2000-23942 RESO
RESOLUTION NO.
2000-23942
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, FOR A COMBINED ANNUAL PREMIUM
OF $686,081.00 (NET OF BROKER COMMISSIONS), FOR A
ONE-YEAR PERIOD, WITH AN OPTION TO RENEW FOR
TWO (2) ADDITIONAL YEARS, PROVIDED THE ANNUAL
RATE DOES NOT INCREASE BY MORE THAN TWENTY
PERCENT (20%), PER YEAR, AS PROPOSED BY ARTHUR
J. GALLAGHER & CO., THE CITY'S BROKER OF RECORD.
WHEREAS, as proposed by Arthur 1. Gallagher and Co., the City's broker of record, the
Administration has recommended the purchase of Flood insurance, with the National Flood
Insurance Program for a total annual premium of $170,000; All Risk property insurance (including
windstorm) with Allianz Insurance Company, for a total annual premium of $500,486.00; and
Boiler/Machinery insurance with Hartford Steam Boiler, for a total annual premium of $15,595.00;
for a combined annual premium of $686,081.00; and
WHEREAS, funding is available from the SelfInsurance Fund Number 540.1790.000378;
and
NOW, THEREFORE, BE IT DULY RESOL VED THAT THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, hereby approves the purchase
of Flood Insurance, All Risk Property insurance ( including windstorm), and Boiler/Machinery
insurance for all City-owned buildings and contents, for a combined annual premium of $686,081.00
for a one-year period, with option to renew for two additional years, providing rate increases of no
more than twenty percent (20%) per year, as proposed by Arthur J. Gallagher & Co., the City's
broker of record.
PASSED AND ADOPTED this 24th day of
May
,2000.
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A;f"EST:
L 0 lL0td'
ity Clerk
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APPROVED AS TO
FORtv\ & I.)t.J"GUA(3E
&. FOR EXECUTION
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CITY OF MIAMI BEACH
PROPERTY IBOllER & MACHINERY
RENEWAL PROPOSAL
June 1, 2000 - June 1, 2001
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PRESENTED BY:
ARTHUR J. GALLAGHER & CO. - MIAMI
NATIONAL PUBLIC ENTITY AND SCHOLASTIC DIVISION
JORI L. VAN DER VOORT, ARM
ACCOUNT EXECUTIVE
GREGORY S. BUTTERFIELD, CPCU. ARM
AREA PRESIDENT
LISETTE M. de DIEGO
AREA ASSISTANT VICE PRESIDENT
GARY M . VAN DER VOORT
AREA CHAIRMAN
ELLEN COLSON
SENIOR ACCOUNT MANAGER
May 5. 2000 - Revised
IMPORTANT: This proposal is an outline of the coverages proposed by the insurers, based on the information
provided by your company. It does not include all terms, coverages, exclusions, limitations, conditions of the actual
contract language. The policies themselves must be read for those details. Policy forms for your reference will be
made available upon request.
Koger Executive Center, 8300 N.W. 53'd Street - Suite 350 - Miami, FL 33166
Phone: 305-592-6080 Fax: 305-592-4049
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CITY OF MIAMI BEACH
TABLE OF CONTENTS
EXECUTIVE SUMMARY
1
PROPERTY PROGRAM
2
BOILER & MACHINERY PROGRAM
3
BEST RATINGS & AJG DISCLOSURES
4
City Miami Bch-2000-01
EXECUTIVE SUMMARY
SECTION 1
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CITY OF MIAMI BEACH
EXECUTIVE SUMMARY
ABOUT YOUR BROKER - ARTHUR J. GALLAGHER & CO.
