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 15% ($105,357) from the current fiscal year with the greatest rate of increase specific to the coverage for property insurance (26%).  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 5 years, specific to large vehicle claims.  The value of the losses when compared to the premium paid for the coverage (the loss ratio) results in increase in the property insurance renewal amount.
 

2) 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 with most policies seeing increases exceeding 20% year-to-year.  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.

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.

I move to approve the purchase of various commercial insurance policies to protect the financial interests of the City, in an amount of approximately $807,600.00, for the next policy periods and authorize the Contracts and Risk Manager to execute agreements for those policies.