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  5.       
Meeting Date: 03/15/2021  
Submitted By: Lucy Coelho-LaFreniere, Human Resources Manager

RECOMMENDATION:

That the City Council authorize the City Manager to renew the City’s excess Workers’ Compensation reinsurance with Safety National Casualty with a policy limit of $50 million and a Self-Insured Retention (SIR), or deductible, of $1 million per claim for all employees at an annual premium cost of $187,988 for the period of March 20, 2021 through March 20, 2022.
DISCUSSION:
The City’s current excess Workers’ Compensation policy will expire on March 20, 2021.  In an effort to secure the lowest cost renewal option staff instructed the City’s broker, Schrimmer Insurance, to solicit bids from reinsurers. They contacted three carriers, of which only one submitted a price proposal, as described below.

Current market conditions across the nation has made it challenging to find insurance carriers who are willing to quote workers’ compensation policies for cities, especially due to the risk of exposure from public safety operations.  For this reason, Schrimmer Insurance was only able to secure one pricing proposal.  They indicated that the cost of insuring police personnel continues to be a significant factor in obtaining quotes and has significantly impacted workers’ compensation insurance premiums.  Additionally, it is anticipated that COVID-19 related workers' compensation claims across the country may exceed many agencies' insurance deductibles, including the City of La Habra's which is set at $1 million per case, due to the unknown long term effects of the disease.  Another factor impacting rates is attributed to the civil unrest demonstrations that occurred throughout the country in 2020.  These events increased the number of large cost Workers's Compensation claims from police personnel and other first responders.  As a result of the above factors, insurance carriers are spreading their risk among all their policy-holders in the form of higher premiums in order to pay claims.

The one bid that was secured by Schrimmer Insurance is from the City’s current carrier, Safety National Casualty.  Safety National Casualty has an excellent rating and superior financial strength, and its proposal includes a $1 million Self Insurance Retention (SIR), or deductible, for all employees including police employees, and an aggregate policy limit of $50 million at an annual premium of $187,988.  This proposal represents a premium increase of $78,092 compared to the City’s current annual premium.  A summary of the City’s current coverage and all quotes for the excess Workers’ Compensation reinsurance are listed below:
         
  Company Policy Limits SIR Premium  
Current Carrier Safety National Casualty $50 million $1,000,000 $109,896  
           
Quote 1 Safety National Casualty (RECOMMENDED) $50 million $1,000,000 $187,988  
                   
Staff recommends renewing the City’s excess Workers’ Compensation reinsurance with Safety National Casualty.  This will provide coverage for all City employees with a $1 million SIR and an annual premium of $187,988.
FISCAL IMPACT/SOURCE OF FUNDING:
Sufficient funds for workers’ compensation insurance premiums have been included in the adopted Fiscal Year 2020-2021 Risk Management budget.  Staff recommends the acceptance of Safety National Casualty proposal, with a $1 million SIR and an annual premium of $187,988.
GENERAL PLAN RELEVANCE:
General Plan Goal ED 9 Fiscal Strength-Stability
 

    

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