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, flood 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), Administrative 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 by a history of claims in the past few policy years that resulted in increases to the property and general liability premiums that were slightly higher than expected. 

Across all policies, the total increase in premiums amounts to 12% over Fiscal 2016. 

Property/Boiler:  Up 12.8% ($28,385) – The primary factor causing the change in premium for property coverage is due to multiple property claims made over the last 2-3 fiscal years resulting in payments from this policy.  This causes the underwriter to consider this history in pricing the City’s rates.  This adjustment to the rate is in addition to the market forces on the insurance industry that are typical in year-to-year increases. 

Public Entity General Liability: Up 11% ($29,012) – The change in premium with respect to general liability is a reaction to the claims history and the associated payments made by the City and their insurance companies on multiple claims over the last 2-3 fiscal years.

Employee Dishonesty:                  Up 3% ($615)

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
During the 2016 fiscal year, the City was able to add coverage for flood damage to our insurance portfolio.  Historically, the City only carried coverage of this type for specific property locations at high risk due to their location, as coverage for all locations was either unavailable or cost prohibitive.  Following the rain event in June/July of 2015 that caused damage to facilities at Pah Rah Park, the City’s insurance broker was able to secure coverage against future events at a reasonable cost.  That premium cost is also now included in the line for property coverage.  

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 2016-2017, but direct the City Manager further.

I move to approve the purchase of various commercial insurance policies for the next policy periods in the amount of $558,168 and authorize the Contracts and Risk Manager to execute agreements for those policies.