2015-29021 Reso RESOLUTION NO. 2015-29021
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, TO ACCEPT THE FINANCE AND CITYWIDE PROJECTS
COMMITTEE'S APRIL 8, 2015, RECOMMENDATION TO APPROVE 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
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, the Administration has recommended the additional increase in Named
Windstorm insurance limit of $5 million to obtain a total of $20 million in Named Windstorm
coverage; and
WHEREAS, funding is available from the Risk Management budgets 540-1792-000378
($2,735,000), 540-1792-000390 ($53,000) and Park Department budget 480-0463-000343; and
WHEREAS, the City Commission authorizes the Administration to purchase the
forestated insurances, as proposed by Arthur J. Gallagher Risk Management Services, Inc., if
within budgeted funds; and
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), 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 P24 2015.
ATTEST: '••�.��..������v����i
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T:\AGENDA\2014\May\May 28 Items disk M�h'a�eme t. •; pit'� ��NGUAGE-
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44441,cH
City Attorney Date
COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution Of The Mayor And City Commission Of The City Of Miami Beach, Florida, To Accept
The Finance And Citywide Projects Committee's April 8, 2015, Recommendation To Approve 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:
IEnsure Expenditure Trends Are Sustainable Over the Long Term I
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., is in the process
of marketing the City's portfolio of property in the marketplace and obtaining various options to
renew the program with favorable terms and conditions, within the budgeted amount.
Based on the response that the City has received from the State of Florida, and in recognition of
the recommendation made by the Finance Committee on April 8, 2015, the Administration
recommends that the Mayor and Commission authorize an increase in the Named Windstorm
insurance limit of $5 million to obtain a total of $20 million in Named Windstorm coverage at an
estimated additional premium of $368,000, which is included in the FY2014/15 budget. It is also
recommended that the Mayor and Commissioners 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), through the City's Broker of Record, Arthur J.
Gallagher Risk Management Services, Inc., with a "not to exceed"amount of$2,798,000.
Advisory Board Recommendation:
N/A
Financial Information:
Source of Amount Account
Funds: 1 $2,435,000 540-1792-000378 Risk Management Fund
2 $53,000 540-1792-000390 Risk Management Fund
3 $310,000 480-0463-000343 Parking Depar=tn e,*
- Total $2,798,000
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Sonia Bridges, Risk Manager
Sign-Offs:
Department Director Assistant City Manager City MA`- r
SCT KGB
JLM
T:\AGENDA\2014\May 2014-056 MF Insurance Broker of Record-Summary.doc
0 MIAMIBEACH AGENDA MTEM R-1 DATE S (0-I c
M I AM I BEACH
City of Miami Beach, 1700 Convention Center Drive,Miami Beach, FL 33139,www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Honorable Mayor Philip Levine and embers o` he Ci Commission
FROM: Jimmy L. Morales, City Manager 4 11111
DATE: May 6, 2015
SUBJECT: A RESOLUTION OF THE MAYO AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, T ACCEPT THE FINANCE AND CITYWIDE
PROJECTS COMMITTEE'S APRIL 8, 2015, RECOMMENDATION TO
APPROVE 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
BACKGROUND
This item was presented at the April 8, 2015, Finance and City Wide Projects Committee
(FCWPC) meeting, and was passed to the full Commission with a recommendation for approval.
Over the last two years, the City has been updating its property insurance program to better
reflect its risk, as well as to comply with the State of Florida suggestion for preserving the City's
eligibility for Federal Emergency Management Agency (FEMA) relief under the Stafford Act, in
the event of a Named Windstorm. Updating the program has included adding properties
previously self-insured, and increasing Named Windstorm insurance limits where reasonable,
and within the City's budgetary constraints.
In order to be eligible receive FEMA funding, the City is required to present its property
insurance program to the State of Florida, Office of Insurance Regulation (via the Florida
Division of Emergency Management) every year and obtain a "reasonableness" letter. The City
received this letter for the June 1, 2013, policy year. At the same time and under separate
cover, the State advised the City to consider purchasing additional windstorm limits for next
policy year (June 1, 2014), although the State did not recommend a specific amount.
As to the actual amount of insurance coverage the City should carry, the prudent
recommendation is that the City continue with its risk management strategy which consists of
preserving its ability to obtain relief from the FEMA, under the Stafford Act, and possibly from
the State of Florida, in the event of a Federally-declared disaster, and purchasing Named
Windstorm insurance coverage. This recommendation translates into determining how much
money the City needs to be able to access immediately, in addition to the working capital in
place, to respond and recover from a tropical storm or hurricane. The Risk Management
Division will work with the Emergency Management Department to determine appropriate levels
of funds needed for immediate reconstruction of facilities critical to continuity of operations, in
addition to working capital needed to respond and recover from a tropical storm or hurricane.
