Item C23
. '
BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
~keting Date: Aoril 17.2002
Division: Mana!?ement Services
Bulk Item: Yes --X- No
Department: Administrative Services/RiskManagement
AGENDA ITEM WORDING: Approval of insurance policy covering County propeny and contents
in the amount of$92,124.546. Lexington Insurance Co. would cover the first
$5.000,000 in values, including excess \vind and tlcod coverage. Roval Insurance CO.\vould insure the
. - - ~
additional 87, 124,546 excluding wind and flood coverage. CNA Insurance Co. would insure our boiler
and machinery equipment. The effective date oftl-tis policy would be 05/01/02.
ITEM BACKGROUND: Current propeny program with Allianz Insurance Co., has been extended
until May 1, 2002, Due to the insurance market being extremely limited in the number 0 f carriers and
the capacity of these carriers. it has become necessary tor us to go with 3 separate insurers in order to
obtain adequate coverage. If staff recommendations are approved, the County's 2002/2003 propeny
insurance will be essentially the same as the 2001/2002 program. except coverage for \\-lod and flood
losses will be limited to $5,000.000 in excess of the State and Federal programs. To obtain wind and
flood limits that are equal to the County's total insured values would have cost the County in excess of
$950,000. Based on the County's historical losses. it is believed that the premium savings justifies the
added exposure.
PREVIOUS REVELANT BOeC ACTION: Approval
CONTRACT/AGREEMENT CHANGES: New policies for County Property coverage
STAFF RECOMMENDATIONS: Approval.
TOTAL COST: $424.656.
BUDGETED: Yes ---L No
COST TO COUNTY: $424.656.
REVENUE PRODUCING: Yes
No X
AMOUNT PER MONTH
Year
APPROVED BY: County Atty ~ O~~/PurCha:;in!L-- . Risk Mat..;ement~) ,.
DIVISION DIRECTOR APPROVAL: ~0 d '-- i ~~
Ji-\.tvIES L. ROBERTS
DOCUMENTATION:
Included ~
To Follow
Not Required
DISPOSITION:
AGENDA ITEM # ~~
Revised 2/27/0 [
Monroe County Risk Management
1100 Simonton Street
Key West, FL 33040
(305) 292-4542 Voice
(305) 295-4364 Fax
(-'-~
O~~~o~~E
(305) 294-4641
BOARD OF COlJNIT COMMISSIOERS
MAYOR. Sonny McCoy. District 3
Mayor Pro tern, Dixie Spehar, District I
Nora Williams, District 4
George Neugent, District 2
Murray E. Nelson. District 5
.
MEMORANDUM
To:
Date:
James L. Roberts
County Administrator (I
~ \~(~
Wayne Robertson l.v'
Risk Management Administra~or V
" ') [' P IVV
Sheila Barke~U:u!:::; \ . v
Sr. DirectO"''-7J...tralive Services
April 3, 2002/
From:
Thru:
RE:
Monroe County Property coverage
After reviewing the options available to the County for our 2002 - 2003 property coverage renewal, I
concur with Interisk Corporation's recommendation. Even though we do have underlying State and
Federal policies for wind and flood, there are caps to the limits allowed. These policies are also subject
to deductibles. I feel it is in the County's best interest to have another layer up to $5,000,000 for wind
and/or flood, in case of a catastrophic loss.
I am available to discuss in further detail.
Thank you.
04/El3/2002 14:31
81328711341
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PAGE 02
INTERISK
CORPORATION
Consultants
1111 North Weltlhore Boulevud
Suite 208
Tampa. fL 33607-4711
Phone (113) 287-1040
Facsimile (813) 217-1041
Risk Mauaement
Employee Beftefits
April 3. 2002
Mt, Wayne Robertson
Rille Manager
Monroe County
S I 00 Coli. Road, Room 205
Key West, Florida 11040
,Dear Wayne:
The County currently purehases its Property insurance from Allianz Insurance Company dw includes
protection for losses resulting from wiad, t100d md brcKdown of macbinay and equipment. subject to
ftlUOftable deductiblu Tbe County i. paying an maual premium of S293 .172 for limits of approximatcly
$92 million. The poHcy is subject to the following _jor sub-limits:
)> Flood
> Breakdown of Macbinery and Equipment
SS million
SIS million
While the policy COIIIainI ocha' IUb-Jimits, they are aaocilKd with ucillary coverqes and are believed to
adequately protect tbe County"s interest. Varying deduaibles have been ClItabli.hed in all altcmpt to
maximize the COlt effectiveness orabe program. An overview orlhe major featurel of the currem program
is included on the ...ached evaluation spreadsheer,
Over the pac lCYer" yars, iDluraac:e compaaies have been altenqJCiaa to minimize the eft"cctI c:at.....opbic
losses have on their financial position, This bas resulted in companies.