4th largest broker in the United States and the World
A public company traded on the New York Stock Exchange
Over 200 offices throughout the United States and in all major insurance market
centers
Over $2 billion worth of premiums placed Worldwide
4,300 employees worldwide linked together by Gallagher Online for immediate
access to market information and client solutions
Known nationally as the Public Entity and Scholastic experts
OUR FLORIDA PUBLIC ENTITY AND SCHOLASTIC POSITION
Largest broker for Individual/Pooled Self Insured Programs for Public Entities and
Schools
AJG is known for its commitment to public entity clients from a time in the past
when no one was interested in serving the public entity marketplace
AJG handles more Florida Public Entity and Scholastic Major Property Schedules
than any other broker
A long list of well known satisfied clients serve as our best credentials
· 51 Florida Cities
· 20 Florida County Governments
· 62 Florida County School Systems
· 28 Florida Community Colleges
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
EXECUTIVE SUMMARY
SOUTH FLORIDA PROPERTY MARKET STATUS (As OF APRIL 2000):
~ Catastroohic losses over the past several years have severely impacted the
property marketplace. Last year's storm season was the second most expensive
year in insurance history. Only in 1992, the year of Hurricane Andrew, were
catastrophic losses higher. Underwriting guidelines have now shifted from
growth, at any price, to underwriting profit.
~ The markets showed clear signs of change in early 2000, AD,;I has shown weeklv
almost dailv tightening as we approach the opening of hurricane season.
~ Windstorm preoccupies 95-98% of the marketplaces underwriting attention and
pricing.
~ All carriers have greatly reduced appetite for new business. Many carriers are
exiting coastal exposure business particularly South Florida.
~ Renewal carriers are all looking for premium increases ranging from 10-15 %, 25-
50%, and even 100,200 and 300% increases depending on the "aggressiveness"
and "bottomed out" expiring program.
~ Renewal carriers are also moving up windstorm deductibles as a percentage of
total values.
~ Our extensive "property based" public entityleducational client list is attached.
All of these clients are feeling the impact of the rapidly changing Florida property
market. Particularly, the large, highly concentrated South Florida accounts.
How THE INSURANCE MARKET VIEWS YOUR EXPOSURES:
1. 100% High Concentrated Property: Large Property Schedule,100% South
Florida coastal risk, NO inland spread of risk, 100% of property is exposed to
wind and considered coastal.... almost waterfront property.
2. Loss Limit - Wind Limit is absolutelv within the 100% loss limit. In a direct hit
storm, the $25,000,000 limit is 100% exposed. Markets expect to payout the
entire $25,000,000 limit in a medium to large size wind storm. Therefore, their
pricing must reflect the exposure.
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
3. Probable Maximum Loss - Your Probable Maximum Loss (PML) will range from
$85,000,000 to $170,000,000 (or 25% to 50% of your Total Insurable
Values). Currently, you purchase wind coverage up to $25,000,000 (or 7% of
your TIV). We stronalv urae the City to consider purchasing higher limits of
wind coverage.
4. Hurricane Andrew -The $1,500,000 damage the City incurred from Hurricane
Andrew is considered peripheral damage and is NOT a benchmark for
considering the expected loss from a medium to large windstorm. Hurricane
Andrew directly hit areas approximately 20 miles south of Miami Beach. All
carriers expect the City to sustain damage within the PML in a medium to large
windstorm.
RENEWAL NEGOTIATIONS:
In early March 2000 we discussed with you your expectations for the June 1,
2000 property renewal. You indicated that based on market conditions, you were
hopeful that the program would renew with no more than a 10% increase from
Allianz Insurance Company.
We discussed your anticipated renewal with the carriers and thought this would be
a realistic request. However, as April drew closer, it became quite obvious that the
current program would not renew within your requested threshold.
We developed a standard set of underwriting specifications based on the
information you provided and approached the following carriers on the City's
behalf. The results from this market solicitation is as follows:
MARKETING SUMMARY
CARRIER: QUOTED/DECLINED COMMENTS
Allianz Underwriters Ins. Company Quoted Primary Layer and TIV
excess of 20MM
American Custom (Agricultural Ins. Quoted $5MM Excess of $15MM
Co.)
Lexington Insurance Company Quoted $5MM Excess of $5MM
L10yds of London Quoted $5MM Excess of $10MM
American Empire S/L Ins. Co. Declined Pulled out of Florida Market
1 11 100
American Underwriting Managers, Quoted On as reinsurance of Allianz
Inc (Fulcrum).