We are committed to providing excellent public service and safely to all who live,work and ploy in our vibrant,tropical,historic community.
City Commission Memorandum
May 6,2015
Authorization to Purchase Insurance
Page 2 of 5
Based on the State's recommendation to increase the City's Named Windstorm coverage, the
Administration recommended at the June 20, 2014, FCWPC meeting to increase coverage to
$25 million, in increments of $5 million a year over the next 2-3 years, assuming the limits
continue to be available and reasonable. (See Attachment 1 — FCWPC Memo — June 20, 2014)
The FCWPC recommended the first increase of $5 million, which increased the windstorm limit
to $15 million for the June 2014 — May 2015 policy year. At the August 13, 2014, budget
briefing, the FCWPC recommended holding off on additional increases pending the state
department's response to the increase to $15 million coverage in 2014 and to instead allocate
the ad ditional premium monies sought to the Risk Management Fund - Contingency. (See
Attachment 2 — FCWPC Memo —August 13, 2014)
The City received its "reasonableness" letter for the June 2014 policy year. Once again, under
separate cover, the State advised the City to consider purchasing additional windstorm limits for
the policy year, again without recommending a specific amount. (Attachments 3 & 4) Therefore,
the Administration and the City's Risk Management Broker of Record are recommending the
purchase of an additional $5 million of Named Windstorm coverage (for a total of $20,000,000
windstorm limit) for the June 2015 - 2016 policy year, which results in the payment of additional
premium estimated at $368,000.
Renewal Recommendations for the June 1, 2015— May 31, 2016 policy year:
Below is a recap of each insurance policy and changes made during the current policy year
(June 2014-15) that will affect this year's estimated renewal premiums. (Also see Exhibit 1 —
Chart of Property Insurance Program Comparison (from policy year June 2013 to June 2015-
16).
All-Risk Property Insurance (including Boiler& Machinery):
• Proposed $5 million Named Windstorm coverage increase (taking the limit to $20
million), at an estimated additional premium of$368,000
• At the June 2014 renewal, the City added it's parking garages to the property program
using estimated values. Coverage for these garages was accepted by the City's primary
insurer; however, this was subject to the City providing the square footage and
appraised values of each garage as soon as it was known. The garages have been
appraised, the square footage is known and so are the insurable values. This
information, which resulted in an additional $50,022,123 in insured values has been
reported to our insurers
• The City acquired several residential properties valued at $13,748,844.
• The City added $2,800,000 in values for Fire Station #2 Administration Building that was
inadvertently omitted after it was renovated.
The City's current Total Insured Value is $936,855,291. This is a 9.8% increase over the June
2014-15 policy year. These changes are expected to generate a total cost (premium and
surcharges) not to exceed $2,370,000 (approximately $488,000 of this amount is to be allocated
to the Parking Department for the garages). The All-Risk property renewal includes an option to
purchase terrorism coverage which is very limited and has elected not to purchase this
coverage.
City Commission Memorandum
May 6,2015
Authorization to Purchase Insurance
Page 3 of 5
In addition to the All-Risk Property coverage, the City purchases Boiler & Machinery coverage
for property built to operate under a vacuum or pressure, or used for generators, transmission or
utilization of energy (water pumps, A/C units). The City purchases this insurance due to the fact
that many of its properties house this type of machinery/equipment. Damage sustained by
machinery/equipment for breakdown is not currently reimbursable under any type of State or
in coverage with a $10 thousand combined
Federal program. This policy provides $100 million g $
P 9 P Y
deductible.
Flood Insurance:
Flood insurance is offered through the National Flood Insurance Program (NFIP). To qualify for
aid from FEMA for loss due to flood, the Stafford Act requires that the City purchase flood
insurance from NFIP for eligible properties. The policy limits are $500,000 for buildings and
$500,000 for contents, with a $25,000 deductible.
Fine Arts:
The Fine Arts policy has historically provided property coverage for arts throughout the City, the
Bass Museum, and Art in Public Places. This policy provides coverage for all perils (All Risk,
Windstorm) for insured values. Underwriters at Lloyd's continue to offer a very favorable
program at a flat rate renewal, approximately $50,000. Additionally, the City has earned 'no-
claims" bonuses over the past several years.
