Item O06 0.6
t, BOARD OF COUNTY COMMISSIONERS
County of Monroe Mayor Sylvia Murphy,District 5
The Florida Keys l'U � � Mayor Pro Tern Danny Kolhage,District 1
�pw° Michelle Coldiron,District 2
Heather Carruthers,District 3
David Rice,District 4
County Commission Meeting
April 17, 2019
Agenda Item Number: 0.6
Agenda Item Summary #5457
BULK ITEM: Yes DEPARTMENT: Risk Management
TIME APPROXIMATE: STAFF CONTACT: Maria Slavik(305) 295-3178
N/A
AGENDA ITEM WORDING: Approval to accept Marsh USA proposal and renew Property
Insurance, with the first (primary) layer of $5 million coming from a combination of Lloyds of
London, Hiscox and Sompo; the next (first excess) layer of an additional $5 million coming from
Great Lakes; and the final (excess) layer ($238 million in excess of $10 million) coming from
RSUI/Landmark American Ins. Co.. Also, authorization for the Risk Administrator to execute all
necessary forms.
ITEM BACKGROUND: The County's current property insurance coverage expires on April 30,
2019. The broker for the County's property insurance is Marsh USA.
For the upcoming policy year, Marsh USA has proposed to renew the County's Property Insurance
with for an annual premium of $978,155.00. The property insurance is composed of two parts: a
primary layer, which provides full coverage of up to $5 million including wind and flood for
County-owned properties, and an excess layer (currently for $232 million in excess of the first $5
million coverage).
Primary Layer—First$5 million: For the upcoming year, Marsh is proposed a primary layer of$5
million through a combination of Lloyds (50%), Hiscox Insurance Company (25%), and Sompo
Insurance Company (25%). Lloyds' premium will be $500,004.00 for its ($2.5 million) portion of
the $5 Million of coverage; Hiscox premium will be $188,004 for 25% of the premium for its ($1.25
million) part of $5 Million of coverage; and Sompo's premium will be $212,504 for its ($1.25
million) part of the $5 million coverage. The Lloyds portion (50% of the primary) will actually be
provided by a consortium. Currently, Marsh has secured a commitment for this portion from one
member of the consortium only (Canopius)but is working on securing commitments from the rest of
the Lloyds consortium prior to the meeting date. This agenda item will be updated as additional
information becomes available.
The overall premium for the primary layer is $900,512, which represents an increase of +$224,117
over last year's premium of $676,395 for the same coverage. The increase for the primary layer is
attributable both to an increase in the value of insured properties (primarily as a result of new
construction), and a dramatic increase in premiums by all property carriers in the marketplace as a
result of pressure from natural and non-natural catastrophes throughout the country in the past
several years.
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This layer of coverage has a deductible of$50,000, except for wind and flood events, which carry a
deductible of $1 million per location per occurrence. The County purchases other, separate wind
and flood policies from Citizens (wind) and multiple carriers through the NFIP to cover the
deductible.
Excess Coverage: In light of overall insured values, the County purchases excess insurance. For
the upcoming year, Marsh is offering two alternatives for its excess program.
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3 Layer Option": Currently, the County purchases excess insurance coverage from Landmark in
the amount of $232 million on top of the primary $5 million layer. This excess layer provides
excess coverage, but no excess coverage for wind or flood events.
For the upcoming year, as a first option, Marsh is proposing to purchase a new, first excess layer of
$5 million in coverage on top of the first $5 million of coverage through the primary
(Lloyds/Hiscox/Sompo) policy. The carrier is Great Lakes. The premium cost is $250,004, but
would also result in a cost savings on the next (Landmark) excess layer of approximately $12,000,
for a net incremental cost of $238,000. Whereas the current excess layer (Landmark) does not
provide any wind or flood coverage, this new excess layer provides full coverage including wind and
flood, for any claims that exceed the primary policy.
In addition to this, Marsh proposes to purchase a second excess layer (shown as Layer 3 in the chart
below) from the current excess carrier, Landmark, for an annual premium of $65,377. This would
provide coverage for $238 million in excess of(a) the primary $5 million layer, followed by (b) the
first $5 million excess layer from Great Lakes.
Under this option, the County's total property coverage premium for the upcoming policy year
would be $1,215,893, an increase of $287,209.20 in the County's annual premium when compared
to the premium the County paid for the 2017/18 premium. While the cost for Layer 2 is an
additional $237,738 vis-a-vis Option 2 without this layer, Staff and the County's insurance
consultant are recommending Option #1 because of the increased excess coverage. Staff
believes that this option provides the coverage necessary in light of overall property values that
need to be covered.