Chubb Custom Declined Not interested in Class
Commonwealth Ins. Co. Declined No new capacity for South
FL Exposures
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
CARRIER: QUOTED/DECLINED COMMENTS
Essex Ins. Co. Declined Due to exposure and
attachment
First State Management Group Declined Due to attachment and not
(Pacific) really a big municipal player
Gerling America Insurance Company Declined Not interested in Class
Great American Insurance Declined Not interested in Florida
Companies Wind business unless high
excess on a large schedule
Hartford Specialty Insurance Declined Due to exposure and
Company attachment
Programme Underwriters (TIG Non-Renewed Due to exposure and
Specialty) attachment, but willing to
attach excess of $ 50mm
RLI Insurance Company Declined Not interested in class or
attachment
Royal Specialty Underwriting, Inc. Declined Not interested - wants to
be excess of $100mm
Transnational Ins. Co. Declined No Florida Capacity
Gulf Ins. Declined Not interested in
attachment point and
exposures
Westchester Specialty Group Declined Wants multiples of primary
pricing offered and not
interested in buffer layers
Wausau Declined Would only consider excess
of PML and excluding wind
ACE USA Declined Not interested in
attachment or pricing for
exposures
Coregis Declined Not interested in
attachment or pricing for
exposures
Glencoe Insurance Co. Declined Not interested in
attachment or pricing for
exposures
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
Loss HISTORY
DATE OF Loss AMOUNT DESCRIPTION
8/24/92 $1,500,000 Hurricane Andrew
1995 $200,000 est. Water Damage at Convention Center
1995 $500,000 subrogated Fire at old City Hall
9/26/99 $137,577 Fire at South Pointe Facilities
6/8/99 $200,000 est. Combined Property/Boiler & Machinery
HISTORICAL PROPERTY VALUES & RATES
YEAR TIV RATE
98-99 $300,439,805 .0915
99-00 $295,439,805 .0931
00-01 $342,952,182 .1459
PROPOSED RATE
PROPERTY RENEWAL PROGRAM:
The terms and conditions of your renewal program presented are consistent with
the current South Florida property market.
)0> Named Windstorm deductible is 2 %of damaged locations(subject to a maximum
of $5,000,000 and a minimum of $250,000) in lieu of the extremely
competitive $1,500,000 deductible we negotiated previously.
This is quite favorable considering underwriters initially wanted the Named
Windstorm deductible to reflect 2% of the Total Insured Value ( or
$6,800,000).
)0> All other perils deductible, including non-named windstorm remains at $50.000.
)0> Allianz Insurance Co. will provide primary $5,000,000 layer. Last year, they
provided primary $7,500,000.
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
~ Total Limit of Insurance is $342,952,182 subject to policy terms, conditions,
exclusions and sublimits.
~ $25,000,000 Named Windstorm (less deductible) will continue. Any non-named
windstorm will be covered up to the policy limit.
~ Flood will continue to be excluded.
~ Your Total Insured Values are $342,952,182. This is a 16% increase from last
year.
~ Based on the City's exposure to severe windstorm losses, The City of Miami
Beach should stronglv consider purchasing more wind coverage, up to your
PML.
~ Renewal Premium: $500,486
OPTIONAL LIMITS OF INSURANCE:
~ We are currently in the marketplace to provide an option of $25,000,000
excess of $25,000,000 for Named Windstorm coverage. This would provide
the City with total Named Windstorm Limits of $50,000,000.
As of today, we have a market lead indication of $5,000,000 (or 20%) part of
$25,000,000 for $35,000. If we were able to fill out the remainder of the layer
at the suggested pricing, the total layer would cost $175,000. However, this
layer is not filled and suggested pricing could increase. Therefore, we expect
the premium for this layer to be a least $175,000 and no more than $250,000.
We expect to have the finalized premium for this layer by the end of next week
(5/12/2000).
BOilER AND MACHINERY RENEWAL PROGRAM
~ All policy terms, conditions and exclusions will remain as expiring except for
the following enhancements:
Business Income/Extra Expense limit has been increased from $1,000,000
to $5,000,000
Demolition and Increased Cost of Construction limit has been increased from
$500,000 to $1,000,000
Newly Acquired Locations limit has been increased from $250,000 to Policy
Limit ($100,000,000); subject to 365 days rather than 30 days.
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
~ Current carrier, Hartford Steam Boiler will be splitting the estimated $200,000
pumping station 1055. Hartford Steam Boiler expects to pay the City of Miami
Beach approximated $100,000.
~ Boiler and Machinery Coverage is also experiencing tightening. For accounts
with good 1055 history, carriers are looking for a rate increase between 5-10%.