EXHIBIT 1
Property Insurance(including Flood, Boiler&Machinery,and Fine Arts)
Policy Year Policy Year Interim Projected
6/1/2013 to 6/1/2014 to 6/1/2014 to 6/1/2015 to Comments
6/1/2014 6/1/2015 6/1/2015 6/1/2016
Increase in values
Total Insured Additional due to recent
Value(TI $685,247,222 $853,146,331 $66,570,967 $936,855,291 property appraisal
valuation,and newly
acquired properties
State recommended
Windstorm $15,000,000 the City to purchase
Limit $ 10,000,000 $ 15,000,000 unchanged $ 20,000,000 additional windstorm
coverage
All Other
Perils Limit $200,000,000 $350,000,000 $350,000,000 $350,000,000 No expected change
(AOP) unchanged unchanged to the AOP limit
Property
Increase in premium
Insurance
due to recent
(including
Boiler& $ 1,472,609 $ 1,919,389 $10,000 $2,002,000 property appraisal
valuation,and newly
Machinery)
acquired properties
Premium
City Commission Memorandum
May 6,2015
Authorization to Purchase Insurance
Page 4 of 5
Property Insurance(including Flood, Boiler& Machinery,and Fine Arts)
Additional
Premium for$5
$5MM
N/A $ 332,483 N/A $ 368,000 Million Windstorm
Windstorm (included above) limit increase
Premium
Anticipated 5% rate
Flood increase from the
Policies- $ 314,742 $ 360,000 N/A $ 378,000 NFIP, and additional
Premium policies for newly
acquired properties
Fine Arts Anticipate no change
Policy $ 44,005 $ 42,374 N/A $ 50,000 in values,and flat
Premium rate renewal
Premium includes
Total $2,321,763 $10,000 $2,798,000 Property, Boiler&
$1,837,351
Premium Machinery, NFIP
Flood& Fine Arts.
Policy Year Policy Year Interim Projected
6/1/2013 to 6/1/2014 to 6/1/2014 to 6/1/2015 to Comments
6/1/2014 6/1/2015 6/1/2015 6/1/2016
*The Parking Dept.
has$310,000
Risk budgeted for
FY2014/15; a budget
Management
Budget $2,735,000* transfer will be
FY2014/15 requested to cover
the $488,000
projected garage
premium
Note: The above cost projections are not confirmed by any insurers, and are for discussion
purposes only. Our broker is in the process of marketing our insurance, and will have more
concrete figures as we approach the June 1, 2015, renewal date.
RECOMMENDATION
Based on the response the City has received from the State of Florida, and in recognition of the
recommendation made by the Finance Committee on April 8, 2015, the Administration
recommends that the Mayor and Commission authorize an increase in the Named Windstorm
insurance limit of $5 million to obtain a total of $20 million in Named Windstorm coverage at an
City Commission Memorandum
May 6,2015
Authorization to Purchase Insurance
Page 5 of 5
estimated additional premium of$368,000, which is included in the FY2014/15 budget. It is also
recommended that the Mayor and Commissioners 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), through the City's Broker of Record, Arthur
J. Gallagher Risk Management Services, Inc., with a "not to exceed' amount of$2,798,000.
Attac ents
J LM/ B/SC-T
T:\AGENDA\2015\May\HUMAN RESOURCES\Memo-Property Ins Renewal 2015.docx
ATTACHMENT 1
AA I A Mi E AC 1-1
$Mlwitl Beech 1700.Convention Center Drive Miami Beach,FL 33139 . i t_
���� � e ►v�nnv m rim becrchri.gov
COMMITTEE MEMORANDUM
TO: Finance and City Wide Projects C mittee
FROM: Jimmy L. Morales, City Manager � ✓l'
DATE: June 20, 2014
SUBJECT: Proposed Actin Plan for Named i:ndatorm Insurance Limits
The City's property schedule ($863 million) represents a 100%•coastal exposure with no inland
spread of risk. The fact that the City of Miami Beach sits on a barrier island and is concentrated
within a seven square mile area means the City will be significantly impacted If a hurricane hits
in this area. This creates a challenge for the City in purchasing windstorm coverage, and for
Insurers who need to manage their aggregates in windstorm-prone areas.
The City of Miami Beach purchases Named Windstorm coverage to help recover from a tropical
storm or hurricane related damages. The amount has been partially based on the cost of
coverage (which fluctuates in hard and soft markets) and budgetary iimitations. in the past ten
years, the amount of Named Windstorm coverage purchased has ranged from $10 to $25
million, in excess of applicable deductibles. Since 2000, the limit has remained at $10 million,
approximately 1.17% of the total insurable value (Tiv). This compares to 41% of the TlV for all
other perils (A0P).