The resulting coverage would be as follows:
Layer Insurer Limits Deductibles Proposed Annual Premium
Hiscox Insurance $50,000 except
Company $Imillion per Hiscox-$188,004
Layer 1 Lloyds of London $5 million location per Lloyds of London-$500,004
Sompo Insurance occurrence for Sompo -$212,504
Company wind and flood Total-$900,512
events
Layer 2 Great American $5 million $5 million(Layer $250,004
$238,230,702 in $10 million
Layer 3 Landmark excess of$10 $65,377
million (Layers 1 and 2)
Total $243,230,702 $1,215,893
"2 Layer Option": As a second option, as an alternative, Marsh can provide the same program as
what is in place in the current policy year, which is essentially Layer 1,plus a non-wind, non-flood
excess layer. This option saves $250,004 but provides no excess coverage for claims in excess of$5
million for wind or flood events. If this option were selected, the resulting coverage would be as
follows:
Layer Insurer Limits Deductibles Proposed Annual Premium
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Hiscox Insurance $50,000 except
Company $lmillion per Hiscox-$188,004
Layer 1 Lloyds of London $5 million location per Lloyds of London-$500,004
Sompo Insurance occurrence for Sompo -$212,504
Company wind and flood Total-$900,512
events
$238,230,702 in $5 million
Layer 2 Landmark excess of$5 (Layer 1) $77,643
million
Total $243,230,702 $978,155
PREVIOUS RELEVANT BOCC ACTION: 1/21/15 - BOCC approved the Marsh USA bid
proposal and insurance purchases. 4/119/18 —BOCC approved renewal of the current policies.
CONTRACT/AGREEMENT CHANGES:
Marsh USA proposed Property Insurance with Lloyds of London, Landmark and Hiscox for annual
premium of$1,215,893.00 which represents an increase of$524,947.20.
STAFF RECOMMENDATION: Approval to accept Marsh USA proposal with "3 Layer Option"
and renew Property Insurance, with Layer 1 (primary) coming from Lloyds/Hiscox/Sompo, Layer 2
(excess) coming from Great Lakes, and Layer 3 (excess) coming from Landmark, and approval for
Risk Administrator to execute all necessary forms.
DOCUMENTATION:
Interisk Recommendation Letter
FINANCIAL IMPACT:
Effective Date: 5/1/19
Expiration Date: 5/1/20
Total Dollar Value of Contract: $1,215,893.00
Total Cost to County: $1,215,893.00
Current Year Portion: $690,945.80
Budgeted: Yes
Source of Funds: Internal Service Fund/Primarily Ad Valorem
CPI: N/A
Indirect Costs: N/A
Estimated Ongoing Costs Not Included in above dollar amounts: N/A
Revenue Producing: No If yes, amount:
Grant: N/A
County Match: N/A
Insurance Required: N/A
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Additional Details:
04/17/19 503-08502 - RISK MGMT INSURANCE $1,215,893.00
REVIEWED BY:
Maria Slavik Completed 04/02/2019 6:06 PM
Cynthia Hall Completed 04/02/2019 7:11 PM
Bob Shillinger Completed 04/03/2019 6:23 AM
Budget and Finance Completed 04/03/2019 6:36 AM
Kathy Peters Completed 04/03/2019 8:44 AM
Board of County Commissioners Pending 04/17/2019 9:00 AM
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I NTERISK CORPORATION
Consultants 1111 North Westshore Boulevard
Suite 208
Risk Management Tampa, FL 33607-4711
Employee Benefits Phone(813)287-1040
Facsimile (813)287-1041
April 2,2019
Ms. Maria Slavik,CPM
Risk Administrator
Monroe County
It I I I21s Street
Suite 408
Key West,Florida 33040
CL
Subject: Renewal of Monroe County's Property Insurance
Dear Maria:
Monroe County's Property Insurance expires on May 1,2019. The expiring Property policy is provided by
Lloyds of London and Landmark American Insurance Company. Both Lloyds and Landmark enjoy a
favorable rating from the AN Best Company,the leading evaluator of insurance company operations.
Lloyds provides the first$5 million of coverage that includes coverage for wind and flood related damages.
A$50,000 deductible applies to all non-wind and non-flood events and a$1 million per location per
occurrence deductible applies to wind and flood events. Landmark provides$237,328,227 of coverage for
damages that exceed$5million. The Landmark policy does not provide any coverage for wind and flood
events.The County is currently paying an annual premium of$690,945.80 for this coverage.
A
Marsh USA(the County's insurance agent)has extensively marketed the County's program and has
submitted the County's account to over 53 different insurers. It is believed that the insurers Marsh
approached represent the majority of insurers that have the ability and desire to write the insurance
coverages the County is seeking. Unfortunately,Marsh's efforts have not produced favorable results.
Most of the insurance companies approached by Marsh either declined to submit a proposal or their pricing
was not competitive.
As of a result of Hurricane Irma,the County suffered wind and flood damage to its buildings and contents
totaling$15.9 million. Lloyds has committed to providing its full policy limits($5 million)for the
Hurricane Irma losses. To date the County has received$1.5 million of this amount and subject to Lloyds
receiving the Release that has been approved by the Board Lloyds will issue another check in the amount of
$3.5 million. Landmark's policy did not provide any coverage for wind or flood events.
As a result of the losses the County suffered during Hurricane Irma and the insurers having to pay its policy
limits for the losses,Marsh has advised that they are having to restructure the County's Properly program.