~ As a result of the 1055, Hartford Steam Boiler will be increasing renewal
premium from $9,150 to $15.595.
City Miami Bch-2000-01
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PROPERTY PROGRAM
SECTION 2
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CITY OF MIAMI BEACH
PROPERTY PROGRAM RENEWAL
FOR
JUNE 1, 2000 - JUNE 1, 2001
Carrier(s) Per Property Program Page
Best's Rating Per Property Program Page
Policy Form Current Policy form, with necessary updated for 2000/2001
1-----
Coverage/TIV All Risk of direct physical loss or damage, including windstorm,
excluding flood, based upon TIV of $342,952,182
Valuation Replacement Cost - No Co Insurance
limit of liability $342,952,182
Sublimits Included in the limit of liability, not in addition to the limit
Named Windstorm $25,000,000 per occurrence
Earthquake $10,000,000 per occurrence and annual aggregate
Newly Acquired Property $5,000,000 per occurrence / 90 day reporting
Builder's Risk $5,000,000 per occurrence / 90 day reporting
Ordinance or Law $5,000,000 per occurrence
Business Interruption $4,000,000 per occurrence (Only at Theater - $1,500,000,
Convention Center - $2,500,000)
Extra Expense $1,000,000 per occurrence
Transit $250,000 per occurrence
Personal Property at $250,000 per occurrence
Unscheduled Locations
Rental Value $250,000 per occurrence
EDP Equipment/Datal $150,000 per occurrence
Media
EDP Extra Expense $150,000 per occurrence
Personal Property at $100,000 per occurrence
Exhibition
Pollution Clean Up and $25,000 per occurrence
Removal
Expediting Expenses $25,000 per occurrence
Debris Removal $5,000,000 per occurrence not to exceed the greater of 25%
of the combined amount of direct physical damage and time
element
Deductible( s) Named Windstorm: 2 % of the latest reported value of insured
property at the location where the loss occurs, subject to a
$250,000 minimum deductible/$5,000,000 maximum
deductible
All Other Perils: $50,000 per occurrence
City Miami Bch-2000-01
Terms and Conditions
Premium
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
90 days notice of cancellation/1 0 days for non payment
Actual Loss Sustained as respects Time Element coverage
Electronic Date Recognition Exclusion
Exclusions include, but not limited to: currency, money, bullion,
notes, securities; property sold by the insured under conditional sale; land
or land value or water; cost of excavations, foundations of buildings
which are below the under surface of the lowest floor; piers, docks or
wharves; live animals, birds, fish or reptiles; growing crops, trees,
shrubs, lawns; furs; jewelry; paintings, etchings, works of art;
automobiles, trucks, trailers, semi trailers, motor cycles, motor scooters
and similar vehicles licensed for highway use; watercraft, aircraft,
property while outside the confines of any location owned, leased, rented
or occupied by the insured; interruption of business - except at the
convention center and theater, aerial electrical and communication
transmission and distribution lines, towers, poles, cables
Perils excluded, but not limited to: Flood; water which backs up
through sewers and drains; war; nuclear; pollutants; asbestos; electrical
injury or disturbance; mechanical breakdown, wear and tear,
deterioration, insects, vermin; faulty workmanship or material; rain, hail
to property in the open; actual work upon or installation of personal
property; infidelity or dishonest act; mysterious disappearance; theft or
attempted theft of personal property at a location vacant or unoccupied;
Boiler & Machinery
$500,486
...~
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~
CITY OF MIAMI BEACH
LAYER AND PREMIUM SCHEDULE
LA YERS PREMIUM
4th Excess Layer - $ 322,952,182 Excess of $ 20,000,000 $ 46,600
3'd Excess Layer - $ 5,000,000 Excess of $ 15,000,000 $ 35,000
2nd Excess Layer - $ 5,000,000 Excess of $ 10,000,000 $ 90,000
1 st Excess Layer - $ 5,000,000 Excess of $ 5,000,000 $ 102,886
Primary Layer - $5,000,000 $ 226,000
Total Premium $ 500,486
Plus State Surcharges and Inspection Fees $ 1,078
