98-22726 RESO
RESOLUTION NO.
98-22726
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING
THE PURCHASE OF PROPERTY INSURANCE, INCLUDING
WINDSTORM INSURANCE OPTION AND FLOOD
INSURANCE, FOR CITY BUILDINGS AND CONTENTS, FOR
A COMBINED ANNUAL PREMIUM OF $423,865 (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 TEN PERCENT (10%) PER
YEAR, AS PROPOSED BY ARTHUR J. GALLAGHER & CO.,
THE CITY'S BROKER OF RECORD.
WHEREAS, the Administration has recommended the purchase of All Risk property
insurance including windstorm insurance option, effective July 1, 1998, for an annual premium of
$275,279, with Allianze Insurance Company, and the purchase of flood insurance, effective June 1,
1998, for an annual premium of $148,586, through National Flood Insurance Program; for a total
annual premium of $423,865; and
WHEREAS, funding is available from the Selflnsurance Fund Number 540.1790.000378;
and
NOW, THEREFORE, BE IT DULY RESOLVED THAT THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, hereby approves the purchase
of All Risk property insurance, including windstorm insurance option and flood insurance for all
City-owned buildings and contents, for a combined annual premium of $423,865 for a one-year
period, with option to renew for two additional years, providing rate increases of no more than ten
percent (10%) per year, as proposed by Arthur J. Gallagher & Co., the City's Broker of Record.
PASSED AND ADOPTED this 6th day of
May
V!/ ~ ,1998
Mayor
ATTEST:
cc~J rCLL~
CIty Clerk
APPROVED AS TO
FORM & lANGUAGE
& FOR EXECUTION
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a\COM-MEM04. 98/WIND98.R WB
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RESOLUTION NO.
95-21845
A RESOLUTION OF THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING
AND AUTHORIZING THE MAYOR AND CITY CLERK TO
EXECUTE A CONTRACT WITH ARTHUR J. GALLAGHER
& COMPANY TO PROVIDE INSURANCE BROKERAGE
SERVICES TO THE CITY FOR TWO YEARS, AT A FEE OF
$35,000.00 PER YEAR, WITH AN OPTION FOR TWO
ADDITIONAL ONE-YEAR RENEWAL PERIODS.
WHEREAS, at a regular meeting on November 21, 1995, the Mayor and City Commission.
accepting the findings and rankings of a selection committee, awarded RFP 17-95/98, cntitlco
"Insurance Broker Services," to the top-ranked proposer, Arthur J. Gallagher & Company; and
WHEREAS, pursuant to the Mayor and City Commission's directive, the Administration
has negotiated the attached contract with Arthur J. Gallagher & Company to provide insurance
brokerage services to the City for a two-year period, at a fee of $35,000.00 per year, with an option
for two additional one-year renewal periods.
NOW, THEREFORE, BE IT DULY RESOLVED by the Mayor and City Commission
of the City of Miami Beach, Florida, that the Mayor and City Clerk are authorized to executc the
attached contract with Arthur J. Gallagher & Company to provide insurance brokerage services to
the City for two years, at a fee of $35,000.00 per year, with an option for two addi!ional one-year
renewal periods.
PASSED AND ADOPTED this20thday of
FORM APPROVJ:D
LEGAL DEPT.
By 1/41/-' tfJ/.J;
Date ! J-.lu'j Ii 5'_
C:\WPWIN6l1\WPDOCS\RESOLUTN\GALLAGHR.CON
~ITY OF MIAMI BEACH
ITV HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
,tp:\\cLmiami-beach, fl. us
COMMISSION MEMORANDUM NO.
:J~3-g~
TO:
Mayor Neisen O. Kasdin and
Members of the City Com ion
DA TE: May 6, 1998
FROM:
Sergio Rodriguez
City Manager
.