)> RcducinS the amount ofinsurance they were wiJling to provide;
). Restriaing or eliminatins catastrophic coverasCl, such u those Clused by the perils of wind and ftood;
~ Providing coverqe only to tbose orpnizations that have I favorable Joss experience;
)> IWling deductibJes and
)> Increasi... premiums sianifac:andy.
A number ofilUlUl'lftcc companies withdrew from providing Propeny inauranc:e locally, This baa created a
shortage of quality Propeny inluta/l(;e. Many organizations have been raced with premium increues of
3~/. and more. Some organizations have been uuble to SClCUJ'e the iruurancc they aced and have had to
either partially or fully self-iftlure Ioaea dJat bad previoutly been tnusferTed to an inlUl"lllC8 company,
The trll8ic events of September II" further drained the 6RaJK:ial resources of in5UI~ companies that has
made mittel's even worse,
R.erognizing the problems with the insuratM:c market. the County's ascot (MMsh USA) was coow:tcd in
November 2001 to discuss the SU'1tCIY th.It should be used during the relNJ'keting oftbe County's Property
'.
04!El3/2ee2 14:31
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program, Durinlthe discussions, Marsh advised that Alliinz wurance Company (the incumbent insurer)
intended to renew the County's program at a reasonable COlt. Based on these diKussions and the difficulty
to obtain quality insurance, it was decided to coordilJate with Marsh and attempt to negotiate a favorable
~cncwaJ from AlIianz. In addition, M...sh was inst~cd to explore all optioos, to include the UK of other
Insure".
On December 21, 2001 Alliaoz issued a "Notice ofNonrencwal" indicatiDR that they were DOt goina to
renew the program uDue to pouible changes in terms, rates or condition,". Mush advised UI mat the
notice was sent out to comply with Florida Statutes and it WIS still Allianz's intent to I'CDCW the program.
This was supported by In e-mail, daccd January 29, 2002 tlw 9t.8lCd that they wc:rc uwilling to offer
rencwaJ. but do Doc know exact limits and price ioacases".
While March I, 2002 was established IS the date Marsh was to provide their formal proponJ(s), it was not
until March IS, 2002 that Marsh provided the first indication of the cost of the County's program for the
200212003 policy year. The indication was the pricing for the first S5 million of coverage alln lnIIUaI cost
ofS350,OOO Marsh could not provide firm quotations for the remainder of the program, but projected that
tbe total program wou1d co. betweeJl $700,000 and $150,000,
In an effort to explore all options, the Florida LealJUc of Cities (the Lca&ue) was col1tlCted in an eft"Oft to
persuade them to offer a competitive proposal that was more in line with what lhe County was currently
paying. In tbe past, the League had declined to propose on the County's property program, however,
foUowing a ~ of negotiations, the leegue &gnled to develop a proposal, excluding wind and flood.
They indicated dlat the cose oflheit pI'08run would ~ between S280,000 and $350,000, Unfonwwe1y. the
l...ague could !lOt obtain final commitment &om their re-insure:rs due to the fac:t tNt their re-inaunnce
contracts renewed 011 April 1-, The League was conccmcd tbal if they added anomer $92 million of
property exposure while negatiatioas wen: underway, it could have an averse affect on the pricins of their
reinsurance, They iDdicated tbat if Allianz could ex1eod the curreot program until May 1,2002, a formal
propoSlll could be produced,
Original attempts to obtain an extension from AlIianz were umuccessful and it wu not until they were
advi.ed that the County viewed their e-mail of Janua}' 29- II voiding their notice of nonrcnewaJ and were
willins to litipte this issue, tbat they finally apeed lID extend the current program until May 1,2003 at the
apirins pmIIium. The colt of the atet1aton for the month will be S2~,~lO, Florida stalUlel requin:
inlUrenl to provide the inaured with a forty-five (45) day notice if they plan not to renew an exillins policy,
On Match 26-, MII'Sb submitted the remainder oftbcit proposal that involved the UIC oCthrce (3) different
insurance compaaies, The total cost otMarsh's proposal was S950,OOO. Marsh wu advised that this wu
UDKceptabJe and tbe prosnm hid to be modified in an attempt to lower the premium. Manh was
inlUUCtecl to ddllt11line the cost of the prognm if the. perils of wind and flood were excluded or reduced.
