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8.1 Property Casualty InsuranceAGENDA SECTION NO: ITEM NO: Page 1 M. CITY OF SALINA REQUEST FOR CITY COMMISSION ACTION DATE TIME 06/27/2011 4:00 P.M. ORIGINATING DEPARTMENT: CITY MANAGER'S OFFICE BY: Jason A. Gage FISCAL APPROVAL: BY: FINAL APPROVAL: BY: ITEM: Resolution No. 11 -6836 Authorizing the City Manager to enter into an agreement with Travelers for the renewal of the City's Comprehensive Property /Casualty Insurance. BACKGROUND: Staff has completed our review of the June 30, 2011 — June 30, 2012 Comprehensive Property /Casualty Insurance Program Proposal for the City of Salina. We recommend continuation of the relationship with our current provider, Travelers. Shortly after the first of the year, City staff began working with our broker (Sunflower Insurance Group) and insurance consultant (Bob Charlesworth) to evaluate the insurance market and available carrier options. Our research shows that as a result of decreased investment returns coupled with increasing operating costs, global disasters and storm losses, the soft market cycle is ending. The result is increased rates and harder underwriting standards across the insurance industry. In addition, our research continues to show a limited number of carriers in the marketplace able to provide competitive coverage for a city our size. The City's current 5 -year loss ratio (loss ratio is a profitability test used by insurance carriers that is developed by dividing total losses by total premium) is 63 %, which is considered "good" industry wide, and is the result of mostly catastrophic weather related loss. Our target goal is to keep our loss ratio below 50% which is considered "better than average." Barring any catastrophic events this next policy year, it is projected we will meet this goal. Due to the City's slightly elevated 5 -year loss ratio of 63 %, the changing marketplace and the limited availability of carriers, it was determined that it was not in our best interest to solicit bids outside of Travelers. Even though the City experienced a rate increase for each line of coverage the end result in premium from the expiring policy period is a nominal $1,309 or .39 %. This is due to a decreased budget and number of employees. Our goal is to obtain both the best possible services and price for insurance coverage. While coverage, conditions and costs are important, so are the services provided. We are confident we have accomplished our end goal with Travelers. Staff considers the renewal offering to be competitive and in keeping with industry pricing trends. Provided below is a breakdown of the changes in premium from the expiring policy year. It also includes the rate changes. One noticeable change is to Inland Marine and can be attributed to the addition of a few large and costly pieces of mobile equipment. The General Liability exposure is down due to the ratable budget being lower. Law Enforcement and Employment Practices Liability also show a decrease in premium due to a decrease in employees. Premium Summary 2010 -2011 2011 -2012 Insurance Cost Difference Insurance Rate' Change Property $102,962 $107,235 4.15% 3.00% Inland Marine $9,429 $11,428 21.20% 3.00% Crime $3,954 $4,073 3.01% 3.00% General Liability $66,965 $61,711 -7.85% 2.50% Law Enforcement $44,014 $43,021 -2.26% 6.20% Auto $75,250 $79,157 5.19% 3.10% Public Officials Liability $9,416 $9,098 -3.38% 6.90% Employment Practices Liability $21,146 $18,722 - 11.46% 7.10% Total $333,136 $334,445 0.39% Overall, the opinion of Bob Charlesworth and Sunflower Insurance Group is that the City of Salina, when compared to other municipalities, has very competitive rates. CONFORMANCE WITH STRATEGIC PLAN: GOAL #3: The City will provide the highest quality of services, consistent with Governing Body direction, available resources and staff commitment to quality. CITY OF SALINA REQUEST FOR CITY COMMISSION ACTION DATE TIME 06/27/2011 4:00 P.M. AGENDA SECTION ORIGINATING DEPARTMENT: FISCAL APPROVAL: NO: 8 BY: ITEM CITY MANAGER'S OFFICE FINAL APPROVAL: NO: 1 Page 2 BY: Jason A. Gage BY: FISCAL NOTE: Insurance premiums are funded through the Risk Management Fund which is an internal service fund. Premium costs are allocated by the enterprise funds and general fund department operations. The total premium for this renewal is $334,445, an increase of $1,309 (.39 %) from the expiring premium which is within the budget allotment for insurance. CONCLUSION: When taking into consideration the rapid changes throughout the Property /Casualty insurance market, we are pleased with this insurance renewal and services provided by Travelers. We wish to acknowledge the contributions of both Sunflower Insurance Group and Bob Charlesworth. The combination of their years of experience and assistance in negotiating competitive rates makes for a beneficial and cost effective relationship. Finally, the City's risk management philosophy states that "risk management is every employee's responsibility." We believe this philosophy has proven to be a very successful approach to reducing losses and the resulting insurance costs that would otherwise burden our community. RECOMMENDED ACTION: Due to the pending renewal date of June 30, 2011 and the reasonable cost of coverage as provided, staff recommends approval of Resolution No. 11 -6836 authorizing the City Manager to enter into an agreement with Travelers for renewal of the City's Comprehensive Property /Casualty Insurance in the total amount of $334,445. 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