2014-28612 Reso RESOLUTION NO. 2014-28612
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, APPROVING THE PURCHASE OF FLOOD INSURANCE,
ALL-RISK PROPERTY INSURANCE (INCLUDING WINDSTORM), BOILER &
MACHINERY INSURANCE FOR CITY BUILDINGS AND CONTENTS (INCLUDING
NEW CONSTRUCTION), AND FINE ARTS INSURANCE (BASS MUSEUM AND ART
IN PUBLIC PLACES), AS PROPOSED BY ARTHUR J. GALLAGHER RISK
MANAGEMENT SERVICES, INC., THE CITY'S BROKER OF RECORD.
WHEREAS, as proposed by Arthur J. Gallagher Risk Management Services, Inc., the
City's broker of record, the Administration has recommended the purchase of Flood Insurance
with the National Flood Insurance Program; All-Risk Property Insurance (including Windstorm)
with Lexington Insurance Company, Boiler & Machinery Insurance with Zurich-American, and
Fine Arts Insurance with Lloyds of London; and
WHEREAS, funding is available from the Risk Management budgets 540-1792-000378
($1,975,000) and 540-1792-000390 ($53,000); and
WHEREAS, the City Commission authorizes the Administration to purchase the
aforestated insurances, as proposed by Arthur J. Gallagher Risk Management Services, Inc., if
within budgeted funds; and
WHEREAS, the City Commission authorizes the Administration to renew the proposed
policies for up to four (4) additional one-year terms, provided the premium amounts do not
exceed budgeted funds.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby approve the purchase of Flood Insurance, All-Risk Property Insurance
(including Windstorm), Boiler & Machinery Insurance for all City-owned buildings and contents
(including new construction), and Fine Arts Insurance (Bass Museum and Art in Public Places),
as proposed by Arthur J. Gallagher Risk Management Services, Inc., the City's broker of record.
PASSED AND ADOPTED this day of 2014.
ATTEST
Raf I Granado, City Philip v' ayor
:INCOR.' ORATED." APPROVED AS TO
T:\AGENDA\2014\May\RESO �rty ._tar�E pt�r./has Ju 1-2014.docx FORM &LANGUAGE
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City Attorney yr Date
COMMISSION ITEM SUMMARY
Condensed Title:
Resolution Of The Mayor And City Commission Of The City Of Miami Beach Florida, Approving The
Purchase Of Flood Insurance, All-Risk Property Insurance (Including Windstorm), And Boiler &
Machinery Insurance For City Buildings And Contents (Including New Construction); And Fine Arts
Insurance (Bass Museum and Art In Public Places), As Proposed By Arthur J. Gallagher Risk
Management Services, Inc., The City's Broker Of Record
Key Intended Outcome Supported:
Ensure Expenditure Trends Are Sustainable Over the Long Term
Item Summary/Recommendation:
Property Insurance is necessary to protect the financial interest of the City. To qualify for FEMA
assistance, the City is required to purchase a reasonable insurance program to protect its assets.
The City's Broker of Record, Arthur J. Gallagher Risk Management Services, Inc., has marketed
the City's portfolio of property in the marketplace and obtained various options to renew the
program with favorable terms and conditions, within the budgeted amount. Historically, the City
has retained the risk of loss for its parking garages; however, these values have been included in
the June 1, 2014 schedule of values.
The Administration recommends that the Mayor and City Commission of the City of Miami Beach,
Florida approve the purchase of Flood Insurance, All-Risk Property Insurance (including
windstorm), Boiler & Machinery Insurance, and Fine Arts Insurance (Bass Museum and Art in
Public Places), as proposed by Arthur J. Gallagher Risk Management Services, Inc., the City's
Broker of Record up to the current budgeted amount of $2,028,000 and authorize the
Administration to renew within budgetary allocations an additional four years.
