2007-26519 Reso
RESOLUTION NO.
2007-26519
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 ), AND BOILER/MACHINERY
INSURANCE FOR CITY BUILDINGS AND CONTENTS
(INCLUDING NEW CONSTRUCTION), FOR A ONE-YEAR
PERIOD, AS PROPOSED BY ARTHUR J. GALLAGHER &
CO., THE CITY'S BROKER OF RECORD.
WHEREAS, as proposed by Arthur J. Gallagher and Co., 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 as the primary layer and Boiler/Machinery Insurance
with Travelers Property Casualty Company of America; and
WHEREAS, funding is available from the Self Insurance Fund Number
540.1792.000378; and
WHEREAS, the City Commission authorizes the Administration to purchase the
aforestated insurances, as proposed by Arthur J Gallagher and Co., if within budgeted
funds; and
WHEREAS, the City Commission also authorizes the Administration, to purchase
additional Windstorm coverage, if available with the remaining 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), and Boiler/Machinery Insurance for all City-owned
buildings and contents (including new construction), for a one-year pe. d, a proposed
by Arthur J. Gallagher & Co., the City's broker of record.
PASSED AND ADOPTED this 11th day of April 0
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City Clerk Robert Parcher
APPROVED AS TO
FORM & LANGUAGE
& FOR EXECUTION
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Callagher Public Entity & Scholastic Division
A Division 01 i\rthllr) Calbghtl" (.u iF 1"lld,1'
April 2, 2007
Mr: Cliff Leonard
City of Miami Beach
1700 Convention Center Drive
Miami Beach, FL 33139
. Re: 2007-08 Estimated Renewal Figures
Dear Cliff-
The City's Master Property Program renews on June 1, 2007. You have
requested we provide you with our best premium estimates for that renewal as
well as the Flood and Boiler & Machinery policies.
Master Property Program
As of this writing, . we believe that the program with Lexington Insurance
Company will be renewed with a flat rate. The City recently conducted a city
wide replacement cost appraisal of their buildings which resulted in an increase
of 9.35% in Total Insured Values. A comparison of the 06-07 versus the
estimated 07-08 renewal is as follows:
Rate
Total Insured
Value 1nV)
Premium
Citizens
Assesssment
6,84%
EMPA
Total Cost
q6-G! $~::~5 8~~~ated~~:~:9j
1=- $1>20:28i ~~~:;:V) =-==:}1.8~i.140_
$117,667 Florida Hurricane $18811
-~-- $8. :~::u~~ 1%__~~$8 .
m......._... I mm..._m......_+-...__m....... m.m'"
$1,837,9571 Total Cost ~,,---L-,_ $1,899,959
You will note that the figures above represent our best guesstimate of the
marketplace as of today. Many factors will have an effect on the final price and
limits available. We will continue to monitor the marketplace and advise of any
changes. Additionally, changes in the Cities loss experience and exposure
base(property values) can also positively or negatively impact the figures
8200 N W. 41sT Street. SUite 200
Mlal11i, FL 331 G6
I\Alln 306592 6080
Fa~ :30b tj924049
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You will also note that the 6.84% is not being charged. However the Florida
Hurricane CAT Fund assessment of 1% is being charged this year. This is a 1%
surcharge on all policies, except Workers Compensation, Accident & Health,
Medical Malpractice Liability, and NFIP Flood policies. The purpose is to place
dollars back into the Florida Hurricane CAT Fund, which was depleted after the
2005 storm season. Public Entities are not exempt from this assessment.
Flood Coverage
Your flood policies are currently placed with the National Flood Insurance
Program (NFIP) and have various renewal dates throughout the year. Total
policy premiums are currently $291,263. As of this writing, the rates are
relatively flat. However, please keep in mind that one of the underwriting factors
is the TIV of each building. Your building values have increased by 9.35
Therefore, if the rates remain flat, the renewal premiums would be approximately
$318,496.
Boiler & Machinery Coverage
The Boiler and Machinery marketplace is relatively stable. Last years premium
was $26,707. Assuming a 9.35% increase due to the value increase, the
estimated premium would be $29,204. This policy would be subject to the
Florida Hurricane CAT Fund assessment (1%) which is $293. Therefore, the
Total Estimated Cost would be $29,497.
Citizens Property Insurance Co.
You requested we provide you with various quotes for coverage placed with
Citizens. We randomly selected various City buildings and are providing the
following:
Bldg Name
~Uild~;i~i:~~ conte~~~~ - ~~::~~~6~~
-=- $1:O00'0~ .:-- $0 r==)2,354
L., $1,000,00.0 I ,,~._ $15,480
Muss Park Rec.
......._._...mm....
Tennis Center
...........__._..__._~.._-
S. Pointe Park Fac.
Rec. Center
The above are estimates of premium only and assume a 3% deductible. The
current maximum limit available from Citizen's is $1,000,000. This means that
for buildings with a value excess of $1,000,000 the maximum limit offered by
Citizens is $1,000,000. Additionally, there are many terms, conditions and
exclusions that are more restrictive than the City's current Master Property
Program. We will continue to explore this option if the City is interested in it.
Finally, the carriers are currently reviewing the City's submission. We are
exploring several options and will provide those to you as soon as they are
finalized. We expect to have the program completed by mid May. .
If you have any questions or wish to discuss further, please do not hesitate to call
me.
G
COMMISSION ITEM SUMMARY
Condensed Title:
Resolution authorizing the purchase of Flood, All Risk Property Insurance (including windstorm) and
Boiler Machine Insurance as ro osed b Arthur J. Galla her and Co., the Ci 's Broker of Record.
