GENERAL MANAGER TO RENEW INSURANCE COVERAGES FOR FISCAL YEAR 2012 -13. frequency and severity of the District's Workers' Compensation claims over the preceding two years. In 2010 -11 that factor decreased to .90. Over time, the District's experience modifier has gone down. For the 2012 -13 renewal, the District's experience modifier is .74. 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 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 $554,146. 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 June 4, 2012 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 with Chartis, to bind coverage for Pollution Liability with Aspen Specialty Insurance Company, to renew property coverage with the PEPIP program 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.