Marsh offered two options for their restructured program. Their first option would continue to contain 2
layers with the first layer providing$5 million of coverage and would include coverage for wind and flood
events. The second layer would provide coverage for the next$238,230,702 and would not include
coverage for wind and flood events.Marsh's second option would contain 3 layers. The first layer would
continue to provide limits of$5 million and would continue to provide coverage for wind and flood events.
The second layer would provide additional limits of$5 million and would also include coverage for wind
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and flood events. This would increase the Co ty's wind and flood protection from 5 million to$10
million. The third layer would provide additional limits of$233,230,702 and would not include coverage
for wind and,flQod events. If the County were to acceptMarsh's second option,coverage would be
provided by Hiscox Insurance Company,Lloyds of London,Sompo Insurance Company,Great Lakes
Insurance Company and Landmark eric Insurance Company. Hiscox.and Sompo each has committed
to providing limits equal to 25%($1,250,000)of the first$S million. This equates to$2.5 million of
coverage. Marsh is working with Lloyds to structure e remaining$2.5 million of coverage.
It should be noted that Lloyds of London is not an actual insurer. It is a syndicated organization comprised
of 99 different insurers referred to as syndicates. Conoius Insurance Services is one of Lloyd's
syndicates. Conopious has committed to being the lead insurer providing limits of$500,00 part of$2.5
million for an annual premium of 10,000. Marsh has been unsuccessful,to date,in locating insurers that
would be willing to provide the remaining$2 million of the$ .5 million limits. Marsh has assurede
Countyat that they will complete the entire structure of the program prior to the expiration of the current
program for a total annual premium o 1, 15,83.
If the County acceptsMarsh's second option the structure of the program would be as follows:
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a er Insurer Limits Deductibles tLoposed Annual Premium
Hiscox Insurance $50,000 except
Co 1 million per Hiscox-$188,004
Lloyds of London location per Lloyds of London-$500,00
Layer ! Sompo Ins ce $5 million occurrence for Sompo-1212,504
Company wind and flood Total-$900,512
events
Great Lakes
Layer 2 Insurance 5 million 5 million $250,004
Company o
Landmark
American
233,230,72 in
Layer 3 Ins ce excess of$10 10 million 65,377
million
Company
0
o I $23,23 ,72 $1,215,993
If the County accepts 's first option the program would be structured similar to the current program
d the coverages would be provided by Hiscox Insurance Company,Lloyds of London,Sompo Insurance
Company and Landmark American Insurance Company.As with option 2 Hiscox,Sompo and Landmark
have already committed to the program. Conopius has also committed to provide limits o 5 ,00 part of
2.5 million of the first$5 million layer. Marsh is continuing their efforts to finalize the$5 million layer.
If the County selects Marsh's first option the program will be structured as follows®
Layer Insurer Limits Deductibles Proposed Annual Premium
Hiscox Insurance $50,000 except
Co $l million per Hiscox-$1 ,004
Layer 1 Lloyds of London $5 million location per Lloyds of London-$50,004
Sompo Insurance occurrence for Sompo-1212,504
Company wind and flood Total-$900,512
events
238,20,702 in
Layer 2 Landmark excess of SS $S million $77,643
million
Total $243,230,702 $ 7 ,155
All of the insurers being proposed by Marsh enjoy a favorable rating from AN Best.
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Since the County is seeking higher wind and flood limits it is believed that Marsh's second option would be
preferable.
The following table compares the major features of Marsh's proposed second option to the County's
program that is about to expire.
ExpiringPro enewal Pro ram
Total Insurable Limit $234,428,227 $243,230,702
Overall Policy Limits $234,428,227 $243,230,702
Major Sub-Limits
Named Windstorm $5,000,000 $10,000,000
Flood $5,000,000 $10,000,000
Building and Ordinance $10,000,000 $10,000,000
Builders Risk $5,000,000 $5,000,000
Extra Ex ense $5,000,000 $5,000,000
Deductibles
Basic $50,000 per Occurrence $50,000 per Occurrence
V Million per Location/Per $I Million per Location/Per >%
Named Windstorm
Occurrence Occurrence
Flood losses at properties not
0
located in Flood Zones A&V
and Flood losses not related to a $100,000 $100,000
Named Windstorm
5%of the property damaged, 5%of the property damaged,
Flood losses at properties located -J
in Flood Zones A&V subject to a minimum of$1 subject to a minimum of S I r-
Million million .2
Flood losses resulting from a $1 Million per location per $I Million per location per
Named Windstorm occurrence occurrence
Con ctors Equipment $5,000 except$50,000 for Named $5,000 except$50,000 for Named E
tra E
Windstorm Windstorm 0
0
$5,000 except$50,000 for Named $5,000 except$50,000 for Named
Communication Towers Windstorm Windstorm
$50,000 except 25%of loss $50,000 except 25%of loss A
Emergency Materials Arresting subject to a$500,000 minimum subject to a$500,000 minimum
System(EMAS) ford caused by aircraft far IMa e caused bz aircraft
E
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Please give me a call if you have any questions or wish to discuss this issue in more detail.
Cordially,
INTERISK CORPORATION
.....................
Sidney G.Webber
CPCU,ARM
CL
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