2016-29444 Reso RESOLUTION NO. 2016-29444
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, ACCEPTING THE FINANCE AND CITYWIDE
PROJECTS COMMITTEE'S RECOMMENDATION OF MAY 20, 2016, AND
APPROVING THE PURCHASE OF FLOOD INSURANCE; ALL-RISK PROPERTY
INSURANCE, INCLUDING WINDSTORM (WITH ADDITIONAL NAMED
WINDSTORM LIMIT OF $5 MILLION); BOILER & MACHINERY INSURANCE FOR
CITY BUILDINGS AND CONTENTS (INCLUDING NEW CONSTRUCTION); AND
FINE ARTS INSURANCE (BASS MUSEUM AND OTHER LOCATIONS), AS
PROPOSED BY ARTHUR J. GALLAGHER RISK MANAGEMENT SERVICES, INC.,
THE CITY'S BROKER OF RECORD; SAID PROPERTY INSURANCE PROGRAM
COVERING THE PERIOD FROM JUNE 1, 2016 THROUGH MAY 31, 2017, FOR A
TOTAL COST NOT TO EXCEED $1,824,891.
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 and Starr Specialty Lines; Boiler & Machinery Insurance with Travelers, and Fine
Arts Insurance with Lloyds of London (the "Property Insurance Program"); and
WHEREAS, on May 20, 2016 the Finance and Citywide Projects Committee accepted
the Administration's recommendation to bind the Property Insurance Program, covering the
period from June 1, 2016 through May 31, 2017, at a not to exceed amount of$1,874,621; and
WHEREAS, on May 31, 2016, the Administration bound coverage for the Property
Insurance Program (pending approval of the $5 million additional Named Windstorm limit) with
the following confirmations:
Carrier: Lexington 75%; Starr Specialty Lines 25%
Total Insured Value: $601,153,520
Loss Limits: Named Windstorm - $20,000,000
All Other Perils - $150,000,000
Business Income/Rents - $17,452,230
Deductibles: Named Windstorm—7.5% subject to a
minimum of$1,000,000
All Other Perils - $100,000
Valuation: Real and Personal Property - Replacement
Cost
Business Income/Rents—Actual Loss
Sustained
Primary Property Insurance w/Named $1,162,504
Windstorm Premium (75%):
Primary Property Insurance w/Named $387,516
Windstorm Premium (25%):
Boiler& Machinery: $12,345
Fine Arts: $37,526
Total Cost (without the Additional $5 Million $1,599,891
Named Windstorm Limit):
Additional $5 Million Named Windstorm $225,000
Limit:
Total Program Cost with $25 Million Named $1,824,891
Windstorm Limit:
WHEREAS, the Administration recommends that the Named Windstorm insurance limit
be increased by $5 million to obtain a total of$25 million in Named Windstorm coverage; and
WHEREAS, funding for the Property Insurance Program, including the additional $5
million Named Windstorm insurance coverage, is available from the Risk Management budgets
540-1792-000378, 540-1792-000390, and Parking Department budget 480-0463-000343; and
WHEREAS, the Administration recommends the approval of the purchase of the
Property Insurance Program, including the additional $5 million Named Windstorm insurance
coverage, from Arthur J. Gallagher Risk Management Services, Inc., the City's broker of record,
for a total cost not to exceed $1,824,891, from existing 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 accept the Finance And Citywide Projects Committee's recommendation of
May 20, 2016, and approve the purchase of Flood Insurance; All-Risk Property Insurance,
including Windstorm (with additional Named Windstorm limit of $5 million); Boiler & Machinery
Insurance for City buildings and contents (Including new construction); and Fine Arts Insurance
(Bass Museum and other locations), as proposed by Arthur J. Gallagher Risk Management
Services, Inc., the City's broker of record; said Property Insurance Program covering the period
from June 1, 2016 through May 31, 2017, for a total cost not to exceed $1,824,891.
PASSED AND ADOPTED this • day of Taff 2016.