Advisory Board Recommendation:
NA
Financial Information:
Source of Amount Account
Funds: 1 $1,975,000 540-1792-000378 Risk Management Fund
2 $53,000 540-1792-000390 Risk Management Fund
Total $2,028,000
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Sonia Bridges, Risk Manager
Sign-Offs:
Department Director Assistant City Manager Ci ana er
SCT KGB JLM
T:1AGENDA120141May1RFQ 2014-056 MF Insurance Broker of Record-Summary.doc
MIAMIBEACH AGENDA ITEM R1 1 F_
DATE
MIAMI BEACH
/ ,
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139,
www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Honorable Mayor Philip Levine an Members f the City Commission
FROM: Jimmy L. Morales City Manager
DATE: May 28, 2014
SUBJECT: A RESOLUTION OF THE MAY AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, APPROVING THE PURCHASE OF FLOOD
INSURANCE, ALL-RISK PROPERTY INSURANCE, INCLUDING
WINDSTORM, BOILER & MACHINERY INSURANCE FOR CITY BUILDINGS
AND CONTENTS (INCLUDING NEW CONSTRUCTION); AND FINE ARTS
INSURANCE (BASS MUSEUM), AS PROPOSED BY ARTHUR J.
GALLAGHER RISK MANAGEMENT SERVICES, INC., THE CITY'S BROKER
OF RECORD.
ADMINISTRATION RECOMMENDATION
Approve the recommendation.
KEY INTENDED OUTCOME
Ensure expenditure trends are sustainable over the long term.
BACKGROUND
There are several reasons why this item is before you today with such short notice. First, the
Broker of Record, Arthur J. Gallagher Risk Management Services, Inc., was approved via
Resolution Number 2014-28551 April 23, 2104; leaving them little time to research the
marketplace on the City's behalf. Second, when researching the option of purchasing additional
windstorm coverage, staff identified that the authority granted through Resolution Number 2009-
27077 to renew proposed policies as long as premiums were within budgetary allocations,
expired with the renewal in 2013.
The City uses Gallagher to secure all insurance programs. Annually, prior to policy expiration,
the City directs Gallagher to contact all available markets for property insurance quotes.
Attached are the estimated renewal figures from Gallagher (Attachment 1). The City's
insurance needs are covered by the following four (4) policies: (1) Flood, (2) All-Risk Property,
including Windstorm, (3) Boiler & Machinery (equipment breakdown), and (4) Fine Arts (Bass
Museum and Art in Public Places). The All-Risk Property, Boiler & Machinery, and Fine Arts
City Commission Memorandum
May 28,2014
Authorization to Purchase Insurance
Page 2 of 3
policies expire May 31, 2014. The Total Insured Value (TIV) for all buildings/structures is
$685,247,222.
Historically, the City has retained the risk of loss for its parking garages. However, at this
renewal it is recommended that the City add the parking garages to its schedule of property at
an estimated insured value of$166,611,143.
The Fine Arts have an insured value of$32,177,526 for arts at the Bass Museum and Art in City
Buildings and Public Places.
The City relies on the Federal Emergency Management Agency (FEMA) to provide financial
assistance for expenses and damages related to flood and/or windstorm not covered by
insurance, if designated as a Federally Declared Emergency. The State of Florida certified last
year that the City's coverage was reasonable; however, under separate cover the City was
advised to increase its windstorm coverage (Attachment 2).
The first coverage, Flood, is only offered through the National Flood Insurance Program (NFIP).
To qualify for aid from FEMA for loss due to flood, the Stafford Act/FEMA requires that the City
purchase flood insurance from NFIP for eligible properties. The policy limits are $500,000 for
buildings and $500,000 for building contents with various deductibles per location. The City
purchases a separate policy for each eligible location. The individual policies renew from May
through December.
The second policy, All Risk Property, can be purchased with or without windstorm coverage. In
order to comply with FEMA's eligibility requirements for windstorm, the City is required to
purchase coverage that is reasonably available. The premium cost for All Risk including
windstorm for 2013 to 2014 was $1,530,466. The policy included a windstorm sub-limit of $10
million. This policy was offered by Lexington Insurance Company; who provided primary
coverage for All Risk that included a windstorm sub-limit, for the lowest cost. Lexington has
provided a quote for the renewal of this policy with a rate reduction so the premium to renew the
existing coverage will be $1,407,927.