PROPERTY PROGRAM FOR 06/01/2000 - 06/01/2001
Limits, Structure & Subscriptions A.M. Best Rating
$342,952,182 Limit Per Occurrence - $25,000,000 Named Windstorm
layers Company Limit Rating Financial
level Size
4th Excess laver Allianz Insurance Company 322,952,182 plo 322,952,182 A+ XV
$322,952,182 per ($5,000,000 Named Windstorm)
occurrence excess of
$20,000,000
3'd Excess Layer Agricultural Insurance Co. $3,500,000 plo $5,000,000 A XIII
$5,000,000 per Greenwich Insurance Co $1,500,000 plo $5,000,000 A+ XI
occurrence excess of
$15,000,000
2nd Excess Laver Underwriters at L1oyds, London $5,000,000 plo $5,000,000 A XV
$5,000,000 per
occurrence excess of
$10,000,000
1 st Excess Laver Lexington Insurance Co. $5,000,000 plo $5,000,000 A++ XIV
$5,000,000 pef
occurrence excess of
$5,000,000
Primarv Laver Allianz Insurance Company. $5,000,000 plo $5,000,000 A+ XV
$5,000,000 per
occurrence primary
layer. including Wind
Flood Excluded
Note: Deductible for Named Windstorm is 2% (subject to $5,000,000 maximum/$250,000 minimum)
City Miami Bch.2000-01
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BOILER & MACHINERY PROGRAM
SECTION 3
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CITY OF MIAMI BEACH
BOILER & MACHINERY RENEWAL
Company
Hartford Steam Boiler Inspection & Insurance Co.
Best's Rating
A+ X
COVERAGES LIMITS
Equipment Breakdown Limit $100,000,000
Property Damage Included
Business Income $5,000,000
Extra Expense Combined with Business Income
Service Interruption $500,000
Perishable Goods Excluded
Computer Equipment $500,000
Demolition & ICC $1,000,000
Expediting Expenses $100,000
Hazardous Substances $100,000
CFC Refrigerants $50,000
Newly Acquired Locations Included in policy limit; Subject to
365 days reporting
Location{s): As per schedule submitted
OEOUCTIBLES
Direct Coverages: $ 5,000
Except Air Conditioning> = 50HP $25 per horsepower, $5,000 minimum
Indirect Damage: 24 hours
OTHER CONDITIONS
Extended Business Income: 30 days
Newly Acquired Locations: 365 days
ALSO INCLUDED
Errors in Description Computer Related (Y2K) Loss Endorsement
Defense Brands and Labels
Loss Adjustment Agreement HSB Freestyle Plus
Equipment Breakdown Coverage Summary (specimen included)
Omnibus Location Endorsement
PREMIUM
$15,595
City Miami Bch-2000-01
BEST'S RATINGS
&
AJG DISCLOSURES
SECTION 4
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CITY OF MIAMI BEACH
INSURANCE COMPANY SELECTION
The Best's Guide is the guidebook the insurance industry uses to determine the
financial stability of an insurance company.
A copy of the Best's Guide report on the insurance companies quoted is available for
your review.
While we strive to be certain that your insurance is placed with reputable, highly
rated insurance companies, we have no way of guaranteeing the financial accuracy
of the Best's Guide or the financial stability of any insurance company.
For these reasons, we recommend that you take into account the financial stability
of all the insurance companies prior to making your selection as to who will write
your insurance.
1999 Best's Admitted Surplus
Company Proposed Assigned Carrier Lines
Rated Carrier
1 . Allianz Insurance Company A+ XV X
2. Agricultural Insurance Company A XIII X
3. Greenwich Insurance Co. A+ XI X
4. Lexington Insurance Co. A + + XIV X
5. Underwriters at L1oyds, London AXV X
6. Hartford Steam Boiler & Inspection Co. A+ X X
Alphabetical Listing Numerical Listing
A+, A+ + = Superior Ranges from 1 to 1 5
A, A- = Excellent 1 = Smallest Category
B+,B++ = Very Good 1 5 = Largest Category
B, B- = Good
C+, C+ + = Fair
C - Marginal
-
Admitted Carrier - Authorized licensed insurer doing business in Florida and protected
by the Florida Insurance Guarantee Association, Inc. under F.S. 631.
Surplus Lines Carrier - An unauthorized insurer which has been made eligible by
Florida's Department of Insurance to issue insurance coverage. Surplus Lines carriers
are not protected by Florida's Insurance Guarantee Association, Inc. under F.S. 631.