�. J. ' .• 1.t! put.,:ae. [OU 2004 to 0 4'
2004 to 2005-$26 million
2006 to 2007 -$10 million
2008 to 2009- $20 million
2009 to 2014- $10 million
in the 2008/09 policy year,.the City took advantage of a soft Insurance market and increased the
Named Windstorm limit from $10 to $20 million. However., prior to the June 2009 renewal; the
property insurance market hardened as a result of industry-wide undetwrlting losses in 2008,
and the weak investment climate. As a result, the estimated premium to maintain the same
level of coverage, with a slight increase in the deductible, was$1,843,304. It was then decided
to lower the. Named.Windstorm limit to $10 million and Increase the deductible in order to renew
coverage within the allocated budgetary resources. The renewal premium for this lower level of
coverage was$1,460,346.
On the 13th of May 2009,the City Commission passed Resolution 2009-27077 (Attachment 1)
authorizing the Administration to renew the insurance program for up to four additional one-year
terms, provided premiums did not exceed budgeted funds. Subsequently, the City has
maintained the $10 million policy limit.
FCWPC Memorandum
Proposed notion Plan for Named Windstorm insurance Limits
Page 2 of 3
June 20,2014
lam,
In the event a named tropical storm or hurricane causes severe damage to the City's property,
we will need an immediate infusion cal funds In order to recover and begin the rebuilding process
as quickly as possible. The Federal Emergency Management Agency (FEMA), and possibly the
State of Florida, typically provides disaster assistance to the City. However, to comply with
FEMA's eligibility requirements under the Stafford Act, the City is required to purchase Named
Windstorm coverage that is reasonably available.
In the past ten years, the City has received approximately $7.5 million In disaster relief from
FEMA. An estimated $3J5 million of this represents recovery for damage to physical locations,
and therefore is the amount that the City is committed to insure under the Stafford Mt. This is
important to keep in mind when considering a limit of insurance for windstorm.
Mother requirement to receive FEMA funding is to present your property insurance program
every year to the State of Florida, Office of Insurance Regulation, to obtain a "reasonableness"
letter. The City received this letter for the 201 3/14 policy year(Attachment 2), At the same time
and under separate cover, the State advised the City to purchase additional windstorm limits for
the 2014/16 policy year (Attachment'3). While the State did not recommend a specific amount,
Human Resources Risk Management staff, along with the City's Broker- of Record, is
recommending increasing the coverage level in $5 million increments at each renewal period,
as long as the limits are available and market conditions are reasonable.
CP saria. tifr t.• et .°t} . entities •rovided ti Cif.'s.P Op 4 .J:suraa. 00 _ bit
South.Florida South.florid? South Florida
Coastal School (A) Qo stal.County..1 ) astal.$dl f .)
roo
TIV $31.5,379,995 $12,224,099,312 $6,072 133,350
Windstorm Limit $2,500,000 (0.8%) $136,000,000 0.10%.) $110,000,000(1.81%)
glit__l ,ior1da South Florida i l for z
ga.stal chool.(D) aa..taj ou ty.(E) oga�tal Coul�t,�
TIV $7,933,690,322� ,yrryy ,g $2,049,228,338 r� t1 / $4,,685,,�040,6�98�r
Windstorm Limit $250,000.,000 (3. 5%) $80,000,000 (3,9%) $275,000,000(6%)
pout_Floriria
oastai City..(C)
TIV $500,000,000
Windstorm -Limit $35,000,000 (7%)
t o v-m— el 6 tit :Tn.:.•t o :
Fot ..a> k Tale .f~. mp no_13eaoh. Hialeah
Property TIV $248,296,333 $67,500,824 $250,000,000
�� a ti
AOP Limit $50 million (20.1 !o) $20 million (29,61x) $25 million (10%)
Windstorm Limit $60 million (20.1%) $10 million (14.8%) $25 million (10%)
gal l Qables fiyieca eaoh
Property TIV $209,201,816 $78,298,021
AOP Limit $209,201,816 (1:00%). $30 million (39.3%)
Windstorm Limit $25 million (12%.) $30 million (39,3%)
We ore m pr avidkv altar,)public:MINIM end.so*lo oil who 1J .work one ploy in ter v&nt tropical,historic communiy..