SUBJECT:
A RESOLUTION OF THE MA YOR AND CITY COMMISSION OF THE CITY OF MIAMI
BEACH, FLORIDA, APPROVING THE PURCHASE OF PROPERTY INSURANCE,
INCLUDING WINDSTORM INSURANCE OPTION AND FLOOD INSURANCE, FOR CITY
BUILDINGS AND CONTENTS, FOR A COMBINED ANNUAL PREMIUM OF $423,865
(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 TEN PERCENT (10%) PER YEAR, AS PROPOSED BY
ARTHUR J. GALLAGHER & CO., THE CITY'S BROKER OF RECORD.
ADMINISTRATION RECOMMENDATION:
Adopt the resolution.
BACKGROUND:
The City's property insurance needs are covered primarily by two policies: Flood and All Risk (fire,
explosion, lightning). The City has been reliant on aniticpated aid from the Federal Emergency
Management Agency (FEMA) for reimbursement for windstorm losses. The predominant peril to
City-owned facilities is storm related loss due to flood and/or windstorm damage.
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.
In 1996, the premium for Flood coverage was $176,545 and in 1997, it was $140,293. For 1998,
the premium is $148,586 for coverage that will be effective July 1, 1998.
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 dl!e 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.
continued...
AGENDA ITEM
C.1~
5-lo-9..a
DATE
Commission Memorandum
Page 2
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.
Following Hurricane Andrew, the cost of Windstorm coverage soared. In 1996, purchase of an All
Risk policy with a maximum limit of $20,000,000, a 2% Windstorm deductible per location, and
$250,000 deductible per occurrence for all other perils would have cost $946,643 more than a policy
without Windstorm protection. In 1997, the market improved, but Windstoffil coverage would have
still added a hefty $380,424 to our premium cost. Because of the high cost of coverage and the
assurances we had about our eligibility for FEMA reimbursement, we elected not to purchase
Windstorm coverage in those years.
The annual premium for the City's current All Risk Policy, excluding Windstorm, is $102,514. The
renewal quote for this policy effective June 1, 1998 will be $97,419. Renewal of this All Risk Policy
without Windstorm coverage would require the City to rely upon FEMA reimbursement in the event
of any windstorm loss.
This year, our broker, Arthur 1. Gallagher Co., following our directions, has identified a superior All
Risk policy that includes Windstorm protection for both named and non-named storms. The All
Other Perils limit is increased from the $100,000,000 limit available in 1996 to $300,000,000 and
the deductible is reduced from $250,000 to $100,000. The Windstorm coverage limit is $25,000,000
with a deductible of $1,500,000 versus the 1996 proposal that offered $20,000,000 limit with a
$6,000,000 deductible.
Despite this much enhanced All Risk coverage, which would be effective on June 1, 1998, the
additional cost for Windstorm protection is modest by recent standards--$177,860 above the $97,419
price of an All Risk policy without Windstorm protection. That is a considerable sum of money, but
given that aid from FEMA is not "contractual" and that we want to position ourselves 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 three
years. The Administration requests authority to exercise those options provided that a future rate
increase, if any, does not exceed 10% per year.
In summary, the Administration recommends purchase of the following coverage:
continued.. .
Commission Memorandum
1. National Flood Insurance Program (NFIP)
Limits: $ 500,000 Building
$ 500,000 Building Contents
Deductible: $ 5,000 Per Location
Premium:
$148,586.00
2. AlIianze Insurance Company (Best's Rating A VIII)
Limits: $300,000,000 All Risk including Non-Named Wind with a
$ 100,000 Deductible (Excludes Flood)
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 Demolition/Increased Cost of Construction
$ 1,000,000 Extra Expense
$ 250,000 Property in Transit
$ 250,000 Personal Property at Unscheduled Locations
$ 100,000 Property at each Exhibition
Deductibles: $
$
100,000 All Perils per occurrence except Named Storms
1,500,000 Per Occurrence-Named Storms
Term: Three Year: Subject to annual re-rate
Premium: $275,279.00 (Annual)
TOT AL PREMIUM:
$423,865.00
Funds are available in the Self-Insurance Fund Account No.540.1790.000378.
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