ATTEST:
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COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution Of The Mayor And City Commission Of The City Of Miami Beach, Florida,
Accepting The Finance And Citywide Projects Committee's Recommendation Of May 20,
2016, And Approving The Purchase Of Flood Insurance; All-Risk Property Insurance,
Including Windstorm (With Additional Named Windstorm Limit Of $5 Million); Boiler &
Machinery Insurance For City Buildings And Contents (Including New Construction); And
Fine Arts Insurance (Bass Museum And Other Locations), As Proposed By Arthur J.
Gallagher Risk Management Services, Inc., The City's Broker Of Record; Said Property
Insurance Program Covering The Period From June 1, 2016 Through May 31, 2017, For A
Total Cost Not To Exceed $1,824,891.
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., 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 FY15/16 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 May, 20, 2016, 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 $25 million in Named Windstorm coverage at an
estimated additional premium of $225,000, which is included in the FY2015/16 budget. It is also
recommended that the Mayor and Commissioners approve the purchase of 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$1,824,891.
Advisory Board Recommendation:
N/A
Financial Information:
Source of Amount Account
Funds: 1 $2,556,425 540-1792-000378 Risk Management Fund
4J3 2 $53,000 540-1792-000390 Risk Management Fund
3 $362,821 480-0463-000343 Parking Department
Total $2,972,246
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Sonia Bridges, Division Director, Risk & Benefits
Sign-Offs:
Deartment Director Assistant City Manager City nager
SCT '-j MT JLM Li `
T:WGENDA\2014\May\RFQ 2014-056 MF Insurance Broker of Record-Summary.doc
I
MIAMIBEACH AGENDA ITEM R ,
DATE Es
MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive,Miami Beach, FL 33139,www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Philip Levine and Members f the City ommission
FROM: Jimmy L. Morales, City Manager
DATE: June 8, 2016
SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, ACCEPTING THE FINANCE AND CITYWIDE
PROJECTS COMMITTEE'S RECOMMENDATION OF MAY 20, 2016, AND
APPROVING THE PURCHASE OF FLOOD INSURANCE; ALL-RISK
PROPERTY INSURANCE, INCLUDING WINDSTORM (WITH ADDITIONAL
NAMED WINDSTORM LIMIT OF $5 MILLION); BOILER & MACHINERY
INSURANCE FOR CITY BUILDINGS AND CONTENTS (INCLUDING NEW
CONSTRUCTION); AND FINE ARTS INSURANCE (BASS MUSEUM AND
OTHER LOCATIONS), AS PROPOSED BY ARTHUR J. GALLAGHER RISK
MANAGEMENT SERVICES, INC., THE CITY'S BROKER OF RECORD; SAID
PROPERTY INSURANCE PROGRAM COVERING THE PERIOD FROM JUNE 1,
2016 THROUGH MAY 31, 2017, FOR A TOTAL COST NOT TO EXCEED
$1,824,891.
ADMINISTRATION RECOMMENDATION
Adopt the resolution
FUNDING
The annual cost associated with the property insurance program, including windstorm, boiler &
machinery, and fine arts insurance, is subject to the allocation of funds in the City's Fiscal Year
2016/17 operating budget.
BACKGROUND
The Florida property insurance market continues to remain soft, with significant capacity
creating competition among carriers to provide insurance for catastrophic exposed property.
During this soft market, the City has been updating its property insurance program to better
reflect our risk, as well as to comply with State of Florida suggestions for preserving our
eligibility for Federal Emergency Management Agency (FEMA) relief under the Stafford Act, in
the event of a hurricane.
The City of Miami Beach requests from the Florida Division of Emergency Management (DEM),
on an annual basis, a determination of the reasonableness of the City's property insurance
program. This is done to preserve the City's ability to obtain funding from the FEMA in the
event of a hurricane that is declared to be a federal disaster. In 2014, DEM provided a
determination that the City's program was reasonable. However, they also suggested that the
We are committed to providing excellent public service and safety to all who live, work and ploy in our vibrant,tropical, historic community
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 2 of 5
May 20th,2016
City "continue to look into higher Named Windstorm limits for the coming policy year." Based on
the State's recommendation to increase the City's Named Windstorm coverage, the
Administration recommended at the June 20, 2014, Finance and Citywide Projects Committee
("FCWPC") meeting to increase coverage by $5 million per year to a total of $25 million over
the next 3 years, assuming the limits continue to be available and reasonable (Attachment 1).
