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HomeMy WebLinkAbout97-22430 RESO RESOLUTION NO. 97-22430 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING THE RENEWAL OF PROPERTY INSURANCE AND FLOOD INSURANCE FOR ALL CITY-OWNED BUILDINGS AND CONTENTS, FOR A COMBINED ANNUAL PREMIUM OF $252,322, FOR A ONE-YEAR PERIOD, AS PROPOSED BY ARTHUR J. GALLAGHER & CO., THE CITY'S BROKER OF RECORD WHEREAS, the Administration has recommended the renewal of the current property insuranc e program with Royal Indemnity Company and flood insurance through National Flood Insurance Program fllr a total annual premium of $252,322; and WHEREAS, funding is available from the Self Insurance Fund Number 540,1790.000378; and NOW, THEREFORE, BE IT DULY RESOLVED THAT THE MAYOR AND CITY COMMISSIO~,I OF THE CITY OF MIAMI BEACH, FLORIDA, hereby approves the renewal of property insurance and floc j insurance for all City-owned buildings and contents, for a combined annual premium of $252,322, .'or a one-year period, as proposed by Arthur J. Gallagher & Co., the City's Broker of Record, PASSED AND ADOPTED this 18thday of ATTEST: R 0 ~ a-- -P D.AciuA- APPROVED AS TO FORM & LANGUAGE & FOR execunON City Clerk I I JGP: FiWB:CL:lsg f:\cmgr\$all & a:\Comm-mem.96\WIND-ins. '~7 CITY OF MIAMI BEACH CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH FLORIDA 33139 COMMISSION MEMORANDUM NO. ~ 0 R~ q '7 TO: Mayor Seymour Gelber and Members of the City Commission DATE: June 18, 19917 FROM: Jose Garcia-Pedrosa City Manager SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAn,,1II BEACH, FLORIDA, APPROVING THE PURCHASE OF PROPERTY INSURANCE AN) FLOOD INSURANCE FOR CITY BUILDINGS AND CONTENTS, FOR A COMBli'IIE) ANNUAL PREMIUM OF $252,322 (NET OF BROKER COMMISSIONS), FOR A ONE-YEA:~ PERIOD, AS PROPOSED BY ARTHUR J. GALLAGHER & CO., THE CITY'S BROKEn QI F RECORD. ADMINISTRATION RECOMMENDATION: Pass and adopt the attached resolution. BACKGROUND: In 1996, the City Commission awarded a one-year contract for Property Insurance to Royal Indenni y Company, a one-year purchase of Flood Insurance through the National Flood Program, and a one-ye;lr contract for Boiler and Machinery Insurance through Hartford Steam Boiler. The combined annual prerliu n was $284,684 (Net of Broker Commission). At that time, the City was presented with two options: 1. Purchase an all-risk policy with a maximum policy limit of $20,000,000. The policy contained ;3 2 (0 Windstorm deductible per building location (maximum of $5,2 per occurrence) and a $250,OCO.( 0 deductible per occurrence for all other perils. This option included purchasing flood insurance thr')u~ h the NFIP and purchasing coverage for Boiler and Machinery. Gallagher put together a layered proposal with a total premium cost of: Basic All-Risk Policy Package Flood Coverage from NFIP Boiler & Machinery $1,045,577 176,545 9.196 TOTAL ANNUAL PREMIUM $1,231,318 2. Purchase all-risk coverage (excluding wind), with a $100,000 deductible, NFIP flood coverage and Boiler and Machinery coverage for an annual premium of $284,684. This option self-insured tie windstorm exposure and provided an annual premium savings of $946,643 when compared 0 Option 1. Option 2 was recommended by the Administration and approved by the City Commission. contimed .. AGENDA ITEM Q~j- ~ - U.l:9l- DATE Commission Memorandum Page 2 June 18, 1997 ANALYSIS: We have obtained a current report regarding the Insurance Market from Arthur J Gallagher and Co. We hav~ also obtained current information from the Department of Insurance and the State of Florida Departmelt (If Community Affairs regarding eligibility for FEMA reimbursement. A. Market Analysis Gallagher contacted various companies on our behalf to obtain coverage and premium quotalior s to construct the best property insurance program available at this time. That effort revealed that: 1, A limited number of insurance carriers are willing to write wind insurance in Florida, 2, Premiums have increased substantially--from three (3) to ten (10) times dependin~ C 1 location and construction. 