FCWPC Memorandum
Proposed Action Plan for Named Windstorm Insurance Limits
Page 3 of 3
June 20,2014
Motes
1) The percentages above represent coverage limits compared to the total Insurable value,
2) Property T1V for Fort Lauderdale and Pompano Beach does not include utility properties,
Remnivinittigo
It is therefore recommended that based on the State's recommendation to increase coverage,
and the Increasing value of our properties, should the aforementioned criteria be met, and in
keeping with the authorization granted by Resolution 2014—28612 (Attachment 4), adopted by
the City Commission May 28, 2014, the City should budget each year for$5 million in additional
coverage until the $35 million target Is reached or the state determines that the amount of
coverage is reasonable. For the 2014/15 policy year the City has received a non-bindable
annual premium indication of $335,000 (including State of Florida surcharges) to purchase an
additional$5 million of Named Windstorm coverage.
Attach ‘‘ nts
/''
JLM/K '4/SC-1/SS
F.\HUMAt$a(l\SYLVlA\FCWPC1Named Windstorm Increases FINAL 2.doo
We OM comsnined providing excellent pubhk service and safety toad who live,work and play in our%bcrn!lropicc 1,historic community
ATTACHMENT 2
MIAMI BEACH
City of Mimi Beech, 1700 Canventfan Center Drive,Miami Beach,FL 33139,www.mlamibeochfl.gov
COMMITTEE MEMORANDUM
TO: Finance and City Wide Projects Committee
FROM: Jimmy L Morales, City Manager ieSri
DATE: August 13, 2014
SUBJECT: Named Windstorm Coverage
Elapkaround"
The City of Miami Beach's property schedule is valued at $$53 million and represents a 100%
coastal exposure with no Inland spread of risk The fact that the City of Miami Beach sits on a
barrier island and is concentrated within a seven square mile area means that if a tropical storm
or hurricane hits ourarea,the impact on the City will be substantial.
The City's insurance broker analyzes the City's property portfolio in terms of wind exposure
using two different probable maximum loss (PML) models (RMS, a trademark of Risk
Management Solutions and Applied lnsuranoe Research, Inc. [AIRS). These are the same
computer models insurance companies use to measure their aggregated risk in certain
geographical areas.
The City of.Miami.Beech's property portfolio is perceived to generate risk as summarized In the
table below. The model, developed prior to the 2014 renewals, is based on the prior year's total
insured values (TIV) of$685 million before the addition of the parking garages to the City's
insured property schedule.
Critical Return AIR MODEL NMS MODEL
Probability Period Ground Op Gross Loss Ground Up Gross Loss
0.10% 1 000 $ 357,045,026 $ 305 124 273 $ 453 463 502 $ 416,801 353
0.20% 500 $ 282,959,658 $ 232 278,554 $ 361,389 806 $ 327 485 822
OAD%
_:,:11413.;i"
..114 .'S* 1 ;Griot. � '$., 1- Ti
1.,00% 100 135 607 613 $
90 551 276 $ 170,899 634 $ 146 283 428
2,00% $ 68 644,437 $ 33,731,.840 $ 101,808,053. .$ 77,862,144
5.00% 20 $ 22,817,600 $ 6,780 970 $ 30,689,077 $ 8,312,953
Average Annual Loss �$ 8,290,936 $ 3,228,200 $ 6,842,000 $ 4,820,252
Insurance companies and rating agencies use the 250-year. storm (0.4% probability of occurring
in any given year) as a benchmark for perceived risk to a property Insurance portfolio. Based on
that benchmark, the industry estimates the City's PML (the amount of catastrophic risk the City
adds to the carrier's portfolio) between $212 million and $275 million. However, it is not
reasonable to expect a City to insure for.a 250 year storm event; typically, jurisdictions rely on
FEMA (Federal Emergency Management Agency)for that type of event..
The City purchased $16 million of coverage and insurance companies anticipate that as the
result of a medium to large windstorm event, the City will sustain damage well in excess of this
We ore.catirrtittsci ro proyidIrkg emelle,t public gervice and safely Po d8 who live,work and ploy in our vibrant,ha?pical,historlrr:fomtrway.
FCWPC•Memorandum
Named Windstorm Coverage
Page Z of'5
August'13,2014
amount and price coverage•accordingly. The City needs to determine how much cash it will
need to have access to immediately after a storm and the insurance companies need to decide
how mush coverage they can afford to sell and at what price to entities located in wind-prone
areas which will, sooner or later, result in payments to the insured party. These are among the
challenges faced by the City In purchasing Named Windstorm coverage, and the insurers, who
need to manage their aggregate exposure in wind-prone areas. Of the 26 Insurers that our
broker approached in 2014, only five submitted responsive quotes.
The City has a risk management strategy to help recover from tropical storm or hurricane
related damages, which consists of preserving its ability to obtain relief from the FEMA, under
the Stafford Mt, and possibly from the State of Florida, in the event of a Federally-declared
disaster, and purchasing Named Windstorm insurance coverage.
