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HomeMy WebLinkAbout8 Insurance package renewal Agenda Item # Memorandum To: Board of Directors From: Peter Holzmeister Date: April Subject: Insurance package renewal 1. Why this matter is before the board Each year during April, we renew the District's property and liability insurance package. The package expires on May 1s` each year and we need to renew it to make sure we are covered. This item appears on the board agenda each April. 2. History We have retained Marsh Risk Management Services as broker of record for our insurance. They help define the insurance coverage that is appropriate for our District along with the suggested deductibles to balance risk management and cost. 3. New information We do not yet have the renewal proposal. We are expecting it any hour. We will get it to the board as soon as we get it. Robb Hubbard of Marsh Risk Management Services will attend the meeting to explain the package and answer questions. 4. Recommendation Once the renewal package arrives, we will be able to develop a recommendation for the board's consideration. Robb Hubbard MARSH Vice President Marsh Risk&Insurance Services 3 Embarcadero Center San Francisco.CA 94111 California License#0437153 415 743 7741 Fax 415 743 7778 robb.hubbard@marsh.com www.marsh.com April 11, 2003 Mary Chapman Truckee-Donner P.U.D 11570 Donner Pass Road P.O. Box 309 Truckee, CA. 96160 Dear Mary: Re: Renewal for 5-1-03 to 04 We have attached a copy of our brokerage proposal for reference as a part of the 5-1-03-renewal process for property and liability coverage. Coverage options include St. Paul, the incumbent carrier and Public Utility Risk Management Association's captive program. Both offer similar coverage concepts for your consideration. The coverage offered on renewal is the same as carried last year. Of special note is that overall property values on real and personal property increased about 15% from last year, which is included within the pricing shown on both programs. The total pricing for the program last year with St. Paul was $354,634. Renewal pricing is $368,981. The chart attached shows the variances by line of coverage with the premium differences. The PURMA offering totals $343,401. Brokerage fees would be added to both totals as we are handling your program, as per the original proposal attached on a fee basis. You will see references to various terms on the spreadsheet: CIGA and TRIA. Those terms mean: ■ CIGA, California Insurance Guarantee Association ■ TRIA, Terrorism Risk Insurance Act CIGA covers the cost of the California State guarantee fund and is a mandated charge on coverage placed using admitted insurers. Figures shown do not include CIGA charges unless otherwise noted. TRIA is the mandated Federal Terrorism Act Coverage. This is the assessment cost if an insured wants to purchase coverage for terrorism from a carrier. We will discuss this in more detail with the Board during our presentation. Marsh x McLennan Companies MARSH Page 2 April-11, 2003 Overall, we are pleased with the results of the marketing efforts this year. In the face of continuing market conditions where many accounts are receiving rate increases in excess of 35%, the increase for Truckee Donner is in the range of 13%including fees and slightly less than that if the PURMA program is selected. This increase includes the cost of the higher property values. Neither includes costs for cable operations should the Board elect to move in that direction. We anticipate that by the time of the Board meeting that we may have one other option for the Board to consider,but wanted to have our base program provided for Board review ahead of time. The option we are looking at is whether or not a separate property placement outside of PURMA will make any premium difference. The essential differences between the plans are straightforward: PURMA carries a limit of liability of$25 million compared to St. Paul at S10 million. PURMA's property/boiler program has a$25,000 deductible whereas St. Paul has a $5,000 deducible. Unless we can find an alternative with the same coverage as carried on the property portion of the risk, since PURMA property cost is significantly higher, we are recommending continuing coverage with St. Paul. I will be at the Board Meeting to answer questions. Sincerely, Robb Hubbard Vice President MARSH Page 3 April 11, 2003 ¢My aocumemsuapua+anewal tlomtlOc Robb Hubbard Marsh Risk&Insurance Services Vice President 3 Embarcadero Center,Suite300 San Francisco,CA. 94111 Phone:415 743 7741 Fax:415 743 7778 robb.hubbard(a'marsh.com California License No.0437153 MARSH April 11, 2003 Mary Chapman Truckee-Donner P.U.D 11570 Donner Pass Road P.O. Box 309 Truckee, CA. 96160 PROPOSAL FOR INSURANCE BROKERAGE SERVICES Dear Mary: Truckee-Donner P.U.D. (TDPUD) is a very special client to our team. We are pleased to outline herein, our proposal for Insurance Brokerage and Risk Management Services. We stand ready to resume a level of experienced service to TDPUD and to continue a committed partnership of which we can all be proud. In your evaluation of Marsh, you have the benefit of a 10-year "report card" on the professional services, commitment and leadership our team has displayed to TDPUD. Our team has skillfully guided TDPUD through hard and soft markets, and