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Home My WebLink About2006-26200 Reso RESOLUTION NO. 2006-26200 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; Boiler/Machinery Insurance with Travelers Property Casualty Company of America; and WHEREAS, funding is available from the Self Insurance Fund Number 540.1792.000378. WHEREAS, the Administration was directed to research purchasing insurance for each building; WHEREAS, if this is not feasible, the Administration is authorized to buy $10 million worth of coverage, and buy additional coverage, if available with the remaining funds; WHEREAS, the City Commission authorizes the Administration, if prudent, to buy more coverage, if available. 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, II Ri k Property Insurance (including a Windstorm), and Boiler/Machinery Insura e or I City-owned buildings and contents (including new construction), for a one-ye r p ri s ~ oposed by Arthur J. Gallagher & Co., the City's broker of record. PASSED AND ADOPTED this 10th day of 'tfTjST:, () IU~O ~ ~J City Clerk Robert Parcher APPROVED AS TO FORM & LANGUAGE & FOR EXECUTION 5' I '::/.Q b e 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 Manage} 1--"< May 10, 2006 0 U SUPPLEMENTAL TO 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. DATE: SUBJECT: The Administration has reviewed with Arthur J. Gallagher and Co., the City's Broker who has advised that the premium cost for the primary layer of All Risk Property Insurance (including $10,000,000 in Named Windstorm Sublimit) will be approximately $1,525,000.00. Gallagher will attempt to place additional insurance with remaining funds available from the Budget. Agenda Item Date R7E f)-It) -()(p 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: Property 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 coverage if available and prudent, up to the current budgeted amount of $2.5 million. We anticipate having a preliminary estimate of the first level of coverage in time for the supplemental distribution. The remaining levels can be negotiated with an expected completion before the policy expiration which is May 31,2006. 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 OBPI Total Financial Impact Summary: Ci Clerk's Office Le islative Trackin Mayra Diaz Buttacavoli Si n-Ofts: Department Director Assistant City Manager City Manager ~ f tv J.t.v- T:\AGEN DA \2006\may1 006\Regular\P-1 NS06sum. doc tD ...,. MIAMI BEACH AGENDA ITEM DATE R7E. '5"-10-01::, ce MIAMI BEACH City of Miami Beach, 1700 Convention Center Drive, Miomi Beach, Florida 33139, www.miamibeachfl.gov COMMISSION MEMORANDUM TO: Mayor David Dermer and Members of the City Commission FROM: Jorge M. Gonzalez, City Manager (Wa,A.cL... ~ DATE: May 10, 2006 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. ANALYSIS: The City's property insurance needs are covered by three policies: Flood, All Risk (fire, explosion, lightning) and Boiler/Machinery (equipment breakdown). The predominant peril to City-owned facilities is storm related loss due to flood and/or windstorm damage. 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. Eligibility for FEMA reimbursement is Federally governed by the Stafford Act. The Stafford Act authorizes the President (FEMA per Executive Order) to provide financial and other forms of assistance to State and local governments, certain private nonprofit organizations and individuals to support response, recovery and mitigation efforts following Presidentially declared major disasters and emergencies. The Stafford Act describes generally the declaration process, the types and extent of assistance provided and fundamental eligibility requirements. To qualify for aid in case of loss due to flood, the Act requires that the City purchase the maximum insurance available. The City has complied with the mandate in the past by purchasing coverage from the only available source, Le., the National Flood Insurance Program. Limits are $500,000 for buildings and $500,000 for building contents. There is 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 2006 through December 2007. The total annual premium for 2005-2006 was approximately $280,000.00. No premium increase is anticipated for 2006-2007. 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. City Commission Memorandum May 10, 2006 Purchase of Property Insurance Page 2 of 5 As a result of the 2005 storm season, the premium cost for Windstorm coverage has increased substantially with limited insurance carrier availability (capacity). The City of Miami Beach is viewed as a high risk/exposure (island community) by the insurance market and as a result, Arthur J. Gallagher and Co., the City's broker of record (Gallagher) advises that many of the insurance carriers would rather offer available insurance capacity to lower risk/exposure clients (inland communities). Also, insurance carriers are unwilling to offer final quotes until just before renewal. The City currently purchases All Risk (this is a Primary/Excess layered program) with a Named Windstorm sublimit of $45,000,000. This Named Windstorm sublimit is made up of primary limits of $10,000,000 provided by Lexington and the balance, $35,000,000 made up of excess layers provided by Zurich Insurance Co., Nutmeg Insurance Co., Arch Specialty Ins. Co., Lloyd's of London/Glencoe, and Allianz Insurance Co. The total annual premium for 2005-2006 was $2,164,380.00. Gallagher following the City's direction, has identified a replacement program which is All Risk including Windstorm protection for both named and non-named storms. Lexington Insurance Company has indicated that they will offer a renewal of the primary coverage (Lexington is the only carrier willing to quote the City's primary layer). Lexington indicates a significant premium increase with probable change to the current deductible clause. With regard to excess layers, it is anticipated that renewals will be limited with significant premium increase. Additionally, the State of Florida has increased the Assessment/Premium Tax on all policies this year to offset reserve deficiencies for Citizens Insurance (Windstorm Pool). It is anticipated that with the premium increase, Premium Tax on windstorm coverage and additional premium for new construction, the cost of the City's program may increase by more than 100% for All Risk including Windstorm. It is unlikely that the final renewal will include the current sublimit for Named Windstorm of $45,000,000.00. The All Risk renewal includes an option to purchase Terrorism coverage. This coverage is very limited and does not respond to all types of terrorism. In the past the City has not elected to purchase this coverage. The third coverage, Boiler/Machinery provides coverage for property built to operate under a vacuum or pressure, or used for generations, transmission or utilization of energy (water pumps, A.C. units, generators). The City purchases this insurance due to the many locations that house this type of machinery/equipment. Damage sustained by machinery/equipment for breakdown is not currently reimbursable under any type of State or Federal program. The premium for 2005-2006 was $23,240 with coverage provided by the Travelers. We have reviewed with Gallagher and anticipate an increase in the area of 30%. It is important to understand that FEMA is not an insurance company. FEMA's policies, procedures, and administration are effected by political and bureaucratic factors that can retard responsiveness and/or reduce anticipated financial aid. Insurance companies, presumably, respond to claims pursuant to the contractual obligations imposed by the Policy. That distinction has increased relevance when disasters occur, recoveries are sought, and speed is important. While the Administration would prefer the City purchase all offered insurance, sound fiscal responsibility dictates that recommendations be based on "cost versus risk". Since storm City Commission Memorandum May 10, 2006 Purchase of Property Insurance Page 3 of 5 related loss is the predominant peril to City-owned facilities, the Administration does not recommend the purchase of Terrorism coverage. 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 excess Named Windstorm sublimits. In the event of a major disaster or multiple disasters (such as the Hurricane Season of 2005) it has become apparent that FEMA is unable to respond quickly and efficiently to the financial and overall recovery needs of both the Public and City Governments. The purchase of additional coverage 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. 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 coverage if available and prudent, up to the current budgeted amount of $2.5 million. We anticipate having a preliminary estimate of the first level of coverage in time for the supplemental distribution. The remaining levels can be negotiated with an expected completion before the policy expiration which is May 31,2006. T:\AGENDA \2006\May1 006\Regular\P-INS06.doc