The property policy provides coverage for damage to city assets up to $1,000,000,000 with varying deductibles. The city's total insured property values are $838,341,320. The values increased by 4.46% due to inflation for cost of construction. Our “all risk” deductible on property is $100,000, except for flood which is $500,000, automobile physical damage is $25,000 and unscheduled property (tunnels, bridges, dam’s roads, streets, sidewalks, traffic signals, etc.) is $500,000. The property policy also includes coverage for boiler and machinery, cyber (information security & privacy), and pollution.
Alliant is heavily marketing the program. They obtained an indication of the renewal premium from the incumbent, Alliant Property Insurance Program (APIP). The not to exceed premium from the incumbent carrier is $570,377 compared to $434,068. This is a 31.40% increase over last year or $136,310. Staff is recommending approval of the not to exceed amount of $570,377.
Alliant has also marketed to eight (8) other property carriers. All declined to provide quotes, except two carriers. Alliant is waiting for proposals from Travelers and Allianz.
Staff obtained a separate pollution policy that enhances the property coverage and provides for pollution liability for first-party claims arising out of a pollution condition with limits of $2,000,000 per pollution condition and $2,000,000 Aggregate, with a $1,000,000 storage tank sublimit. The coverage includes above and underground storage tanks, seepage and contamination, cost of clean-up for pollution and mold for NEW conditions found. The insurance complies with ADEQ financial requirements for insuring the City’s underground and above ground storage tanks. The estimated not to exceed premium is $22,947 compared to $21,855 last FY. Alliant is marketing this program and is waiting for additional proposals.
For cyber exposures, the property coverage includes cyber liability. There is coverage for information security and privacy liability, regulatory defense and penalties, website media content liability, cyber extortion loss, data protection loss and business interruption with separate $2,000,000 aggregate limits. Privacy notification costs have a sublimit up to $1,000,000 and PCI Fines and Penalties up to $100,000. The coverage is subject to a $25,000,000 cyber program aggregate for all insured’s in the pool and for all claims made against the policy. One large loss or multiple losses in one year by the pooling group could use up the total aggregate. The City has a $100,000 deductible.
For the cyber coverage staff also obtained a quote to enhance the cyber liability notification costs that are not subject to the $25,000,000 program aggregate, provides a lower deductible and no monetary cap for credit monitoring and call center services. The firm quote is same as expiring at $22,801. The deductible is reduced from $100,000 per occurrence to kick in after 100 individuals have been notified. The average cost of notification is approximately $295. The deductible would be reduced to approximately $29,500. This enhancement provides up to 250,000 per person notification services.
For the cyber coverage, Staff also obtained a quote to increase the $2,000,000 limit with an additional $3,000,000 for a total of $5,000,000 in limits. The firm quote is the same as expiring at $25,946. We asked Alliant to obtain a quote for an additional $5,000,000 in limits which would provide us with a total of $10,000,000. The cost for the additional limits is $44,376. We recommend purchasing the additional limits if there is budget available to do so after all final quotes have been received.
The city purchases crime insurance which provides protection for the city’s money and securities up to $10,000,000 in limits with a $50,000 per occurrence deductible. The premium was slightly down this year. The total firm premium is $28,011.
The city purchases a fiduciary liability policy which covers the Deferred Compensation Plan Committee with $5,000,000 limits with a $5,000 deductible. This premium is expected to remain flat and is estimated at the expired cost, $12,562.
City Ordinance requires a public employee blanket bond to cover the Risk Management and Workers’ Compensation Trust Fund board. The policy provides a $10,000 limit. The policy cost, $180, is expected to remain the same as the expiring policy.
The city’s excess liability insurance provides coverage on an occurrence basis up to a $50,000,000 limit with a $1,000,000 self-insured retention (SIR). This means that the first $1,000,000 of each occurrence is for the City to pay. The carriers are Safety National who provides the first layer of coverage up to $10,000,000 with Navigators Specialty Insurance providing the second layer up to $15,000,000, Hallmark Specialty Insurance Company providing the third layer up to $25,000,000 and Arch Insurance Company providing the fourth layer up to $15,000,000. The premium for all four layers is $788,130 versus $721,335 last year. Alliant has marketed to other carriers. So far, no other proposals have been received. Alliant will continue working with the carriers to obtain further quotes. Staff is recommending approval of the not to exceed premium amounting to $788,130.
The city purchases a separate airport owners and operator’s general liability policy with $20,000,000 in limits on an occurrence basis including bodily injury and property damage liability, products and completed operations, personal injury and advertising injury, hangar keepers, non-owned aircraft liability, and fire damage liability. This policy is needed to provide coverage for the airport operations hazards which are not covered in the excess liability policy. There is no self-insured retention and no deductible. This is the last year of the 3-year rate guarantee. The premium is $8,995 including Terrorism coverage.
The city purchases a liability policy to protect the Glendale Regional Public Safety Training Center (GRPSTC) with $2,000,000 in limits with a $5,000 deductible. This facility partners with five public entities (City of Surprise, City of Peoria, City of Avondale and Maricopa County Community College District) who use and share the costs based upon their agreements with the City. The total cost sharing of all other entities does not exceed 25% of the facility costs. Since this facility is used by all partners and the costs shared, we recommend continuing to purchase this separate insurance policy. The policy does not renew until 9/29/2019. The estimated premium is $5,898, compared to $5,362 for last FY.
Alliant obtained a quote from the incumbent carrier, Safety National for statutory excess workers’ compensation coverage at an $800,000 self-insured retention (SIR) and employer’s liability with limits up to $2,000,000. Payroll is estimated at $139,675,486, a 2.5% increase from expiring. Total not to exceed premium with the $800,000 SIR is $298,906. Staff is recommending approval of Safety National’s not to exceed premium for $298,906 with a $800,000 SIR. Alliant went out to the market to six carriers. To date, we have received four declinations to quote. Alliant will continue to pursue the remaining carriers for a quote.
Safety National is asking us to consider increasing our SIR to $1,000,000 as they can’t continue to insure this program at an $800,000 SIR. No carriers are willing to offer us a $800,000 SIR for this size of program. Safety National provided a quote for $1,000,000 SIR with a two (2) year rate guarantee for $219,291. The savings by moving to the greater SIR is $79,615 annually or $159,230 for the two years the rate is guaranteed. The additional liability the fund will be responsible for is $200,000 annually. To date, we have only one loss that is expected to exceed the $800,000 SIR based upon current reserves. Safety National is including $5,000 to be used for loss control services. Safety National has indicated they will not be able to provide this quote next year and will require us to move to the $1,000,000 SIR. If market conditions continue, the cost to move our SIR to $1,000,000 next year will be more expensive. If there are funds available after all final quotes are received and the actuarial analysis provides that the Trust is adequately funded at a 55% confidence level with the $1,000,000 SIR, Staff recommends moving to the $1,000,000 SIR at a cost of $219,291.
For all coverage's listed above where we are out to market, Alliant will continue to market the program and bring us the best proposal prior to the July 1, 2019 renewal. The not to exceed premium for all coverage is $1,774,373.
The Risk Management and Workers' Compensation Trust Fund Board met on May 15, 2019 and is recommending to City Council approval of the program as detailed above.