Thi. apprOllCh WII taken becawe the COUJJIY currently purchases primary wind and flood inlUrance &om
Federal and St.e prosrlmS,
On April 2nd, Marsh offind four (4) optional propoll81s for consideration, The first oplion would provide
coverages COtIIisacot with the cumat prosnm, however wind and flood IosICs would be excluded. AlJianz
would provide the entire program with the exeeption of the Boiler and Machiaery coveragc that would be
provided by CNA InlUCance Compeny, The cost ordlis option would be S21O,435.
The first S5 million of coverage under Option 2 would be provided by Lexiogton Insurance Company and
would include protectioo for wind and flood losses. The remainder ofthCl program (S87,124,546) would be
provided by Alliaoz and would not include wind and flood. The COlt oftms option would be S455,26O,
Option) is csJellliaUy idemie&llo Opcioo I, howevs- the Royal Iasuraoee Company would provido the
coverages. The cost ofthi. option would be $207,&30
Option 4 is essentially identical to Option 2, however the Royallnsuranc:e Company would replace Allianz
as the insurer for loues in excess ofSS million, The cost oftlUs option would be $424,656.
2
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Since all ofme proposers enjoy a favorable nling ff9ID the A.M, Best Uld Company, the Ieldial evaluator
of insurance company opentionl, and both of the R.yal propoull (OpIioas 3 Uld 4).e leu CO!lIy than the
corresponding AJljanz's proposals (Option 1 and 2),!it is recommended that the Allianz's proposals be
eliminllled fi'om c:onaidention.
If Option 3 were selected, the County would have to rely solely on the Federal and State prOSfUlI for wind
and flood losses. Under the Federal flood program, limits ofS500,OOO per buildings and a separate limit of
SSOO,OOO for the building's contenas arc provided. The State wind proanm has maximum limits oU)
million per building. If a loss were to exceed these amounts, the County would have to Idf rond the
balance of the damages
lfOptiou 4 were selected, the County would have an additional 55 miUion ofprolection for wind and flood
related Iaue. in excess of the pnlCCClion being provided by the Fedcnland State prosraIDa.
'l'11eft is a poteIatiaJ of a. hurricane srrilcing the Keys lIhat could caule significant damage. It is therefore
believed that Option" would best SCl'VC the County', need.. The $424,6S6 tnmium i. ea.ier to budget
than the amount the County would have to absorb if a major lOll were to O<:CUr, It is therefore
recommended that Option .. be selected,
It should be noced that Marsh's oriBinal propoaI for S9S0,OOO is no Jonaer available since one of the
insurers (Ace Ioaurancc Company) was unwilling tOlexteocl its prOJlONl Ufltil May .-, In addition, the
Florida Leasue i. proc:eeding with ftuJWDS their proposal, bowever it i. DOt lDlicipaled that aU oft.beir
issues will be resolved in time so it can be prcscnted10 the Board.
The final issue that needs to be addressed is the fact that Mush's proposals failed to include the value of
the County'. c:oDtraaor'. equipment. TIle molt ream eslinwe oftbe value of the COUnty'l equiplncot il
$1,454,000. Manb is Ittemptins to have both Royal and A1lianz include the equiplDCDt at DO additional
cost. 1 will k~ you Idvised on any developments ~diDg this iaue. Ie i. not IDlicipued that the
resolution of this issue will alter our recommendations.
Inc:luded as part oftbis repon is a spreadsheet malyss c:ompuing the major featura of all fvur opIiooa to
the Coumy'acum:nt progrun.
As always, I will make myself available to disc:uss tile renewal in more detail at your convenience.
Cordially,
]:;ORroP.AnON
Sidney G. Webber
CPCU, AJlM
3
04/03/2002 14:31
Insurer
AM Best Rating
Limitll
Ral and Personal Property
Wind
flood
Law & Ordinance
Boiler and Machine
Deductible
Buildings valued under
$250 000
BuiJdinp "lual III excess
of $250 000
Wind & Had
Flood
Conmctors EqUIpment
EDP Eqwpmm.t
Communication T owen
Boiler & Machinery
R b.cement Cost
A ed Amo\mt
Blanket Limits
Premium
Comments
81328711341
INTERISK
MONR.OE COUNTY
2002/2003 PROPEK1"\' INSURANCE PROGRAM
RENEWAL ~VALUAnON
April 2002
A++
Allianz-A++
CNA-A
PAGE OS
cioo 2
Lexingron Insurance Co,
Alli2nz Insur.anc:e Co.