3. Deductibles for wind coverage have increased substantially. B. Eligibility for FEMA Reimbursement As indicated in the attached correspondence, we have received reaffirmation from the Departrnel! It of Insurance and the Division of Emergency Management that the City is not required to purcl1a~ e windstorm coverage as a precondition for disaster assistance from the Federal Emergenc y Management Agency. This is the case because the City did not receive such assistance relative I J losses experienced from Hurricane Andrew. There is no provision in the Stafford Act for FEN A I J impose insurance requirements prior to a disaster for facilities which have never received feeler II disaster assistance. C. Recommended Proposal from Arthur J. Gallagher & Co. (Option 1) Gallagher put together a layered proposal, with total premium costs of: Layer 1: All Risk including "Non-Named Storm Wind", Excluding "Named Storm Wind" and Flood. $5,000,000 Per Occurrence Layer 2: All Risk Including Wind, Excluding Flood. $5,000,000 Per Occ. Excess $5,000,000 per Occ. Layer 3: All Risk Including Wind, Excluding Flood. $15,000,000 Per Occ. Excess $$10,000,000 per Occ. Layer 4: All Risk Including Wind, Excluding Flood $15,000,000 Per Occ Excess $25,000,000 per Occ. $ 92,136 180,264 225,330 135.016 TOTAL ANNUAL PREMIUM $632,746 Deductibles: $100,000 Per Occurrence All Perils including "Non Named Storm Wind" covera~ e except 2% of Total Insured Value at damaged location on "Named Storm Wind" - $250,00C pl~r Occurrence minimum wind deductible - on Named Storms Wind Coverage only. Note: "Named Storm Wind Deductible- in the case of "Named Storm" wind loss, the 2% deductible and S 5 million self-insured layer will apply prior to any insurance reimbursement. continued .. Commission Memorandum Page 3 June 18,199" D. Alternate Proposal (Option 2) Gallagher also obtained proposals from companies to provide coverage which excludes wind and flood. Thii coverage is comparable to the City's present program. The best quotation received was from our currer t carrier, Royal Indemnity Company. Royal Indemnity Company is rated A-XII by A.M, Best. This proposal provides total coverage of $25 million per occurrence, subject to a $100,000 per occurre nc ! deductible. The annual premium is $102,514. There is an increase in premium of$3,571 due to an increas! in City property values. The coverage limits for each individual building are that buildings's replacement~O! t value (except the Convention Center and Theater, which are limited to $25 million each). This option would still require adding the flood coverage from NFIP. This would provide flood limils d $500,000 per building and $500,000 for building contents with a $5,000 per claim deductible. The anl1U<11 premium is $149,808. Last year's flood policies cost $149,150. The increase is due to a change in propertl values. The total annual premium for this option is $252,322. This options would require the City to self-insur!e it; windstorm exposure and rely on FEMA protection for a catastrophic windstorm losses, This proposal w:>ul j save approximately $530,232 in premium. CONCLUSION: The Administration has reviewed both options and is now recommending Option 2, This option provide; adequate insurance protection against all risks except windstorm. Under Option 1, windstorm losses w:>ul j have to exceed approximately $10.2 million before the City would receive any insurance payment. The lo:;ses under $10.2 million would first have to be paid by the City and then reimbursement would be requested:r0l1 FEMA. Under Option 2, FEMA would still be requested for reimbursement for losses under $10,2 milli,)n, The $632,746 premium for $35 million of coverage in excess of the deductible is a considerable expensH. Given the confirmations of eligibility for disaster assistance that we received from the Division of Emergenc ~ Management and the Department of Insurance, we believe that Option 2 represents a prudent and co,t effective risk management choice. The Boiler and Machinery coverage has already been renewed. FIJnC S are available in the Self Insurance Fund Account No. 540.1790,000378. /1 JGP:RWB:CL:lsg Attachments f:\cmgr\$all & a:\Comm-mem96\wind-lns.