The City purchased $5 million in additional Named Windstorm limits for the 2014-15 policy year.
At the April 8th, 2015 FCWPC meeting, a recommendation was made and the City purchased an
additional $5 million in windstorm limits, bringing the total Named Windstorm limit to $20
million.(Attachment 2).
In June of 2015, FEMA issued a revised guideline for public assistance which has significantly
changed the process for obtaining waivers for facilities that have insurance obligations. The
new process requires that FEMA issue any waivers of insurance commitments, but requires a
certification from the Insurance Commissioner's office that the insurance coverage obtained is
"reasonable". The Florida Insurance Commissioner's office has not issued any determinations of
"reasonableness" for programs submitted to them in 2015. Our broker, Arthur J. Gallagher
(AJG), is working with the Insurance Commissioner's office as to the need for these waivers,
and to help establish a uniform process for submitting programs to DEM and FEMA for the final
waiver of the insurance commitments.
For the June 1, 2016 — May 31, 2017 Policy Period:
During this policy year the total insured values (TIV) was reduced from $941,506,866 to
$601,290,280, due to the removal of the Miami Beach Convention Center (MBCC), which is
being insured under a separate property program while under renovations (December 2015 —
August 2018). The MBCC is the City's largest single structure, valued at approximately $335
million. The RMS (a trademark of Risk Management Solutions) modeling represents one of the
current best practices in prediction of windstorm losses and is vital to appropriate pricing of
property insurance in Florida. Because of the reduction in TIV, the City's probable maximum
loss (PML) also reduced from $325 million to $153 million. While this is a significant reduction,
the PML remains well above the $25 million Named Windstorm limit that the City is seeking to
purchase with the Commission approval. (See PML chart below.)
RMS 2015 RMS 2016.
Critical Return with Convention Center without Convention Center
Prob. Period Ground Up Gross Loss Ground Up Gross Loss
0.10% 1,000 $550,376,047 $501,924,955 $289,692,124 $259,350,260
0.20% 500 X431.380.639 x389.191.566 $215,396,015 $189,655,482
0.40% 250 $324,835,905 $287,364,376 $152,918,674 $131,574,048
1.00% 100 $202,092,563 $171,488,067 $89,183,264 $74,024,788
2.00% 50 x123,013,029 $95,986,050 $53,085,488 $40,877,639
5.00% 20 $40,840,880 $17,317,178 $18,380,240 x9,396,981
AAL $8,511,043 _ $6,061,424 $3,975,527 $2,837,835
•
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 3 of 5
May 20'h,2016
Renewal Efforts by AJG for 2016/17 Policy Period:
Beginning in March 2016, AJG approached the property & casualty market (more than thirty-
four carriers) in an effort to obtain comprehensive and cost effective quotes for the City's
property insurance program renewal. AJG received multiple quotes and presented the best
offers to the City for review and recommendation.
At the May 20, 2016 FCWPC meeting, there was a discussion regarding the quotes for the June
1st renewal, including an option to increase the Named Windstorm coverage by $5 million, and
temporarily reducing the All Other Perils limit from $350 million to $100 million, while the
Convention Center is under construction and currently not a part of the property insurance
program.