Obtaining relief from the Federal or State government could be a multi-year process,which may
require significant efforts on the part of the City to obtain funds, Additionally, under the Stafford
Act, the City is required to purchase Insurance on its buildings and contents for the amount and
perils) for which It has already received funds from FEMA. Therefore, the City must purchase,
at a minimum, Named Windstorm coverage to fulfill its FEMA obligation, as well'as to have a
ready and secure source,of funds, In the event of a tropical storm or hurricane. Over the past
ten-plus years, the City received approximately $7.8 million in disaster relief from 'FEMA. An
estimated $3.75 million of this represents recovery for damage to physical locations, and
therefore is the amount that the City is committed to insure under.the Stafford Act.
The -cost of,coverage (which fluctuates in hard and soft markets) has been a factor in the
amount of coverage the City has been purchasing, In the past 10 years, the amount of Named
Windstorm coverage purchased has ranged from $10 ,Hilo,, to $,25 million, in excess of
applicable deductibles. Until 2014, the limit had remained at. $10 million (approximately 1.46%
based on $685 TIV at the time). This compares to 41% of the TIV for all other perils (AOP). In
2014, the City decided.to Increase this limit, from $10 million to $•15 million but at the same time
added the parking garages to the insured property schedule ($15 million In coverage is
approximately 116% of the TIV), as part of an effort to obtain Incrementally higher limits over
time
t
atiel, A '.cis •ra, I its!tiro,: =« fP, !o o s 4 a • s n .t i '•As .
$20 1i'�'°"°'`"——a+"'— .- 51tx1.r crM r� Ja,d ' •,'_r'.f+ .i� i , ° a it, s r v"„ 3� t ;f as i5.i?
$16 b X55 i;_ y� + t fa.; '-�;
. t. 4 i r Y 3.
i~` tea:3 f r� x pt '�k}� 5 xA .,
i •4-1 h• ; s1 her iy a AT + mb .
St 4 Y , t
2005 2006 2007 2CoS 2009 2010 2011 2012 2013 2014
FEWPC Memorandum
Named windstorm Coverage
Page 3.of5
August 1I 2014
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2005 2006 2007 2008 2008 2010 2011 2012 2013 2014
in the 2008/09 policy year, the City took advantage of a soft insurance market and increased the
Named Windstorm limit from $10 to $20 million. However, prior to the June 2009 renewal, the
property insurance market hardened as a result of industry-wide- underwriting losses In 2008,
and the weak investment climate. As a result, the estimated premium to maintain the same
level of coverage, with a slight Increase in the deductible, was $1,843,304. The Named
Windstorm limit was lowered to $10 million and the deductible increased to renew coverage
within the allocated budgetary resources. The renewal premium for this lower level of coverage
was$1,460,346.
At the May 13, 2009 meeting, the City Commission passed Resolution 2009.27077 authorizing
the Administration to renew the Insurance program for up to four additional one-year terms,
provided premiums.did not exceed budgeted funds. Subsequently, the City maintained the $10
million policy limit until 2014.
At the June 11, 2014 Commission meeting, subject to review and authorization by the Finance
and Citywide Projects Committee, the Commission authorized the purchase of an additional $5
Million of Named Windstorm coverage through Resolution No. 2014-28023. i
in the event a named tropical storm or hurricane causes severe damage to the City's,property,
the City will need an immediate infusion of funds to recover and begin the rebuilding process OS
quickly as possible. FEMA, and possibly the State of Florida, typ icall y
provides disaster
assistance to the.City. However, to comply with FEMA's eligibility requirements under the
Stafford Act, the City is required to purchase Named Windstorm coverage that is reasonably
available.
in addition to the $3,75 million In coverage minimum, to receive FEMA funding the City is
required to present its property insurance program every year to the State: of Florida, Office of
Insurance Regulation (via the FL Division of Emergency Management)., to obtain a
"reasonableness"letter, The City received this letter for the 2013/14 policy year(Attachment 1),
At the same time and under separate cover, the State advised the City to purchase additional
windstorm limits for the 2014/15 policy year (Attachment 2), although the State did not
recommend a specific amount,
FCWPC Memorandum
Named Windstorm Coverage
Page 4 Or 5
August 13,2014
«'t:a Coale!. a" -Vol
At the City's request, its broker of record provided Information on the TIV and windstorm limits in
other coastal entities in Florida.
