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.  A spreadsheet detailing the various supplemental insurance policies is attached to this Staff Report and details the cost history of policies specific to the City for the past 5 years.

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 (USI Insurance Services), the City markets 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 City Risk Committee and working with departments to identify potential exposures.  The total premiums proposed for this renewal cycle show a year-to-year increase of 14% ($86,113) from the current fiscal year with the greatest rate of increase specific to the coverage for property insurance (23%).  That  increase may be tied to multiple issues:

1. Claim History (Property) - The City’s claims history reflects a number of claims made against the property policy over the past 4 years, specific to large vehicle claims.  The value of the losses when compared to the premium paid for the coverage (the loss ratio) has resulted in a larger than expected increase in the property insurance renewal amount.
    
2. Insured Value (Property) – The vehicle and equipment schedules (inventory of City equipment) is reviewed annually for coverage purposes.  The City has routinely insured licensed vehicles at their replacement cost which is updated each year.  It was determined in the review for the upcoming policy period that non-licensed (contractor-type) equipment had not been insured at the same level and had been covered at only the depreciated value.  This was revised for this renewal and resulted in an increased value to the City’s insured equipment of roughly $1.3 Million.  Combined with natural inflation on building values and the potential cost of replacement vehicles/equipment, the total insured value for the City is estimated at $167.2 Million. 
    
3. Property Coverage (General Conditions) – The market for property insurance coverage across the United States is seeing double digit increases year-to-year with this renewal period.  Much of this can be tied to losses seen in other communities specific to large natural disasters including hurricanes, floods, and wildfires.  Agencies that suffered those types of losses are seeing even greater increases in their renewals over the same period.

The other year-to-year increases in coverage for Public Entity Liability and Employee Dishonesty may be tied to natural inflation factors, increases in coverage and growth in total exposure.  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 as actual values are reviewed and the lists of insured properties undergo a "true-up" process.

COVERAGE CHANGES
Included in the attached spreadsheet of insurance policies is a new line of coverage that is recommended for addition in the upcoming fiscal year.  The line is labeled as “Assault Threat & Response Coverage.”  Like all the other coverages listed, this is certainly a policy that the City would never hope to need.  However, the nature of events in other communities over the past several years has given rise to this sort of coverage. 

Specifically, the coverage is intended to assist government agencies in cases where they may have an incident of an active assailant on their property that does harm to people and/or property.  Past incidents in other communities have resulted in an immediate need for coverage that might include costs for counseling, public information resources, site security, business continuity, etc.  This policy line with a premium cost of $1,709 would attempt to cover those costs (up to $500,000, depending on the type of event), should it be needed.

1. The City Council may approve the item as recommended.
2. The City Council may reject the recommendation of staff, and provide further direction to the City Manager.
3. The City Council may choose not to approve the purchase of insurance policies for 2019-2020, but direct the City Manager further.

I move to approve the purchase of various commercial insurance policies to protect the financial interests of the City in an amount of approximately $708,337.00, for the next policy periods and authorize the Contracts and Risk Manager to execute agreements for those policies.