The options submitted to the City and provided to the FCWPC members are as follows:
2015-2016. 2016-2017
Ex•irin! Renewal O•tion I Renewal O•tion II
$350M AOP $100M AOP $100M AOP
$20M Named Storm $20M Named Storm $25M Named Storm
Property $2,150,500 $1,600,000 $1,825,000
Boiler and Machinery $17,732 $12,345 $12,345
Fine Arts $39,812 $37,256 $37,256
Total Before Fees $2,208,044 $1,649,601 $1,874,601
Citizens Assessment(1.0%) $21,505 SO $0
EMPA Surcharge $12 $20 $20
Total Program Costs $2,229,561 $1,649,621 $1,874,621
The FWCPC accepted the recommendation to bind coverage for Option II for the June 1st
renewal, at a not-to-exceed amount of $1,874,621. On May 31, 2016, the City bound coverage
for the property insurance program (pending approval of the $5 million additional Named
Windstorm limit) with the following confirmations:
Carrier: Lexington 75%; Starr Specialty Lines 25%
Total Insured Value: $601,153,520
Loss Limits: Named Windstorm - $20,000,000
All Other Perils - $150,000,000
Business Income/Rents - $17,452,230
Deductibles: Named Windstorm—7.5% subject to a
minimum of$1,000,000
All Other Perils - $100,000
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 4 of 5
May 20'",2016
Valuation: Real and Personal Property - Replacement
Cost
Business Income/Rents—Actual Loss
Sustained
Primary Property Insurance w/Named $1,162,504
Windstorm Premium (75%):
Primary Property Insurance w/Named $387,516
Windstorm Premium (25%):
Boiler & Machinery: $12,345
Fine Arts: $37,526
Total Program Cost (without additional $5 $1,599,891
Million Named Windstorm:
Additional $5 Million Named Windstorm $225,000
Limit:
Total Program Cost with $25 Million Named $1,824,891
Windstorm Limit:
Flood Insurance:
The City maintains individual flood insurance policies through the National Flood Insurance
Program (NFIP) on most of its eligible properties. Flood coverage is excluded from the property
insurance program, and the FEMA will not provide flood assistance for a loss in the amount that
could have been purchased from the NFIP. The flood insurance market is yielding a rate
increase of approximately 10%. The NFIP policies are subject to a $10,000 or $25,000
deductible. We will consider selecting higher deductibles, up to $50,000 on each of the flood
policies in order to obtain lower flood premiums.
Boiler and Machinery (B&M):
In addition to the property insurance policy, the City purchases coverage for boilers and other
pressure vessels, fired and unfired, as well as machinery or electrical apparatus. The City's
B&M coverage has historically been provided by Zurich; however, Zurich has announced that
they are exiting the market for this line of coverage. The City received a favorable quote from
Travelers, with a 3% reduction in premium and coverage was bound as follows:
Limit: $250 Million, with various sub-limits
Deductible: $10,000
Fine Arts:
This policy provides coverage for art that is displayed in various locations throughout the City.
Historically, Underwriters at Lloyds has provided favorable flat rates, with "no-claims" bonuses
over the past several years. Again, a favorable rate was obtained from Lloyds for this renewal
period, with a 6% reduction in premium.
Insurable Value: $28,866,637
Deductible: $5,000
Other Coverage Considerations for the 2016/17 Policy Period:
Crime Insurance:
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 5 of 5
May 20th,2016
Currently, the City has coverage solely for employees in the finance department at City Hall.
Risk Management has evaluated the program and determined that coverage should be
extended to better reflect the City's true exposure. The City has submitted an application to
expand the Crime coverage to include coverage to all City employees at all City locations.
Cyber Liability:
Due to the proliferation of cyber-attacks, and data breaches experienced by entities across the
country, many governmental entities are concerned with this risk. Cyber Risk insurance can
provide a suite of services to help the City mitigate this risk, respond appropriately, and defend
itself in the event of a lawsuit. The City is completing the application.
The City will continue to explore coverage for Crime and Cyber and was directed to report back
to the FCWPC when pricing was made available.
Recommendations:
Based on the response that the City has received from the State of Florida, and in recognition of
the recommendation made by the FCWPC at the May 20, 2016 meeting, to continue purchasing
additional Named Windstorm limits (if available and within budget), the Administration is
recommending that coverage is bound as described above, including the increase to the Named
Windstorm limit of $5 million, bringing the total Named Windstorm limit to $25 million. The
renewal premium for property, boiler and machinery, and fine arts coverage is $1,824,891. The
City will continue to explore the other coverage options, Cyber Risk, Crime expansion and
report back to the FCWPC when pricing is available.
Attachments
JLM/MT/SC-T
ATTACHMENT 1
1\/\ IA/\A1
City of Miami Booth, 1700 Convention Center Drive,Miami Beach,FL 33139,www.miamibeachf.9ov
COMMITTEE MEMORANDUM
TO: Finance and City Wide Projects C mittee
FROM Jimmy L. Morales, City Manager
DATE: June 20, 2014
SUBJECT: Proposed Action Plan for Named indstorm Insurance Limits
Background
The City's property schedule ($853 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 limitations. 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 2009, the limit has remained at $10 million.
approximately 1.17% of the total insurable value (TIV). This compares to 41% of the TIV for all
other perils (AOP).
