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Home My WebLink About06. Renew Excess Liability and Property Insurance PoliciesCentral Contra Costa Sanitary District BOARD OF DIRECTORS ; r- POSITION PAPER ..r Board Meeting Date: June 19, 2014 Subject: AUTHORIZE THE GENERAL MANAGER TO RENEW EXCESS LIABILITY AND PROPERTY INSURANCE POLICIES FOR FISCAL YEAR 2014 -15 Submitted By: Initiating Dept. /Div.: Shari Deutsch, Safety & Risk Administration, Safety and Risk Management Administrator Management REVIEWED AND RECOMMENDED FOR BOARD ACTION: D. Heath — Director of Administration Roger S. Bailey General Manager ISSUE: The District purchases commercial excess insurance to cover general and auto liability losses above its $1,000,000 self- insured retention. The District also purchases liability insurance policies to cover losses from pollution legal liability, employment practices, and claims for breach of fiduciary duties in administering employee benefit funds and a property insurance policy to protect against loss to District assets. Current insurance policies expire on June 30, 2014. Since the cost of the excess liability and property policies exceed the General Manager's spending authority, renewal of these policies must be approved by the Board. RECOMMENDATION: Review and approve renewal pricing and coverage options and authorize the General Manager to bind the following coverage: Policy Type Carrier Retention Limit Premium Change First Excess Liability ICSOP (AIG) $1,000,000 Second Excess Liability Lexington $15,000,000 Property PEPIP $250,000 $15,000,000 0 $25,000,000 NEW Replacement Cost TBD FINANCIAL IMPACTS: The impact of renewing the first excess liability policy is the insurance premium of $233,875, the same amount as the current coverage. This year staff has also secured a quote for additional $10 million in excess liability limits. If purchased, there would be an additional premium of $103,000. As discussed in more detail below, renewal pricing for the property coverage is not yet available. ALTERNATIVES /CONSIDERATIONS: The alternatives to renewing the excess liability policy are to purchase coverage from other insurance companies that provided quotes or to adjust the District's self- insured retention. CADocuments and Settings \cgee \Desktop \Insurance Renewal Position Paper 1415 doc Page 1 of 3 POSITION PAPER Board Meeting Date: June 19, 2014 Subject AUTHORIZE THE GENERAL MANAGER TO RENEW EXCESS LIABILITY AND PROPERTY INSURANCE POLICIES FOR FISCAL YEAR 2014 -15 Alternative markets were approached for this coverage. However, none of the other carriers approached for excess liability quotes were willing to remove their exclusions for inverse condemnation. As a result, there are no other quotes to review. BACKGROUND: The District's favorable loss history has continued through Fiscal Year 2013 -14. The liability sector of the insurance market has performed reasonably well this last year, although insurance companies no longer receive the level of investment income to which they became accustomed prior to the financial crisis in 2008. As a result, staff anticipated moderate rate increases in all lines of liability coverage. However, the District's renewal quote for the excess liability program is the same price as the current (2014 -15) premium. The following table shows the current expiring and renewal premiums for this coverage compared to last year's expiring and renewal premiums: Year Form Retention /Limit Expiring Renewal $$ % Premium Premium Change Change 2013 -14 Occurrence $1 mil / $15 mil $217,648 $233,875 $16,227 +7 2014 -15 Occurrence $1 mil / $15 mil $233,875 $233,875 0 0 Staff recommends renewing the District's excess liability coverage at the above pricing and retention with AIG. Second Excess Liability Insurance: For a number of years, the District has purchased excess liability limits of $15 million to augment the self- insured retention of $1,000,000 per occurrence. Given the size of the District's most severe exposures, a $15 million insurance limit is not ideal. Since the excess liability insurance market appears relatively stable, staff requested quotes for higher limits of coverage this year. Lexington has offered coverage of $10 million in coverage above the $15 million provided by AIG for an additional premium of $103,000. Staff recommends purchasing a second layer of excess liability coverage from Lexington to bring the District's total excess liability limits to $25 million. 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 (hurricanes, floods, etc.). With this in mind, staff has CADocuments and Settings \cgee \Desktop \Insurance Renewal Position Paper 1415.doc POSITION PAPER Board Meeting Date: June 19, 2014 Subject: AUTHORIZE THE GENERAL MANAGER TO RENEW EXCESS LIABILITY AND PROPERTY INSURANCE POLICIES FOR FISCAL YEAR 2014 -15 budgeted for a 15% increase in the property insurance premium. The current property insurance premium is $133,000. 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 $150,000. 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 modification factors. 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. Over time, the District's experience modifier has gone down. For the 2014 -15 renewal, the District's experience modifier is .61. The Workers' Compensation Insurance Rating Bureau projects that insured losses and allocated loss adjustment expenses for accident year 2013 will hit an 11 -year high, ultimately costing $12.5 billion. For this reason, Alliant Insurance Services is anticipating a 10% increase in the excess Workers' Compensation premium for 2014- 15. As a result, staff anticipates Workers' Compensation premium increases of around 5% over the expiring premium of $414,468. 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 Finance Committee as soon as it becomes available. COMMITTEE RECOMMENDATION: The Finance Committee reviewed this item at the June 9, 2014 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 AIG for $233,875, to purchase an additional $10 million in coverage from Lexington for $103,000, and to renew property coverage with the PEPIP program at rates not to exceed a 15% increase or $150,000. CADocuments and Settings \cgee \Desktop \Insurance Renewal Position Paper 1415.doc