The All Risk renewal includes an option to purchase terrorism coverage. This coverage is very
limited and does not respond to all types of terrorism. In the past the City has not elected to
purchase this coverage.
The third coverage, Boiler/Machinery, provides coverage for property built to operate under a
vacuum or pressure, or used for generations, transmission or utilization of energy (water pumps,
A/C. units, generators). The City purchases this insurance due to the many locations that house
this type of machinery/equipment. Damage sustained by machinery/equipment for breakdown
is not currently reimbursable under any type of State or Federal program. This policy provides
$100 million in coverage with a $10 thousand combined deductible. The premium for 2013-14
was $16,332 with coverage provided by Zurich-American. It is anticipated that the renewal
premium for 2014-2015 will be approximately $17,500.
The fourth coverage, Fine Arts, provides coverage for the Bass Museum and art throughout the
City, including Art in Public Places. This policy provides coverage for all perils (All Risk,
Windstorm) for insured value. The premium from June 1, 2013 to June 1, 2014 was $44,005
with coverage provided by Lloyds of London. The estimated renewal premium is $53,000.
f
City Commission Memorandum
May 28, 2014
Authorization to Purchase Insurance
Page 3 of 3
Following the State's recommendation, at the June 11, 2014, City Commission meeting agenda
there will be an item requesting a budgetary allocation to increase windstorm coverage.
CONCLUSION
The above insurance policies are offered for a one-year period and generally offer renewal
terms. The Administration recommends that the Mayor and Commission authorize the renewal
of the proposed policies for up to four additional one year terms at the City's discretion, provided
the premium amounts do not exceed budgeted funds.
RECOMMENDATION
It is recommended that the Mayor and City Commission approve the purchase of Flood
Insurance, All-Risk Property Insurance (including windstorm), Boiler & Machinery Insurance,
and Fine Arts Insurance (Bass Museum and Art in Public Places), as proposed by Arthur J.
Gallagher Risk Management Services, Inc., the City's Broker of Record up to the current
budgeted amount of$2,028,000.
Attachments
JLM/KGB/SC-T
T:\AGENDA\2014\May\
RE Insurance Purchase-June 1-2014.docx
SO-Property p y
ATTACHMENT 1
Arthur J. GaUa her Risk Management Services, Inc.
May 21, 2014
Ms. Sonia Bridges
Risk Manager
City of Miami Beach
1700 Convention Center Drive
Miami Beach, FL 33139
Re: 2014—2015 Estimated Renewal Premiums
Dear Sonia,
The majority of the City's insurance program renews on June 1, 2014, and you have
asked us to provide you with an estimate of what we believe the renewal premiums will
be for Property, Boiler & Machinery, Flood, and Fine Arts insurance. We have now
received several firm quotes and are awaiting further instructions from the City to
proceed.
Master Property Insurance:
Following is a summary of the current program:
Total Insured Value $685,247,222
Program Loss Limit $350,000,000
All Other Perils Deductible $100,000
Named Storm Sublimit $10,000,000
Named Storm Deductible 7.5%/min. $1,000,000
Premium (including mid-term change) $1,496,053
FL CAT Fund Assessment 1.3% $19,448.69
Citizens Surcharge 1% $14,960.53
EM PA $4
Total $1,530,466
For this year's renewal you have asked us to provide options to increase the Named
Storm Sublimit as well as to add the City's parking garages to the insured property
schedule. To do this, we are presenting $163,742,254 as the insurable value of the
garages. This value was derived from information we have on file, and will be updated
upon receipt of appraisals (to be performed in the near future), as well as additional
information that you are obtaining. A summary of the options, and firm, as well as
projected costs, follows:
8333 Northwest 53 Street, Suite 600
Doral, FL 33166
Main: 305.592.6080
Fax 305.592.4049
www.ajg.com
Arthur J. Gallagher Risk Managcment Seivices, Inc.