Named Windstorm limits purchased from 2004 to 2014:
2004 to 2005 - $25 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 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. 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 131" 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 Nlerrorandum
Proposed Action Plan for Named Windstorm insurance limas
Page 2 of 3
June 20,2014
Analysis
in the event a named tropical storrn or hurricane causes severe damage to the City's property,
we will need an immediate Infusion of 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 33.75 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. This is
important to keep in mind when considering a limit of insurance for windstorm.
Another 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 2013/14 policy year(Attachment 2). At the same time
and under separate cover, the State advised the City to purchase additional windstorm limits for
the 2014/15 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.
Comparison to governmental entities,provided by We City's property insurance consultant
South Florida South Florida South Florida
Coastal School(Al Coastal County(B) Coastal School (C)
TIV $315,379,995 312,224.099,312 $6,072,133,359
Windstorm Limit 32,500,000 (0.8%) $135,000,000(1.10%) $110,000,000(1.81%)
South Florida South Florida South Florida.
Coastal School(D) Coastal County 1E) Coastal County(9
TIV $7,933,590,322 $2,049,228,338 54,585,040,698
Windstorm Limit $250.000,000(3,15%) $80,000.00(3.9%) $275,000,000•(6%)
South Florida
Coastal City(G)
TIV $500,000,000
Windstorm Limit $35,000,000(7%)
a4dkiona/comparison to qoyemmentaIeptities,provided.by The.Risk.ManaQemer,?Division
Fort Lauderdale Pompano Beach Hialeah
Property TIV $248,296,333 $67,509,324 $250,000,000
AOP Limit $50 million(20.1%) $20 million(29.6%) $25 million (10%)
Windstorm Limit $50 million (20.1%) $10 million(14.8%) $25 million,(10%)
Coral Gables Riviera Beach
Property TIV $209,201,816 $76,298,021
AOP Limit 3209,201,816(100%) $30 million (39.3%).
Windstorm Limit $25 million(12%) $30 million(39.3%)
WO cur carrn irJ o orovid rg meritrr;p ri+r *are aro szioy n a+v Ac.i o wx1 unaa,uy r.to oi+arn.+jai;halt r . -,,,,v.
FCWPC Memorandum
Proposed Action Plan for Named Windstorm Insurance Limits
Page 3 of 3
June 20,2014
Notes
1) The percentages above represent coverage limits compared to the total insurable value.
2) Property TIV for Fort Lauderdale and Pompano Beach does hot include utility properties.
Recommendation
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-bindabie
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 = C-T/SB
F W UMAtsaln5YLV1AIFCWPC*arned Windstann Increases Prim.Zdoc
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RESOLUTION NO. 200.9-27077
A RESOLUTION OF THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH,
FLORIDA, APPROVING THE PURCHASE OF FLOOD
INSURANCE, AU. RISK PROPERTY INSURANCE
(INCLUDING WINDSTORM), AND BOILER/MACHINERY
INSURANCE FOR CITY BUILDINGS AND CONTENTS
(INCLUDING NEW CONSTRUCTION), AND FINE ARTS
INSURANCE (BASS MUSEUM), AS PROPOSED .BY
ARTHUR J. GALLAGHER RISK MANGEMENT
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 as the primary layer and
Boiler/Machinery Insurance with Zurich-America and Fine Arts Insurance with Uoyds of
London; and
WHEREAS,funding Is available from the FY 2008-09 Risk Management Claims
Account Numbers 540.1792.000378 and 540.1792X000390 ($1,816,000 for All
Rislc/Wind and Flood,$53,000 for the Fine Arts)and FY 2009-10 Proposed Budget Risk
Management Claims Account No. 540.1792.000378 for Flood ($81,000); 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 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), and Boiler/Machinery Insurance for all City-owned
buildings and contents (including new construction), and Fine Arts Insurance (Bass
Museum), as proposed by Arthur J. Gallagher&Co., the City's'broker of record.