Ke Intended Outcome Su orted:
Improve the City's overall financial health and maintain overall bond rating.
Issue:
Prop~rty Insurance is necessary to protect the financial interest of the City. To qualify for FEMA aid,
the Ci is re uired to urchase maximum reasonable insurance available.
Item Summary/Recommendation:
The Administration recommends that Gallagher be directed to negotiate with the carriers for the best
possible coverage at the best possible premium and that the Mayor and City Commission authorize
the Administration to purchase additional Windstorm insurance if available and prudent, up to the
current budgeted amount of $2.9 million.
AdViSO~ Board Recommendation:
I Not Ap Icable
Financial Information:
Source of Amount Account Approved
Funds: 1 N/A 540.1792.000378 Property
Insurance (Self-Insurance
Fund)
D 2
3
4
aSPI Total
Financial Impact Summary:
Ci Clerk's Office Le islative Trackin
Mayra Diaz Buttacavoli
Si n-Offs:
Department Director
Assistant City Manager
City Manager
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MIAMIBEACH
AGENDA ITEM R 7 B
DATE~
(9 MIAMIBEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor David Dermer and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: April 11 , 2007
SUBJECT: . 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) AND
BOILER/MACHINERY INSURANCE FOR CITY BUILDINGS AND CONTENTS
(INCLUDING NEW CONSTRUCTION), FOR A ONE-YEAR PERIOD AS PROPOSED
BY ARTHUR J. GALLAGHER & CO., THE CITY'S BROKER OF RECORD.
ADMINISTRATION RECOMMENDATION:
Adopt the resolution.
ANAL YSIS:
The City's property insurance needs are covered by three policies: Flood, All Risk
(including windstorm) and Boiler/Machinery (equipment breakdown). The City relies on
FEMA to provide financial assistance for expenses and damages related to flood and/or
windstorm that are not covered by insurance.
The City has recently completed insurance value appraisals for all buildings requiring
insurance (68 locations). The appraisals are designed to meet insurance carrier
underwriting requirements (including Citizens). The total value for City buildings requiring
insurance is $544,000,000.00. This valuation reflects approximately a 9.35% increase
over the values used for 2006-2007.
The City utilizes the services of Arthur J. Gallagher and Co., (Broker of Record) to secure
property insurance. Annually, prior to policy expiration, the City directs Gallagher to
contact all available markets for property insurance quotes. We have attached the
estimated renewal figures from Gallagher.
The first coverage, Flood, is only offered through the National Flood Insurance Program.
The coverage limits are $500,000 for buildings and $500,000 for building contents with a
$5,000 deductible per location. The City purchases a separate Flood policy for each
location within the City. The individual policies renew from June 2007 through December
2007. The total annual premium for 2006-2007 was $291,263.00. It is expected that the
annual premium will increase to $318,496.00 for 2007-2008 as a result of increased
building values. To qualify for aid from FEMA for loss due to flood, the Act requires that the
City purchase available insurance.
City Commission Memorandum
May 11, 2007
Purchase of Property Insurance
Page 2 of 3
The second coverage, All Risk, can be purchased with or without Windstorm coverage.
With regard to FEMA's eligibility requirements for Windstorm, the City is required to
purchase coverage that is reasonably available. As a result of the 2005 storm season, the
premium cost for Windstorm coverage for 2006-2007 increased substantially with limited
insurance carrier availability (capacity). The amount of Windstorm coverage offered to the
City of Miami Beach reduced from $45,000,000 to $10,000,000. The total annual premium
for 2006-2007 was $1,837,957.00. This policy was offered by Lexington Insurance
Company. Lexington Insurance Company was the only carrier willing to provide primary
coverage for All Risk that included a Windstorm sub-limit.
Lexington has indicated that they will offer a renewal of this policy for 2007-2008.
Presently, they are the only carrier that has offering primary coverage with a Windstorm
sub-limit. It is expected that the total premium for the primary insurance will increase to
$1,899,959.00 as a result of increase building values. 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.
As a result of the limited capacity of windstorm coverage for 2006-2007, the Administration
was directed by the Mayor and Commission to research purchasing insurance for each
building through Citizens Property and Casualty Insurance Company. After researching, it
was determined that in order to obtain coverage from Citizens, current (less than a year
old). insurance property appraisals were required. Additionally, it was felt that current
appraisals would help establish value in the event of either an insurance or FEMA related
loss.
It should be noted that Citizens is the carrier of last resort and coverage if purchased
should be used to supplement any primary coverage that is reasonably available. The
attachment from Gallagher includes estimates of premium cost from Citizens for various
City buildings.
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. The premium for 2006-2007 was $26,707 with coverage provided by
the Travelers. We anticipate an increase in the area of 9.35% for an annual premium if
$29,497.00 for 2007-2008. This premium increase reflects the increase in building values.
With regard to the purchase of All Risk (including a Named Windstorm Sublimit), the
Administration recommends the City purchase the primary coverage offered by Lexington
Insurance Company and utilize the remaining funds authorized by the Mayor and City
Commission to negotiate and purchase additional Windstorm insurance (excess limits and
Citizens). The purchase of additional Windstorm limits will help minimize the City's
dependence on FEMA, provide additional funds for damage repair, and speed recovery in
the event of damage sustained from a major storm.
City Commission Memorandum
May 11, 2007
Purchase of Property Insurance
Page 3 of 3
In summary, the Administration recommends that Gallagher be directed to negotiate with
the carriers for the best possible coverage at the best possible premium and that the
Mayor and City Commission authorize the Administration to purchase additional
Windstorm insurance if available and prudent, up to the current budgeted amount of $2.9
million.
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