provided highly competitive insurance programs in both environments, achieving a very solid track record of performance. We have striven for the highest possible satisfaction in our service to you, a difficult goal in this business. We believe we have achieved the trust of the Board and staff over the years. Services Marsh is the largest insurance broker in the United States. Marsh has not worked with TDPUD, but Marsh's San Francisco based Public Entity / Public Utility account team assigned to TDPUD has experience working with you over the last five years. In that time, we provided TDPUD with coverage innovation,pricing consistency combined with a strong service proposition. We are a highly specialized service team that works with nothing but public entities. We have direct experience with a variety of water and power agencies; moreover, we also understand the concerns facing all agencies in the days of tight budgetary constraints. Added to the existing concern is the impact of 9/11/01 on the insurance marketplace. After 9/11, the market has experienced significant change resulting in coverage restrictions and pricing increases. We see very little chance of improvement in the marketplace over the next 24 months. It is exactly that reason why Marsh is the best choice for TDPUD. We understand your operations. We have placed coverage on behalf on TDPUD and have as well, significant experience dealing with insurance carriers in a tough market. Marsh has market clout that other brokers can only talk about. 'Thus, our experience handling your account,clout with the An MMC Company dpud-pmpovi.doc Marsh Risk&Insurance Services Page 2 April 11, 2003 Mary Chapman marketplace and our understanding of public accounts, makes us the right choice to be your broker. We would propose that the TDPUD appoint Marsh as your broker of record; as we detail below, we would propose to work on a fee basis versus a commission on the following insurance policies: ^> General Liability ➢ Property ➢ Umbrella Y Automobile Crime ➢ Inland Marine Boiler and Machinery ➢ Public Officials Errors and Omissions ➢ Earthquake ➢ Aboveground Pollution Fiduciary Liability. We would work on a standard commission's basis if you prefer. Marketing We will market all lines of coverage with commercial insurance carriers and we will ascertain the best coverage and pricing for TDPUD. With the experience of our service team and our strong marketing credentials, we are the best bet for keeping your overall costs in line to the extent possible. Marsh is generally the largest producer for many insurance carries. For instance, Marsh is the largest broker sending business to St. Paul, your current lead insurer. This market clout not only with St. Paul, but many other insurers means that we have a great deal of leverage with these insurers. We also focus our marketing efforts though our Global Broking Division. Global Broking, in concert with the Client Executive, directly negotiates with carriers creating a "client triangle" where our Client, Global Broking and the Client Executive work in concert with the designated market. We encourage our client's to become part of this process both to make certain "your" story is told correctly and also to provide you with direct understanding as to how the marketplace is viewing your risks. Specifics would include: ➢ Negotiation of coverage terms with various carriers ➢ Review of your account with carriers > Development of coverage and pricing options We cannot guarantee what will occur on renewal. In today's marketplace we would be remiss in not telling you that conditions projected for next May would indicate that a further pricing increase will be likely. tdpud-proposal.doc Marsh Risk&Insurance Services Page 3 April 11, 2003 Mary Chapman Administration We will provide all the routine but necessary services directly with the TDPUD; we do not use a service center that is located in a distant City. Your service team will be located in San Francisco. Marsh will also assign an Account Administrator to work on our account with Mr. Hubbard. This allows you to have several direct contacts that know your account and to whom you can communicate. We will handle the necessary backroom work as a part of our services including: Issuance of certificates ➢ Completion of policy summaries and policy handbooks 7 Issuance of additional insured requests Preparation and handling of specifications to go to the market 5 Issuance of binders Billings ➢ Policy reviews for accuracy Processing underwriting and risk changes such as adding new vehicles or equipment to the policy Regular reports and communications Marsh.com is our communications portal and is an easy means for our accounts and their service teams to keep abreast of existing or new issues. A description of the service, which is included at no expense, will be submitted under separate coverage. Risk Management Perhaps one of the chief areas where we believe our prior experience with TDPUD will be the most useful is for us to complete a risk management survey on your behalf.This process, called a Business Needs Risk Assessment, or BNRA, is designed to allow us to evaluate your exposures compared to the coverage carried. This allows us to assure that you both have appropriate coverage with exposures dealt with as needed. As the TDPUD grows by purchase