2013 2:00:00 PM

Monday, June 24, 2013 2:00 PM
City Council Chambers, Legislative Building, 745 Fourth St, Sparks, NV

General Business: 6.7

Title: Consideration and possible approval to purchase various commercial insurance policies to protect the financial interests of the Truckee Meadows Water Reclamation Facility for the next policy periods and authorization for the Contracts and Risk Manager to execute agreements for those policies.

Petitioner/Presenter: Dan Marran, CPPO, C.P.M. – Contracts and Risk Manager/Dan Marran, CPPO, C.P.M. – Contracts and Risk Manager

Recommendation: Recommend approval to purchase commercial insurance policies to protect the financial interests of the Truckee Meadows Water Reclamation Facility for the next policy periods.

Financial Impact: $231,130.00

Total Costs: $231,130.00

Fund: Joint Treatment Plant Account: 603065
Program: TMWRF Administration (131500)
Amount: $231,130.00 Budget Status: Over Budget (See Budget Correction Plan)

Budget Correction Plan:
Budgeted expense for Fiscal 2014. Premiums to be paid in July.

Business Impact (Per NRS 237):
A Business Impact Statement is not required because this is not a rule.

Agenda Item Brief: This is the annual renewal of insurance policies purchased for TMWRF to protect its financial interest relating to potential accidental losses. This staff report covers the periodic renewal of policies specific to Property/Contents. This agenda item also seeks to authorize the Contracts and Risk Manager to execute the necessary paperwork associated with those policies.

Background: TMWRF purchases commercial property coverage to protect against losses relating to its property and contents (including boiler and machinery exposures). General liability (to cover premises exposures and acts of its employees) is covered under the City’s master General Liability policies and programs. General liability claims over $100,000 are handled via the City’s master general liability policy; claims under that amount are managed by Risk Management under the City’s self-funded liability program and the City Risk Management Committee. A spreadsheet detailing the commercial property policy is attached. This policy is renewed annually. The City also carries a Pollution Legal Liability Policy that is renewed on a 3-year cycle with the next renewal not due until Fiscal 2015.

Analysis: Property/boiler coverage rates and availability have significantly changed for the next policy year as most insurers have adjusted their risk models associated with earthquake coverage, resulting in significantly higher premiums to maintain coverage at lower levels than are available in the current policy year. The quoted changes to coverage and rates associated with the lower coverage were significant enough to cause exhaustive research of what options were available in the market to maintain the coverage limits we enjoyed in this area of risk. This issue has impact insurance coverage for all the public agencies in Northern Nevada and the solution to this issue evolved as new solutions were sought. The incumbent carrier did provide quotes for the coverage at TMWRF. But as an example of the quoted changes to the policy, their quote for continued service was $204,042 which included a reduction of the earthquake coverage from $50M to $5M. The policy under consideration with this item maintains the $50M coverage level. COVERAGE CHANGES The proposed policy under consideration moves this coverage from traditional policies serviced by Affiliated FM and Travelers to a pool program called the Public Entity Property Insurance Program (PEPIP). PEPIP is a property insurance program which has more than 6,000 insureds in 45 states. The program was started in 1993 and includes cities, schools, universities, airports, seaports, states, districts and hospitals. This program is the largest property placement in the world with approximately $320 Billion in insured values. The Program is administered by Alliant Insurance Services, Inc. The program is designed to provide flexibility for each of the separate entities to be able to elect various coverages and various deductibles. The placement of this coverage is provided by a combination of layering and quota sharing with various Domestic, Bermuda, and London insurance companies. The program is divided into towers which includes various other public entities. TMWRF will be in a tower with other entities from other states. The insureds in a given tower share a $1 billion each occurrence limit for the all-risk coverage (i.e. fire). The program provides a broad manuscript form which includes all risk coverage, boiler and machinery coverage and terrorism coverage. Earthquake coverage is included with dedicated limits to TMWRF. While the coverage limits and deductibles will remain generally the same as in the past few policy years, the deductible amount specific to earthquake does shift to a “percentage of value” of the property in question. More specifically, the deductible will be 2% of the value claimed with a minimum of $100K. The City’s broker worked exhaustively to seek a “best value” solution. The solution recommended in this staff report represents that work and is significantly lower than initially estimated.

Alternatives: 1. The City Council may approve the item as recommended. 2. The City Council may reject the recommendation of staff. 3. The City Council may choose not to approve the purchase of insurance policies for 2013-2014, but direct the City Manager further.

Recommended Motion: I move to approve purchase of recommended insurance policies for 2013-2014 and authorize the execution of required policy documents as recommended by the Contracts and Risk Manager.

Attached Files:

Ins Cost Grid-Combined Fiscal 2014-FINAL.pdf

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