At Monday's City Commission Meeting, Commissioners considered authorizing the City Manager to enter into an agreement with Travelers for the renewal of the City's Comprehensive Property/Casualty Insurance Program.
BACKGROUND: Annually, the City purchases property and casualty insurance to cover multiple exposures (e.g. buildings, equipment, cyber liability, etc.). Shortly after the first of the year, staff began work with the City's insurance broker, Iron Insurance Partners and Insurance Consultant, Charlesworth Consulting, to evaluate the insurance market and available carrier options. Since property/casualty insurance carriers almost exclusively utilize the agency/broker system to market and sell their policies, the City uses Iron Insurance Partners as our intermediary. Charlesworth Consulting is a contractual extension of City staff offering a wide range of resources, one of which is serving as an advisor during the renewal process. Both Iron Insurance Partners and Charlesworth Consulting are compensated through a Broker Fee Agreement and Consulting Services Agreement respectively.
The City's current insurance expires on June 30, 2023. Iron Insurance Partners and Charlesworth Consulting presented a study session in March in order to prepare for this insurance renewal. The City Commission was updated on the state of the property/casualty insurance market and provided staff direction to move forward with Travelers. The Study Session included considerable discussion of property and liability coverage concerns and their volatility. Inflation is impacting values, product availability and labor rates and there has been an increase in liability claims nation-wide. At that time staff was advised of a possible 8% overall rate increase, which Travelers did follow through with.
Shown below is a comparison of the expiring year's premium by line of coverage and how it compares to Travelers' proposal. Overall, Travelers took an 18% premium increase which equates to a premium increase of $106,374.
The increases are much higher under property and liability, which is not a surprise. Even though staff expected an 8% rate increase, the exposure increases Travelers calculated on the City's property are far more than staff anticipated. They took a 14% increase in values for several properties. Travelers ran Replacement Cost Estimates on the City's largest buildings and they adjusted accordingly. This contributes to most of the increase in the property premium.
Travelers also raised the per occurrence minimum from $50,000 to $100,000 on the wind and hail deductible. Additionally, Travelers removed the Anaerobic Digesters (they treat wastewater solids) from blanket coverage to actual cash value and Memorial Hall was removed from an agreed value to actual cash value.
The conclusion of the Study Session discussion was to proceed with a renewal with Travelers, but Iron Insurance Partners put feelers out to carriers who they know write public sectors to test the market.
This is year 7 of a hard market and it is driving rates and premium. The future is uncertain. While coverage, conditions and costs are important, so are the services provided. Staff has been doing business with Travelers for over 20 years. In addition to their competitive pricing, they have exceptional claims management and staff continues to take advantage of their comprehensive online resources and partnerships they share with their clients.
FISCAL NOTE: The insurance amount budgeted for 2023 property/casualty insurance is $682,764 and is short $14,526 of covering the proposed renewal amount of $697,290. The difference of $14,526 will be paid from the General Fund.
The motion was approved 5-0.