or acquisition of other water/power customers, having a strong understanding of your exposure allows us to do a better job on your behalf. The BRNA process would include: y An insurance policy review r Completion of risk analysis using a risk quantification survey(questionnaire)where members of the TDPUD staff would be interviewed to compare their understanding of risk/exposure to that which actually exists To include a survey of perception of risk to allow for the completion of a risk map, quantifying exposure on a frequency and severity axis > A financial analysis comparing balance sheet and ledger items with actual schedules presented to the commercial marketplace Interviews with not only management, but other staff would be included in the process i Completing a summary report setting findings tdpud-proposatdoc Marsh Risk&Insurance Services Page 4 April 11, 2003 Mary Chapman Claims Assistance As needed, Marsh will supply claims assistance to the TDPUD in the event that problems arise in the manner in which claims are handled. Please refer to our work plan. Fee Presently, we estimate that the TDPUD is paying about$44,000 annually in commissions on the business being handled by our competitor. That figure would not include workers compensation. Renewal tennis will likely increase the income on the account even further. We would propose a fee of $35,000 annually, with changes based on changes in the consumer price index or if other services, as noted in the proposal are requested. If we were appointed to handle the workers compensation placement, there would be an additional fee for that service. If placement required a commission (some insurance carriers will not issue a policy without a commission),we would reduce the fee to offset that commission received. Full disclosure is the rule within Marsh Risk& Insurance Services. Other Services Our risk-consulting professionals keep us advised of new developments in the law as well as new products and services available to our clients. As the leading provider of brokerage and consulting services to the public sector, Marsh has a wealth of insurance-related information of potential value to TDPUD. We will constantly review Marsh's database or resources for topics of interest to TDPUD, and make them available electronically and in hard copy at Board meetings or retreats.Typical other services would include: ➢ Consulting relating to work force strategies, including behavioral risk management, absence management, cumulative injury management; ➢ Environmental risk consulting services; F Claims services other than those specified above, including catastrophic claims, mass tort claims, claims advocacy services and archival research; ➢ Non-recurring insurance placements involving significant quantitative or actuarial analysis or modeling, placements of risks with financial institutions other than insurance carriers, and placements of risks not customarily accepted by insurers; and A Employee benefits services These services would be priced separately. We have included for your review various draft documents, including a fee for services agreement, a sample broker of record letter, my bio, and our services plan outline tailored for TDPUD. These documents are designed to demonstrate our commitment to the handling of your insurance and risk management program. In closing, we appreciate the opportunity to present our service proposal. We hope you will choose Marsh Risk and Insurance Services to be your risk partner. We are eager to work with you as you begin to address the challenges of emerging risk management issues in a very hard and difficult market. uIpud-proposal.doe Marsh Risk&Insurance Services Page 5 April 11, 2003 Mary Chapman Sincerely, Robb Hubbard Sr. Client Executive Public Entities tdpud-proposal.doc Truckee Donner Public Utility District Premium Comparison 02-03 versus 03-04 §fin - .,�'. _ — t _.._. 'flytckee Odmllar,PUtY-Peiec f3 ? f Premium ' Other callers to percentage' complete Premium Premium 2003 TRIA Coverage increase fnbfr. ' PURMA Insurer Coverage 2002-03 04 03-04 fnciadin TVHA pro osal Me fC 5t.Paul Insurance Company _ �4� � -� — -- - i Property,Cargo. Equipment Inland Marine $ 62,412 $ 678 16%'.. $ 119458 121% Crime $1,500 $ 1,350 included above -10% $ 2000 Great Amencan 33 General Liability $123247 $ 130349 $ 1,155 6% $ 40726 67% ' Automobile Liability $40,216 $ 44,627 $ - 11% $ 74 800 Crum 8 Forster, 86% ' -- -- Umbrella $48,278 $ 33,818 $ 231 .30% $ 31 254 35% - Pollution Liability $3,542 $ 3,706 5% Included XS$500000 - --_- Voluntary Property ---- - Damage $5903 $ 6177. 5% sPo lncl-PURMA checking 100% -- EMF Damage $2361 $ 2471 _ 5% s/b mci-PURMA checking -100% ed ',,,'?rs11'K 1 Continental Casualty Company, - iiBodler&Machinery $12 930 $12 387 I included 4% $ _ - included wl prop 100% - -- - _- - ciga included included Royal Indemnity Company - - - Earthquake 8 Flood $30,632 $ 35,24700 ', $ 30.000 _ 15% $ 39,163 _.. -28% _. _... $ 70500 $ 600 U S Speaalty Insurance Expiring Federal Insurance-Rer i Fiduciary Liability $2 000,,$ 1,870,00 Included J% $ 3 000 50 Royal Indemnity Company I -- - - Public Officials D80 $30600 $ 29,700 tool -1% $ 33000 Royals pricing 10% - -- above est only i$12631,PURMA _ Total for coverages $354634 $ 36898i. 4016 r Total for St.Paul only $279,072 $288,441 3%TINT",ffllll si;