City Miami Bch-2000-01
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CITY OF MIAMI BEACH
DISCLOSURES
. This proposal is issued as a matter of information only, and does not amend,
extend, or alter the coverage provided by insurance policies. The information
contained in this proposal is based on the historical loss experience and
exposures that were provided to Arthur J. Gallagher & Co. Descriptions of
coverage in this proposal have been simplified, and this proposal does not
include all the terms, coverages, exclusions, limitations, and conditions of the
actual contract language. The policies themselves must be read for those
details.
. This proposal is not an actuarial study. Should you wish to have this proposal
reviewed by an accredited actuary for accuracy of loss projections, adequacy
of retention of insurance limits, or for recommended methods of funding levels,
we will be pleased to provide a listing of actuaries for these purposes.
. In addition to the fees retained by Arthur J. Gallagher & Co., it is understood
and agreed that other parties, such as excess and surplus lines brokers,
wholesalers, reinsurance intermediaries, underwriting managers, and similar
parties, some of which may be owned in whole or in part by Arthur J.
Gallagher & Coo's corporate parent, may earn and retain usual and customary
commissions and/or fees in the course of providing insurance products. Any
such fees and/or commissions will be the responsibility of the client and not
Arthur J. Gallagher & Co.
City Miami Bch-2000-01
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci.miami-beach.fl.us
COMMISSION MEMORANDUM NO. ~ 2- q -00
TO:
Mayor Neisen O. Kasdin and
Members of the City Commission
DATE: May 24, 2000
FROM: Lawrence A. Levy ~
City Manager
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, FOR A COMBINED ANNUAL PREMIUM
OF $686,081.00 (NET OF BROKER COMMISSIONS), FOR A ONE-YEAR
PERIOD, WITH OPTION TO RENEW FOR TWO (2) ADDITIONAL YEARS,
PROVIDED THE ANNUAL RATE DOES NOT INCREASE BY MORE THAN
TWENTY PERCENT (20%) PER YEAR, AS PROPOSED BY ARTHUR J.
GALLAGHER & CO., THE CITY'S BROKER OF RECORD.
ADMINISTRATION RECOMMENDATION:
Adopt the resolution.
FUNDING:
Funds are available from the Account Number 540.1792.000.378.
ANALYSIS:
The City's property insurance needs are covered primarily 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 governed by the Stafford
Act.
To qualify for aid in case of loss due to flood, the Act requires that we purchase the maximum
insurance available. The City has complied with that mandate in the past by purchasing coverage
from the only available source, i.e., 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 of its locations. The policies renew from July 2000
AGENDA ITEM
ftlA
S- -2-'4--00
DATE
through December 2000 for one year. The total annual premium for 1998-99 was $163,619. Due
to the addition of new locations and increased property values, the total annual premium for 1999-
2000 will be approximately $170,000.
The second coverage, All Risk, can be purchased with or without Windstorm coverage. With regard
to FEMA's eligibility requirements to qualify for reimbursement for losses due to windstorm,
insurance need not have been purchased if the City has not been the recipient of past FEMA monies
in excess of$5,000 for damage to buildings. Miami Beach meets that criterion. Hence, the City can
choose how much risk assumption it wants to take on, i.e., self-insure and rely on FEMA aid or
purchase Windstorm coverage.
During 1996 and 1997, the premium quoted to purchase an All Risk policy which included a
sublimit of $20,000,000 for Windstorm, was in excess of $1,000,000. The City felt that this
premium was not reasonable and chose to purchase an All Risk policy (which excluded Windstorm)
and self-insure for loss against Windstorm. The annual premium for the All Risk policy (excluding
Windstorm) during 1996 and 1997 was approximately $100,000. In 1998 and 1999, the market
improved, and the City was able to purchase an All Risk property policy which included a
Windstorm sublimit of $25,000,000 for approximately $300,000.
The current property insurance marketplace has been severely impacted by catastrophic losses over
the past several years. Last year's storm season was the second most expensive year in insurance
history (1992-Hurricane Andrew was number-one). As a result oflast year's season, carriers are
looking at premium increases and alternative methods to limit coverage (please refer to the attached
renewal proposal provided by Arthur J. Gallagher and Co.-Miami).