PASSED AND ADOPTED this 13th day of May. 2009.
a, or Matti er era Bower
• ATTEST APPROVED AS To
FORM&LANGUAGE
City Clerk Robert Percher a CU
1 v4
•
!NA •T
STATE OF FLORIDA
DIVISION OF EMERGENCY MANAGEMENT
RICK SCOTT BRYAN W.KOON
Governor Dinacter
March 14,2014
C
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Ms. Sonia Bridges, Risk Manager z
City of Miami Beach r„m
1700 Convention Center Drive
Miami Beach, Florida 33139 m
<,
,-rfn
Re: City of Miami Beach (2013-2014) ^.'
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
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:Hvattlaem.mvflorida.con1 or by
phone at(850)487-1660.
Sincerely,
Steven
17V
State Public Assistance Officer
SH/bh
Attachments: Determination of the State Insurance Commissioner
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March 7.2014
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State Public Assistance Officer
Division of Emergency Management
2555 Shumard Oak Boulevard
Tallahassee,Florida 32399-2100
Dear Ms.Pe lo:
This letter is in response to David Me rill's letter dated July 19,2013,in which it was requested
that the Office of Insurance Regulation(Offiee)certify the"seasonableness"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 insurarkce 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 tray not be subject to Chapter 627 of the
Florida Insurance Code,the pro that has been selected appears to be"reasonable"and
competitive gives the state of the Florida insurance market in 2013.
If the Office can be of further assistance,please do not hesitate to contact us,
Kevin M. M 71=
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RESOLUTION NO. 2014.2861.2
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
(5,,975,000) and 540-1792-000390(553,000); 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 broke-of record,
PASSED AND ADOPTED this o't$' day of 1Q 2014:
ATTEST-
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Raf I Granado, City �. .��' k —'�fy.('; hilip -vi• ayor
APPROVED AS TO
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&FC)R EXECUTION
4LO, 1,■- 14/111—
City Anotney AT Date
ATTACHMENT 2
h A. 1 A ) BEAcH
City of Marna Bench, 1700 Convention Center Drivo,Miami Heath, ?"t 33!39, www,rniamihenchil.gov
COMMITTEE MEMORANDUM
TO: Finance and City Wide Projects Committee
FROM: Jimmy L. Morales, City Manager/0 cx
DATE: April 8. 2015
SUBJECT: Discussion Regarding A Resolution 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
Background
Over the last two years. the City has been updating its property insurance program to better
reflect our risk, as well as to comply with State of Florida suggestions for preserving our
eligibility for FEMA relief under the Stafford Act, in the event of a hurricane. This includes adding
properties that were previously self insured, as well as increasing insurance limits where it is
reasonable, and within the City's budget.
In order 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 June 2013 policy year. At the same time and under separate cover, the State advised the
City to consider purchasing additional windstorm limits for the June 2014 policy year), 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
Based on the State's recommendation to increase the City's Named Windstorm coverage, the
Administration recommended at the June 20, 2014, Finance and Citywide Projects Committee
(FCWPC) meeting to increase coverage by $5 million to $25 million 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 Committee recommended the first increase of $5 million
up to $15 million for the June 2014 — May 2015 policy year, looking to reach the target of $25
million. At the August 13. 2014. budget briefing, the FCWPC recommended holding off on
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 2 o14
April 8,2015
additional increases pending the state department's response to the increase to $15 million
coverage in 2014 and to instead include the additional premium in the Risk Management Fund -
Contingency. (See Attachment 2— FCWPC Memo —August 1,3, 2014).
For the June 1, 2015—May 31, 20.16 policy year:
The State has once again recommended that the City consider purchase additional windstorm
limits (Attachments 3 & 4). We are recommending the purchase of the additional $5 million of
named windstorm coverage (for a total of$20,000.,000 windstorm limit) for the June 2015-2016
policy year, which is additional premium estimated at$368,000.
Additional Changes to the Property Program since August 13„2014 FCWPC Meeting
In 2014, prior to the City's parking garages being appraised, the City added these locations to
its statement of values, using estimated values. Coverage for these garages was accepted by
the City's primary insurer, however, this was subject to our providing the square footage of each
garages as soon as it was known. As We have now had the garages appraised, we know the
square footage, as well as the insurable values, and we have reported this information to our
insurers.