�.W` •�� . art fence .1
oir: [e f�l� tlti.• .rov dad� t ,� r o
south_.Ficrida ,outh..lb1•vie a. south:Florida
Coastaleohool.:(A1 coastal Coastal Sohppl(C1
TIV $315,879,995 $12,224,099,312 $8,072,133,359
Windstorm Limit $2,5o0,c0o(0.8%) $135,0:00,000(1`,10%) $110,000,000(1.81%)
South.Ptortd j South Florida . outhl.Plprida,
�/ coastal:$ohoo,I (l ). Coastal County..( CosstaLC_oun u,( .
TIV $7,933,890.,322 2,049,220,338 $4,585,040,698
Windstorm Limit. $280,000,000(3.15%) $80,000,000(3.9%) $275,000,000(5%)
80421,BPrida
Coastal_Qlty_1 )
TIV $500,000,000
Windstorm.Limit $35,000,000 (7%)
The coverage decisions made by those entitles do not automatically turn Into a recommendation
th-at the City of Miami Beach act similarly since differences between:entities need to be taken
into aunt, if the City was to insure at levels similar to coastal City IV, this would result In an
insurance level of$48 million.
In addition to.the information provided by our insurance broker, the City's Risk Management
Division also researched.insurance levels in neighboring cities,
f • BSd g. . "0 = [n en ± t :*:=e A. "s. 113 2.4!"// • {[0..w. ..11
li)ASOUrW 041210716d
Port Lauderdale Pormoarto Peach iaJaleah
Property T1V $248,296,333 $67,509,324 $250,000,000
AOP Limit $50 million (2001%) $20 million (29.6%) $25 million (10%)
Windstorm Limit $50 million (20.1%) $10 miilton (14.8%) $25 million (10%)
Ctaral__,abl.es R .ier :eaoh
Property TIV $209,201,816 $76,298,021
AOP Limit. $209,201.,816(100%) $30 million(39.3%)
Windstorm Limit .$26 million (12%) $30 million (.39.3%)
Notes
-1) The percentages above represent coverage limits compared to the total insurable value
2) Property TIV'far:Fort Lauderdale and Pompano Beach does not include utllltypropertles.
1 CWPC Memorandum
Named Windstorm Coverage
Riga$of 6
August 13,2014
BoOprnmerniatiori
Based on the State's recommendation to increase the City's Named Windstorm coverage* the
Administration recommended increasing funding coverage to $25 million, Increasing the amount
by $5 million per year over three years, assuming the limits continue to be available and
reasonable. The$25 million in coverage is within the range of the probable maximum loss for a
20-year storm ($2s million- $31 million).
As to the actual amount of insurance coverage the City should carry,. the prudent
recommendation is that the City continue with Its risk management strategy which consists of
preserving its ability to obtain relief from the FEMA, under the Stafford Act, and possibly from
the State of Florida, in the event of a Federally-declared disaster, and :purchasing Named
Windstorm insurance coverage. This recommendation translates Into determining how much
money the City needs to be able to access Immediately, In addition to the working capital in
place; to respond and recover from a tropical storm or hurricane. The Risk Management
Divisl`ori will work with the Emergency Management Department to determine appropriate levels
of funds needed for immediate reconstruction of facilities critical to continuity of operations, in
addition to working capital needed to respond and recover from a tropical storm or hurricane.
Attaohments
JIM/KGB/SC-7
P:\HUMA\4011\SYLVIAVCWPC\NAMED WIND STORM INCREASES-AUGUST 2013,doc
i
B rATE OF FLORIDA
DIVISION OF EMERGENCY MANAGEMENT
RICK scow 'BRYAN W KOOK
Governor Wow
r
March 14,2014
Ms..Sonia Bridges,.Risk Manager
Oily of Miami Beach
1700 Convention Centers Drive
Miami Beath, Florida Wag I f
Re: City of:Miarni Beach(2 14)
Insurance Reasonableness Determination Requested
Dear Ms.Bridges:
Please find attached the datemilnatIon tlie 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,"
pp
E li
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 y ou have any questions or require additional Information,,please contectSteven.