CNA Insur.ance Co.
Lczingtoo - A + +
.Alli2oz - A + .;-
CNA - A
$92059 92
$5 million
$500 000
S 15 milJion
. , -~1idJlg;'~1~t~:\5~_1\if.;'j
$50,000
None
None
$500 000
$15 million
Lexington S5.000,ooo
A1li:anz S87 J 24.546
T oCLl
$92124 46
53 million
$5 million
S500 000
StS miJlion
$100,000
$100,000
N/A
N/A
$1 million
5500,000
$5,000 except 150,000 fo.-
WUld & Hail
$5,000 uccpt 1100,000 for
Wind & Hail
$5,000 except $25.000 fcx
Wind & Had subj<<r to a
$50 000 maximum
$1.00 per KVA, subject to
a $1,000 mintmum
$5 000
$5 000
$5,000
$2.500 foe aD loca.tions
except $5,000 at the
Detention Center
Yes
No
No
AlIsanz - $275,279
CNA 5156
T oral '280,435
Yes
Yes
Yes
5293,172
4
$100,000
$1 million
5% (see attached Foomote
Sheet
$5,000 except $50,000 for
wind & hajJ
S5,OOO except S100.000 foe
wind & hail
55,000 except $50,000 for
wind & ba.il
$2,500 foc all locations
except 55,000 It the
Detention Center
Yes
No
No
Lexinton 5350,000
Alli2nz 100,104
CN^ 5 156
Total 4SS
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MONROE COUNTY
2002/2003 PROPERTY INSURANCB PROGRAM
RENEWAL f:VALUATION
April 2002
Insurer
AM Be:,t Racing
RoyaI- A
CNA - A
tioo 4
Lexington Insun.nce Co.
Royal Iosut2oce (.0.
CNA Iosunnce Co.
Lexington - A ++
Roy.al- A
CNA - A
Wind
Hood
Law & Ordinance
Boiler and Machin
Deductible
Buildjo valued under 5250,000
Buildings valued in escess of
$250,000
Wind & Hail
Aood
::"I.,--::a:ac::, i'::>':~ :t:!.". -. ._~; .
Limits
Real and l'ersonal Property
$92,124,546
....~-~..
~~~'_.
$50,000
$100,000
N/A
N/A
$1 million
5% (see aMCbed Foottloce
Sheet
15,000 CJ:cept lSO,OOO for
wind & bail
$5,000 except $100,000 fot'
wind & bail
$5.000 except $50,000 fot
wind & bail
$~ for a1l1ocatioos
except $5,000 at the
Detention Center
Yes
No
No
I....eXIIItun 1350,000
RoyaJ 69,500
CNA 5.156
ToW 424,6.56
ContDCton Equipment
$5,000
EDP Equipment
$5,000
Communiation Towers
lacemcru Cost
^ ed AmoWlt
Blanket Limits
Premium
55 000
$2,500 lOr aU locatioos
except $5,000 at tbe
Detention Center
Yes__
No
No
R0)'21 $202,674
CNA 5,156
Total S207,830
Boiler & Machinery
Comments
5
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MONROE COUNTY
2002/2003 PROPBRTT INSUllANCE PROGRAM
RENEWAL~VALUAnON
April 2002
FOOTNOTES
Under all options CNA will provide the Boiler and Machinery Insuranc;e. Previously Allianz included
the coverage as part of the Property policy and reinsured the coverage with eNA.
The Flood deductibk under options 2 and 4 have the foUowing qua1i6cations:
> A $1 miDion minimum per OCCUaalce for localion. within the Special Flood Hazud. Areas as
defined by the Fe~ Emergency Management Agency,
~ A $100.000 mioUnum pet occurrr:nce EOI: locations ouaidc the Special Flood Hazard.An:as as
defined by the Federal Emergency Ma.o:a8ement Agency if the loss is ass~d with. storm that
has hem named by the N2tioaal W cathu Servia.
> ^ $50.000 minimum and a $100.000 muimum per occuaeoce for Joations ouuide the Special
Flood Ha2atd Ateas as defined by the Fedeni Emergency ~c Agency if the Ion is
associated with a stmm that ha... not been named by me Nacioaal We:adlft Service.
6
.,