The City has received notice of non-renewal from Allianz, the City's current All Risk insurer. Our
broker, Arthur 1. Gallagher Co., following our directions, has identified a replacement policy (also
offered by Allianz) which is All Risk including Windstorm protection for both named and non-
named storms. Allianz is the only insurance company out of twenty-three (23) contacted that was
willing to provide a quote for primary coverage.
The new policy, which would be effective on June 1,2000, provides for identical coverage with the
only changes being an increase in property values, the deductible, and premium rate. The All Risk
coverage limit (excluding Windstorm) is $342,952,182 (based on current increased propertylbuilding
values) and has a per occurrence deductible of $50,000. The Windstorm coverage sublimit is
$25,000,000 with a 2% deductible subject to a $250,000 minimum/$5,000,000 maximum per
occurrence. Allianz has quoted an annual premium of $500,486 which represents an increase of 56%
in the rate. It should be noted that the increase is also reflective of a 16% increase in property values.
Arthur J. Gallagher and Co. has explored the marketplace in an attempt to provide an option of
$25,000,000 excess of the $25,000,000 for Named Windstorm coverage offered. Gallagher estimated
that the additional annual premium would be in the range of $175,000 to $250,000. It does not
appear that this additional insurance will be available by June 1, 2000. Due to the high cost and
problems with availability, it is recommend that this be revisited by the City next year prior to
renewal.
The third coverage, Boiler/Machinery provides coverage for property built to operate under a
vacuum or pressure, or used for the generation, transmission or utilization of energy (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 1998-99 was
$9150. The new premium will be $15,595.
The additional premium of $6,445 is due to both increased property values and a claim for damages
to sewer pump station #1 which was caused by a fire. The fire which was caused by an electrical
short, caused damage to the pump control, variable frequency drives, electrical panels, and lighting
circuitry. Damages, including temporary repairs were assessed at $192,731.91.
The Administration recommends that the City purchase Flood, All Risk, and Boiler/Machinery
insurance coverage. While the All Risk policy premium is a considerable sum of money, we must
recognize that aid from FEMA is not "contractual" and that the amount of assistance varies
depending upon the extent of a declared disaster. It is important to understand that FEMA is not an
insurance company. Its 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. In order for the City to be in the position to make a prompt recovery should we
be struck by a major storm, we believe that the purchase of this coverage represents good value.
Under this proposal, the City will have the option to renew the coverage in each of the next two
years. The Administration requests authority to exercise those options provided that a future rate
increase, if any, does not exceed 20% per year.
In summary, the Administration recommends purchase of the following coverage:
1. National Flood Insurance Program (NFIP)
Limits: $ 500,000 Building
$ 500,000 Building Contents
Deductible: $ 5,000 Per Location
Premium:
$170,000.00
2. Allianz Insurance Company (Best's Rating A VIII)
Limits: $342,952,000 All Risk including Non-Named Windstorm
Sublimits: $ 25,000,000 Named Windstorm (Hurricane)
$ 10,000,000 Annual Aggregate Earthquake
$ 5,000,000 Newly Acquired Property
$ 5,000,000 Builders Risk
$ 5,000,000 Ordinance or Law
$ 4,000,000 Business Interruption
$ 1,000,000 Extra Expense
$ 250,000 Property in Transit
$ 250,000 Personal Property at Unscheduled Locations
$ 250,000 Rental Value
$ 150,000 EDP Equipment/Data/Media
$ 150,000 EDP Extra Expense
$ 100,000 Personal Property at Exhibition
$ 25,000 Pollution Clean Up and Removal
$ 25,000 Expediting Expense
$ 5,000,000 Debris Removal
Deductibles: $ 50,000 All Perils per occurrence except Named Storms which
provide for a 2% deductible of the latest reported value of the
insured property at the location where the loss occurs, subject
to a $250,000 minimum deductible/$5,000,000 maximum
deductible.
Premium:
$500,486.00
3. Hartford Steam Boiler Inspection & Insurance Co. (Best's Rating A+ X)
Limits: $100,000,000 Equipment Breakdown
Deductible: $ 5,000
Premium:
$ 15,595.00
TOTAL PREMIUM:
$686.081.00
~co R/
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Attachment
f:1$alllrisklcliffiproperty-insOO. wpd