Hyatt State Public Assistance Offioer,via email at,fit.s+ n ; ar unvf ddi or by
phone at(850)4874660,
Sincerely,
ev l
State Public Assisten Officer
Soh
At nente Determination of the State Insurance Commissioner
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This t i to 1 aVid •. n's lona dated Jay 19,2013,in o it was mood
that the Office of Insuranos R n ice)way ate nreoxseneblesess" e
wiretap for the Muni ,� � ' -, h U on 9r • that tbz
�OfM! Yi �1. . .. .�procuring i ._ � �#o ie,"
Hof oh: • . an entail co�o w
. firths s'e,i%.1'd "..9°1141y/ear,r Thre o&ang them fi'- a d 1y,
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is to moot the
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Florida Inatome Cot*the program tabs been selected appeals to be ttessonable
4'3eYerttittve*eh the Mate*fibs Florida in 2013.
tie Mike c a n be r assistance,pl o-do not hesitate to co at'
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Wick! a Sonia
From: Christy,Virginia EVirginle,Christy lofr.00m)
Sent: Thursday, Marroh 00,2014&04 PM
To: Bridges,.Sonia
Subject: 138641.13 City of Miami Beaoh;Rtsasonabisness Determination:
Ms.Bridges,
We have fished the review of the above referenced request from your office to c ert1f the°reasonableness"of the
property insurance program for the City of Miami Beach=A letter has been sent to the Department of Emergent
Management It Is recommended.that the city look into higher Named Windstorm thrifts for the coming policy year.
Virginia A.Christy
Assident General Counsel
Office of Insurance Regulation
Division of LegsfServices
200 East Games Street
Tallahassee,FL 32899-4206
Phone:850412-4220
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ATTACHMENT 3
Bridges, Sonia
From: Holton, Leonard [Leonard.Holton @floir.com]
Sent: Monday, November 24, 2014 3:00 PM
To: Bridges, Sonia
Subject: reasoableness of coverage determination.
Ms. Bridges,
The Office of Insurance Regulation has finished the review of the reasonableness of the insurance coverage for the City
of Miami Beach.The coverage appear to be reasonable based on the current market conditions. It is recommended that
the city continue to look into higher Named Windstorm limits for the coming policy year.
A letter will be sent to the Department of Emergency Management regarding the review. DEM should be in touch with
you in the near future.
Leonard Holton
Assistant General Counsel, Legal Services Office
Florida Office of Insurance Regulation
•
1
ATTACHMENT 4
ASO:4-1,1,4
•
STATE O F FLORIDA F
DIVISION OF EMERGENCY MANAGEMENT
RICK SCOTT BRYAN W.KOON
Governor Director
January 14, 2015
Ms. Sonia Bridges, Risk Manager
City of Miami Beach
1700 Convention Center Drive
Miami Beach, Florida 33139 j
Re: City of Miami Beach (2014-2015)
Insurance Reasonableness Determination Requested
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
9 p p
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 Bridgette
Hallum, Public Assistance Coordinator, via email at Bridgette.Hallum(a�em.mvflorida.com or
by telephone at(850)413-9809.
Sincerely,
Bry- Lowe Cry
State Public Assistance Officer ry cf)C.)
rn
•
BL/bh -7-43"'
3 r13
s
Attachments: Determination of the State Insurance Commissioner r
DIVISION HEADQUARTERS • • STATE LOGISTICS RESPONSE CENTER
2555 Shumard Oak Blvd Te1:850-413-9969•Fax:85.0-488-1016 2702 Directors Row
Tallahassee, FL 32399-2100 www.FlorldaDlsaster.orn Orlando, FL 32809-5631
. !X11' /• "\.,iito.„.,,,,
., „; ,.,,:,)„,:,,i arc FINANCIAL.SERVICES
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�r.lt , N `"'{,; COMMISSION
•
•.• -,,,„4_4,4t),.-.-
•. X /! . ►;' �; : im,7,s;„,=!,qt
RICK SCOTT
%i V:I ifr GOVERNOR
OFFICE OF INSURANCE REGULATION CHIEF FINANC AL OFFICER i
PAM BONDI
ATTORNEY GENERAL
KEVIN M.MCCARTY ADAM PUTNAM
COMMISSIONER COMMISSIONER OF
AGRICULTURE
December 11,2014
Bryan Lowe
State Public Assistance Officer
Division of Emergency Management
2555 Shumard Oak Blvd
Tallahassee, Florida 32399-2100
Dear Mr. Lowe:
This letter is in response to Steven Hyatt's request dated September 17,2014, 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, Florida. 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 2014.
If the Office can be of further assistance,please do not hesitate to contact us.
Sincerel e.
414/,
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evin M. McCarty ... M rrA
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KEVIN M.McCARTY•COMMISSIONER ....4 j 3
200 EAST GAINES STREET• TALLAHASSEE,FLORIDA 32399-0305 • (850)413-5914 • FAX(850)488.3334
WEBSITE:WWW.FLOIR.COM • EMAIL:KEVIN.MCCARTY@FLOIR.COM
Affirmative Action/Equal Opportunity Employer