During the June 201415 policy period, the following property insurance changes have occurred:
▪ $13,748,844 in values was added mid-term due to the acquisition of several residential
properties. These values were accepted by the Insurance companies at no additional
cost to the City.
• The City is adding $2,800,000 in values for Fire Station #2 Administration Building. This
building was formerly vacant, but is now in use-and:must be insured. The value we are
using is preliminary, as this building its scheduled to be appraised later this year. The
addition of this building was expected to generate an additional premium of
approximately$1,500; however this amount is being waived (see below).
•. As indicated above, the City will now be reporting the square footage and appraised
values for the parking garages. This has added an additional $50,022,123 in insured
values, and this was expected to generate an additional premium of approximately
$98,500 on the primary property program, however this amount is being waived (see
below)
Due to the City's long term relationship with our insurer, and through the work of our broker, we
are happy to repo_ rt that our primary insurer has agreed to waive this $100,000 In premium:
Instead, we are requesting approximately $10,000 to cover the cost of the City's excess
property and Boiler & Machinery Insurance.
Additional funding of approximately $10;000 may become due for the June 2014-15 policy
period to cover premium'to the Boiler & Machinery carriers, and. the Excess Property carriers.
Part of this premium is generated from the Parking Department.
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 allocable to the parking department
garages). The total amount needed for 2015 is estimated not to exceed: $2,798,000 (includes
Boiler&Machinery, NFIP Flood, and Fine Arts insurance).
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 3 o1.4
April 8,2015
Property Insurance (including Flood, Boiler&Machinery,and Fine Arts)
Policy Year Policy Year I Interim Projected
6/1/2013 to 6/1/2014 to 6/1/2014 to 6/1/2015 to
6/1/2014 6/1/2015j 6/1/2015 i 611/2016 Comments
Increase in values
due to recent
Total property appraisal
Insured Additional valuation,and newly
Value(TIV) $685,247,222 $853,146,331 $66,570,967 $936,855,291 acquired properties
State recommended
the City to purchase
Windstorm $15,000,000 additional windstorm
Limit $ 10,000,000 $ 15,000,000 unchanged $ 20,000,000 coverage
All Other
Perils Limit $350,000,000 $350,000,000 No expected change.
(AOP) $200,000,000 $350,000,000 unchanged unchanged to the AOP limit
Increase in premium
due to recent
Property property appraisal
Ins. valuation,and newly
Premium , $ 1,472,609 $ 1,919,389 $10,000 $2,002,000 acquired properties
Additional
$5MM Premium for$5
Windstorm I Million Windstorm
Premium N/A � $ 332,483 N/A $ 368,000 Limit increase
Anticipated 5%rate
increase from the
Flood NFIP, and additional
Policies- policies for newly
Premium $ 314,742 $ 360,000 N/A $ 378,000. acquired properties
Fine Arts Anticipate no change
Policy in values,and flat
Premium $ 44,005 $ 42,374 N/A $ 50,000 rate renewal
r
Premium includes
Property, Boiler&
Total Machinery, NFIP
[Premium $1,837,351 $2,321,763 $10,000 $2,798,000 Flood &Fine Arts.
FCWPC Memorandum
Named Windstorm Insurance Limit
Page 4 of 4
April 8.2015
Policy Year I Policy Year Interim Projected
6/1/2013 to 6/1/2014 to 6/1/2014 to 6/1/2015 to
6/1/2014 6/1/2015 6/1/2015 6/1/2016 Comments
'The Parking Dept.
has $310,000
budgeted for
Risk Mgmt. FY2014/15;a budget
and transfer will be
Parking requested to cover
Dept. the $488,000
Budget projected garage
FY2014/15 $2,620,000` 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 our renewal date of June 1, 2015..
The other property coverage that will renew June ‘15, is the Fine Arts coverage. The City has
historically insured art that is displayed in various locations•throughout the City. Underwriters at
Lloyd's continue to offera very favorable program at a flat rate renewal, approximately $50,000.
Additionally, the City has earned no-claims bonuses Over the past several years.
Recommendation
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 in August 2014, the Administration is
recommending 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.
Attachments
JLM/KGB/SC-T
C:\Users\humabris\Documents\sonloeridges\FCWPC•Named Windstorm in Limit.docR