SUBJECT/RECOMMENDATION:
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Approve the purchase of Excess property insurance, including Bridges, Boiler and Machinery and Terrorism coverages, from April 1, 2021 through April 1, 2022, at the level of insurance provided for in this agenda item, at an amount not to exceed $2,800,000 and at the property rate of $0.3476 through April 1, 2022, and authorize the appropriate officials to execute same. (consent)
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SUMMARY:
The Risk Management Division requested Arthur J. Gallagher and Co. to obtain quotes for the property insurance program expiring April 1, 2021. After a review of quotes received, staff requests the renewal of current coverage with Berkshire Hathaway Insurance Group with a layer of coverage limits provided by various carriers.
The proposed renewal with Berkshire Hathaway and additional sub-carriers includes a three-year rate guarantee for 2021, 2022, and 2023, subject to a loss ratio provision of 100% for Named Windstorm and 40% for all other perils. By accepting this agreement, the City’s property premium will not be subjected to an approximate 48% marketplace fluctuation projected over the next three years.
This renewal maintains our Named Windstorm coverage at $75 million, and flood insurance at $75 million on an aggregate basis. The self-insured retention (SIR) will remain at $100,000 per occurrence, with a 5% SIR for named storms with no maximum deductible. The Boiler and Machinery Coverage with Travelers will also remain at $200 million with an increase of premium of 14% for a total of $75,192.
The City insures three city bridges on a stand-alone policy through Zurich: Sand Key Bridge, Mandalay Channel pedestrian bridge and the McMullen Booth pedestrian overpass. This policy has a self-insured retention (SIR) of $100,000 per occurrence, with a $500,000 SIR for named storms, and provides an additional $47 million of aggregate windstorm/flood/terrorism capacity which would otherwise be applied to the $100 million limit for the City's property insurance program. This program was placed in 2019, and incorporates a three-year rate guarantee, which will expire in 2022. The premium for the 2021-22 renewal term is $58,873 and includes an increase in bridge values of 0.9%.
The requested renewal maintains the current coverage for “Terrorism - Property & Liability” coverage limits at $25 million for property damage and $10 million for liability for a premium of $22,000. The program also provides Nuclear, Biological, Chemical & Radioactive Terrorism coverage with limits of $3 million, for a premium of $25,270.
Total premiums for this renewal are estimated to be $2,766,417, which represents an increase of 1.33% in premium and less than 1% increase in rate from last year. Staff recommends adding a contingency to a not-to-exceed amount of $2,800,000.
Risk Management believes these recommended coverages will continue to cover the City's property risks at levels and rates which represent a reasonable insurance program for the City.
APPROPRIATION CODE AND AMOUNT:
Funds are available in the Risk Management operating code 5907590-545100, Insurance Premiums, to fund this contract.