The City self-funds loss exposures that are predictable, where it is not cost effective to purchase commercial insurance, and where losses do not threaten its financial stability.  However, there are potential issues that present significant exposure to the City's financial stability, are somewhat unpredictable, and lend themselves to being commercially insured. 

The lines of coverage which are commercially insured include: Property & Contents (including boiler & machinery, auto physical damage and cyber liability), public agency general liability, employee dishonesty and tenant users liability (to protect the city and protect those renting our facilities).  With the assistance of its broker (Wells Fargo Insurance Services, USA), Management Services has marketed these coverages with an eye on value (broadest coverage for the most competitive premium).   

The city continues to work to control losses and limit exposure through the Risk Committee and working with departments to identify potential exposures.  In marketing the City policies this year, staff was challenged with an insurance market that had predicted increased premium rates of as much as 10%.  In the case of City policies, in most cases we were able to negotiate rate increases that are below the market average, with the exception being the City’s property coverage.

A spreadsheet detailing those commercial policies is attached. 

Across all policies, the total increase in premiums amounts to 10% over Fiscal 2015. 

Property/Boiler:  Up 19% ($34,321) – There are two factors causing the premium for property coverage to jump as it has for this period.  First, the City has made multiple property claims over the last 2-3 fiscal years resulting in payments from this policy, causing the underwriter to consider this history in pricing the City’s rate.  Due to this claim history, the rate applied to the City’s property renewal is up by about 15%.  The remaining amount is tied to an increase in values in the City’s property.  During the current  policy period (Fiscal 2015), the property insurance carrier performed appraisals of City locations which had not occurred in (a least) 5-6 years.  The new values added roughly 5% to the value of City locations, against which the insurance rate is calculated.

Public Entity General Liability: Up 4% ($9,656)

Employee Dishonesty:                  Up 5% ($977)

Tenant User Liability:                    Flat (No expense to City)

The total estimated premium depicted on the attached spreadsheet may be adjusted upward or downward, depending on variations in actual exposures throughout the course of the policy year.

COVERAGE CHANGES

There are no coverage level changes proposed for this policy period.

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 2015-2016, but direct the City Manager further.

I move to approve purchase of insurance policies for 2015-2016 and authorize the execution of required policy documents as recommended by the Contracts and Risk Manager.