Total Insured Value Options.
(A) 09
Named Storm Without Parking Garages With Parking Garages
Subtimit Projected (as expiring)
. O tions Program Cost $685,247,222 $84819893476
Premium $1,376,269 $1,597,047
1)$1010001000 FL Surcharges $31,658 $36,736
Total- firth quote $1,407,927 $1,633 784
Premium $1,936,053 $2,223,958
2)$20,000,00.0 FL Surcharges $44,533 $51,155
Total $1,980,586 $29275,113
Premium $2,126,269 $2,451,925
3)$25,000,000 FL Surchar es $48,908 $56,398
Total firm quote) $2,1751177 $2,608,324
Options 1A and 3A above are firm quotes, and can be bound. The remaining options are
projections based on our marketing efforts thus far, and are not bindable. We await
further instructions from the City in order to obtain firm quotes on any and all options
requested. Please also see the corresponding Boiler& Machinery options below.
Flood Insurance:
Further to our previous discussions, there are currently many changes occurring in the
National Flood Insurance Program, and this makes it difficult to accurately project this
premium. Therefore, conservatively speaking, we project that the premium for the City's
Flood insurance policies that renew from May 2014 to September 2014 will increase
from $294,865 to approximately $320,000 (for all current policies expiring through the
end of the year, we expect the premiums will increase from $362,738 to approximately
$400,000).
We are working with you to mitigate the impact that the new flood insurance regulations
will have on the City's budget where possible. We are also researching private insurance
markets who may offer more competitive pricing than the National Flood Insurance
Program.
8333 Northwest 53 Street, Suite 600
Doral, FL 33166
Main: 305.592.6080
Fax 305.592.4049
www.ajg.com
Ardiur J. Gallagher Risk Management Services,Inc.
Boiler&Machinery Insurance:
We have been able to secure a program that has been very cost effective over the last
several years. While we expect for this to remain the case, we understand that the City's
current insurer is requesting a 3% rate increase.Accordingly, the expiring Boiler&
Machinery premium, including surcharges is $16,332, and this year we project the
renewal premium will be:
Projected Premium
Total Insured Value Options including FL surcharges
(A) $685,247,222 $16,822
(13) $848,989,476 $20,842
We are in the market to ensure that the City is obtaining the most competitive Boiler&
Machinery renewal.
Fine Arts Insurance:
We have been advised that the rate for renewal of this coverage will not be higher than
the expiring rate of 0.1368 per$100 of coverage(including FL surcharges). Therefore,
as long as the permanent collection values of$32,177,526 have not changed since last
year, the premium of$44,000 will remain flat in the worst case scenario.
The above estimated premiums do not include Terrorism coverage (where available) as
the City has not been purchasing this coverage. Please let us know if you would like to
explore options for securing Terrorism coverage.
The preceding are only premium estimates based on the information we have at this
time. It is important to keep in mind that as we receive additional information on the
parking garages, the premiums projected for that property could change. We do not
expect this to affect the renewal premium, but it may affect the premium mid-term.
Please let us know how the City wishes to proceed, and we will obtain firm quotes for the
options requested. In the meantime, please feel free to call me if you have any
questions;We appreciate the opportunity to be of service to the City.
Sincerely,
Craig S. 9i s eVice U, ARM, ASLI,ARe
Area Assi ansident
833 3 Northwest 53 Street, Suite 600
Doral, FL 33166
Main: 305.592.6080
Fax 305.592.4049
www.ajg.com
ATTACHMENT 2
STATE OF FLORIDA
DIVISION OF EMERGENCY MANAGEMENT
RICK SCOTT BRYAN W.KOON
Governor Director
March 14, 2014
Ms. Sonia Bridges, Risk Manager
City of Miami Beach
N �, C)
1700 Convention Center Drive -- C M
Miami Beach, Florida 33139
Re: City of Miami Beach (2013-2014)
Insurance Reasonableness Determination Requested CD
x
Dear Ms. Bridges:
Please find attached the determination of the State Insurance Commissioner
regarding the "reasonableness" of the insurance coverage procured by the City of Miami
Beach. Based upon the information reviewed by the Office of Insurance Regulation, the
State Insurance Commissioner has determined that the City of Miami Beach has been
successful in procuring insurance that appears to be "reasonable."
