Item D09
BOARD OF COUNTY COMMISSIONERS
AGENDA ITEM SUMMARY
Meeting Date: April 19,2006
Division: Employee Services
Bulk Item: Yes .-lL-
No
Department: RiskManagement
Staff Contact Person: Maria L. Slavik
AGENDA ITEM WORDING: Approval to accept proposal from Marsh USA for Property Insurance package
through Lexington Insurance Company and Landmark American Insurance Company not to exceed $564,338.
Marsh is continuing their efforts to obtain more favorably priced insurance. It is also being requested that
authority be granted to Risk Management to accept an alternative proposal from Marsh if it is believed to
provide equal or superior coverage for a lower premium.
ITEM BACKGROUND: Provides replacement cost property insurance coverage for county buildings,
contents, communication towers and contractors equipment with a current value of $157,535,175 .
PREVIOUS REVELANT BOCC ACTION: Approval to bid this coverage at 11/19/03 Board meeting.
CONTRACT/AGREEMENT CHANGES: This proposal results in a premium increase of
$212,338. As a result of a recent appraisal, the County learned that the value of its property is currently
$157,575,175. This represents an increase of $66,505,354 in the County's total insured values as a result of a
recent appraisal. This increase will have a significant impact on the cost of the County's property insurance for
the upcoming year.
ST AFF RECOMMENDATIONS: Approval.
TOTAL COST: $564,338
BUDGETED: Yes ~
No
COST TO COUNTY: $564,338S0URCE OF FUNDS:_primarily ad valorum_
REVENUE PRODUCING: Yes
No -X AMOUNT PER MONTH_ Year
APPROVED BY:
County Atty
OMB/Purchasing _
Risk Management _
DIVISION DIRECTOR APPROVAL:
DOCUMENTATION: Included ~ To Follow_
Not Required _
DISPOSITION:
AGENDA ITEM #
Revised 2/27/0]
MONROE COUNTY BOARD OF COUNTY COMMISSIONERS
CONTRACT SUMMARY
Contract with: Marsh USA, Inc. Contract #_
Effective Date: 5/1/06
Expiration Date: 5/1/07
Contract Purpose/Description:
Property Insurance Renewal
Contract Manager: Maria Slavik 3178 Employee Services #1
(N ame) (Ext. ) (Department/Stop #)
for BOCC meeting on 4-19-07 Agenda Deadline: 4-4-2006
CONTRACT COSTS
Total Dollar Value of Contract: $ $564,338
Budgeted? YesL8J No 0 Account Codes:
Grant: $
County Match: $
Current Year Portion: $
503-08502-530-450-_
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ADDITIONAL COSTS
Estimated Ongoing Costs: $_/yr For:
(Not included in dollar value above) (eg. maintenance, utilities, janitorial, salaries, etc.)
CONTRACT REVIEW
Changes
Date Out
County Attorney
Division Director
Risk Management
~
o .M.B .IPurchasing
Comments:
OMB Form Revised 2/27/01 Mep #2
I NTERISK
CORPORA TION
Risk Management
Employee Benefits
1111 North Westshore Boulevard
Suite 208
Tampa, FL 33607-4711
Phone (813) 287-1040
Facsimile (813) 287-1041
Consultants
April 3, 2006
Ms. Maria Slavik
Risk Management Specialist
Monroe County
502 Whitehead St.
Key West, Florida 33040
Subject: Renewal of the County's Property Insurance
Dear Maria:
I have received a copy of Patrica Ibba's email indicating that Marsh has been unable to finalize the renewal
of the County's Property insurance that expires on May I, 2006. While every effort has been made to
conclude the renewal process prior to the agenda deadline for the April Board meeting, final details of the
renewal terms are not currently available. Over the past several years, the number of insurance companies
with the capability and desire to provide Property insurance in catastrophic prone areas (such as Monroe
County) has significantly declined and those that remain have reduced their employee workforce. The
decline in the number of insurers and employees has resulted in significant delays in obtaining renewal
proposals. In some cases organizations have not received the final renewal terms until long after the
renewal date.
The following table displays the structure of the County's current Property program.
Insurer Limits Annual Premium
Lexington $5,000,000 $352,000
Insurance
Company
Landmark $92,029,821 $58,218
American
Total $410,218
The premiums were based on total insured values of $97,029,821.
The program is subject to the following deductibles.
Buildings and Personal Property
with Total Values of less than $50,000
$250,000
Buildings and Personal Property
with Total Values of more than $100,000
$250,000
Wind and Hail $1 million
Contractors Equipment $5,000 except $50,000 for Windstorm & Hail
EDP Equipment & Media $5,000 except $50,000 for Windstorm & Hail
Communication Towers $5,000 except $50,000 for Windstorm & Hail
Flood $500,000 for real property and $500,000 for
personal property
Boiler and Machinery $5,000
Since the Landmark policy excludes all t100d related claims, the program has a $5 million sub-limit for
t100d losses.
Recognizing that wind and t100d losses could produce a financial burden for the County, separate coverage
from Federally and State sponsored programs have been purchased that reduces the deductible for wind
losses to 3% of the value of the buildings damaged and between $500 and $5,000 for nood related losses.
As a result of a recent appraisal, the County learned that the value of its property is currently $157,535,175.
This represents an increase of $66,505,354 (60%) in the County's total insured values. This increase will
have a significant impact on the cost of the County's property insurance for the upcoming year.
Marsh has advised that Lexington Insurance Company has agreed to renew its policy ($5 million of
coverage) for an annual premium of $444,738. While this represents an increase of $92,738 ($444,738-
$352,000), the fact that the total insured values increased dramatically, the proposal actually represents a
rate reduction. The following displays this fact.
2005 Insured Values $97,029,821
2005 Premium $352,000
Rate per $100 ofInsured $0.3627
Values
2006 Insured Values $157,535,175
2006 Premium $444,738
Rate per $100 of Insured $0.2823
Values
While Marsh has not finalized its negotiations for the balance of the program, preliminary indications are
that the premium for the Landmark policy will be no higher than $119,600. Currently the County is paying
$0.06 per $100 of insured values for the Landmark policy. Assuming the final premium for the 2006
policy does increase to $119,600, the rate per $100 of insured values will be $0.075. This would represent
a 25% rate increase. This increase is well within industry standards.
The terms and conditions of the renewal policies will be the same except the Hood deductible will be 5(10 of
the value damaged, subject to a $1 million minimum. Since the National Flood Insurance Program (NFIP)
only offers maximum limits of $500,000, the County would have to absorb all losses between $500,000 and
$1 million. Marsh is exploring alternatives to reduce or eliminate this exposure, however, the cost may be
prohibitive.
Taking everything into consideration, it is believed that Marsh will ultimately develop a program that is
viewed as being favorable. It is therefore recommended that the Board grant the County Administrator
with the power to bind the property insurance with Lexington Insurance Company and Landmark Insurance
Company if the total cost does not exceed $564,338.
As always, please do not hesitate to call if you have any questions.
Cordiall y,
INTERISK CORPORA nON
Sidney G. Webber
CPCU, ARM
CC: Teresa Aguiar