Please understand that this determination applies only for the levels of coverage,
terms and coverage periods that were presented for review; should material terms of the
insurance package change, the applicant will need to resubmit for a new reasonableness
determination.
If you have any questions or require additional information, please contact Steven
Hyatt, State Public Assistance Officer, via email at Steven.Hyatt(a�em.myflorida.com or by
phone at (850) 487-1660.
Sincerely,
Y
Steven e
State Public Assistance Officer
SH/bh-
Attachments: Determination of the State Insurance Commissioner
DIVISION HEADQUARTERS STATE LOGISTICS RESPONSE CENTER
2555 Shumard O-ak Blvd Tel:850-413-9969•Fax:850-488-1016 2702 Directors Row
Tallahassee, FL 32399-2100 www.FloridaDisaster.org Orlando, FL 32809-5631
FINANCIAL SERVICES
CO1YII1 EMON
RICKSCOTT
GOVERNOR
OFFICE OF INSURANCE REGULATION .TBFBAT:'WATIM
C 13F HNANCIAL OFFICER
PAM BOM
ATTORNEY 0WQMAI.
KLWM M.MCCARTY ADAM PU NAM
CO1bIl14ISSIONER CONMHSSIONER OF
AGRICULTURE
March 7,2014
Larissa Pallo
State Public Assistance Officer
Division of Emergency Management
2555 Shumard Oak Boulevard
Tallahassee,Florida 32399-2100
Dear Ms.Pallo:
This letter is in response to David Merrill's letter dated July 19,2013,in which it was requested
that the Office of Insurance Regulation(Office)certify the"reasonableness"of the insurance
coverage for the City of Miami Beach. Based on the information provided,it appears that the
City of Miami Beach has been successful in procuring insurance that appears to be"reasonable."
The City of Miami Beach may have already received an email correspondence with
recommendations for the coming policy year. Due to changes in the marketplace,additional
comments regarding their program may be provided.
The Office understands that the reason the program has been submitted is to meet the
requirements of the Federal Stafford Act,which appears to require the approval of a regulatory
authority. Although some of the products at issue may not be subject to Chapter 627 of the
Florida Insurance Code,the program that has been selected appears to be"reasonable"and
competitive given the state of the Florida insurance market in 2013.
If the Office can be of further assistance,please do not hesitate to contact us.
Sin
Kevin M. McC
N) r _
rT
KEM U WCARTY•COMbIIS.WNER
200 EAST GAINES STREET•TALLAHASSEE,FLORIDA 32399-0305 • (850)413-59 t4 • FAX(850)488-3334
WERSITE:WWW. WDLCOM • EMAiL:KEv1N.MCCARTYQFI0IR.00M
AfF madve Action/Egoal OWaramity Employer
Bridges, Sonia
From: Christy, Virginia [Virginia.Christy @floir.com]
Sent: Thursday, March 06, 2014 5:04 PM
To: Bridges, Sonia
Subject: 138847-13 City of Miami Beach;Reasonableness Determination:
Ms. Bridges,
We have finished the review of the above referenced request from your office to certify the "reasonableness"of the
property insurance program for the City of Miami Beach.A letter has been sent to the Department of Emergency
Management. It is recommended that the city look into higher Named Windstorm limits for the coming policy year.
Virginia A. Christy
Assistant General Counsel
Office of Insurance Regulation
Division of Legal Services
200 East Gaines Street
Tallahassee, FL 32399-4206
Phone:850-413-4220
Email:Virginia.christV@floir.com
1