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Item O4 04 BOARD OF COUNTY COMMISSIONERS COUNTY of MONROE �� i Mayor Holly Merrill Raschein,District 5 The Florida Keys Mayor Pro Tern James K.Scholl,District 3 Craig Cates,District 1 Michelle Lincoln,District 2 David Rice,District 4 Board of County Commissioners Meeting April 17, 2024 Agenda Item Number: 04 2023-2361 BULK ITEM: No DEPARTMENT: County Attorney TIME APPROXIMATE: STAFF CONTACT: Brian Bradley N/A AGENDA ITEM WORDING: Approval to renew Property and Boiler& Machinery insurance for a cost not to exceed $3,447,384. ITEM BACKGROUND: The County's Property coverage expires on May 1, 2024. The current program is segregated into 3 layers. The attachment "Evaluation Letter" displays the structure of each layer when the 2023/24 program was initially bound. Throughout the year properties have been added and deleted from the Program. Therefore, the premiums shown are as when the program was initially bound. Marsh is continuingto o negotiate with insurers which could result in minor improvements in the premiums. This represents a decrease of$336,086 (-16.27%) in the County's annual premium when compared to the premium the County paid for the 2022/23 premium. The renewal provides replacement cost property insurance coverage for County buildings, contents, communication towers and contractors equipment with a current value of$307,055,367. Coverage for wind and flood losses is limited to $10 million in excess of the limits provided by the State administered wind program (Citizens) and the National Flood Insurance Program(NFIP). (The maximum limits under the Citizens program are $1 million per building and maximum limits under the NFIP are $500,000 per building.) 3509 In addition, the County's Boiler and Machinery coverage also expires on May 1 It. The Boiler and Machinery coverage is provided through a separate policy issued by the Hartford Steam Boiler Inspection and Insurance Company with limits of$100 million and a per incident deductible of$5,000 except for damage to Air Conditioning and Refrigerating Equipment which has a $25.00 per HP deductible (Minimum $5,000) . Hartford Steam Boiler enjoys a favorable rating from the AM Best Company, the leading evaluator of insurance company operations. The annual premium for the expiring coverage is $13,290. It should be noted that the County's Boiler and Machinery exposure is considerably less than the $100 million limit. It is common for Boiler and Machinery insurers to offer limits considerably higher than the exposures. The coverage is being primarily purchased to obtain State required inspections of 4 pressure vessels located at the Detention Center on Stock Island. The County is currently paying $16,141 for this coverage. Marsh is in final negotiations with Hartford and exploring alternative insurers. They are estimating a renewal premium of not to exceed $20,000. Assuming this is correct, it is believed this would be a reasonable renewal and it is recommended to renew the Boiler and Machinery coverage with Hartford(or an acceptable alternative) for the 024/25 policy year. HSB has agreed to renew the County's Boiler and Machinery coverage for an annual premium of not to exceed $20,000. This represents an increase of$3,859 (23.90%). This policy covers the boilers at the jail, which are necessary for that facility to operate. This number should come down closer to the signing this contract. PREVIOUS RELEVANT BOCC ACTION: Approval. INSURANCE REQUIRED: No CONTRACT/AGREEMENT CHANGES: none STAFF RECOMMENDATION: Approval. DOCUMENTATION: Evaluation Letter.doc Monroe m Property Program Structure 2024.xlsx FINANCIAL IMPACT: Effective Date: 5/1/24 3510 Expiration Date: 4/30/25 Total Dollar Value of Contract: $3,447,384 Total Cost to County: $3,447,384 Current Year Portion: $3,447,384 Budgeted: Yes Source of Funds: 503-08502-00054 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 Additional Details: 3511 InteriskCorporation Risk Mgt.&Employee Benefits Consultants 1101 Red Maple Circle N.E.,St. Petersburg, Florida 33703-6318 — telephone: 813-287-1040 www.interisk.net April 1, 2024 Brian Bradley RMLO,FCRM Risk Manager Monroe County Attorney's Office I I 1112th Street, Suite 408 Key West,FL 33040 Subject: Property/Boiler and Machinery Renewal Brian, The County's Property coverage expires on May 1,2024. In addition,the County's Boiler and Machinery coverage also expires on May 111. The Boiler and Machinery coverage is provided through a separate policy issued by the Hartford Steam Boiler Inspection and Insurance Company with limits of$100 million and a per incident deductible of$5,000 except for damage to Air Conditioning and Refrigerating Equipment which has a$25.00 per HP deductible (Minimum$5,000) . Hartford Steam Boiler enjoys a favorable rating from the AM Best Company,the leading evaluator of insurance company operations. The annual premium for the expiring coverage is$13,290. It should be noted that the County's Boiler and Machinery exposure is considerably less than the$100 million limit. It is common for Boiler and Machinery insurers to offer limits considerably higher than the exposures. The coverage is being primarily purchased to obtain State required inspections of 4 pressure vessels located at the Detention Center on Stock Island. The County is currently paying$16,141 for this coverage. Marsh is in final negotiations with Hartford and exploring alternative insurers. They are estimating a renewal premium$20,000.Assuming this is correct,it is believed this would be a reasonable renewal and it is recommended to renew the Boiler and Machinery coverage with Hartford(or an acceptable alternative)for the 024/25 policy year. The Property program includes coverage for: 0 The County's Buildings and Contents 0 The County's Mobile/Contractors Equipment 0 The County's EDP Equipment 0 The County's Communication Towers and Equipment 0 The County's EMAS system at KWIA The current program is segregated into 3 layers. Following displays the structure of each layer when the 2023/24 program was initially bound. Throughout the year properties have been added and deleted from the Program. Therefore,the premiums shown are as when the program was initially bound. Layer 1 (Includes Named Storm Wind and Flood Coverage) Annual Total Layer Total Insurer Limits Provided Premium Limits Layer Premiums Westchester $2,000,000 part of $1,200,000 $5,000,000 London—Conopius $852,500 part of$5,000,000 $300,000 $5,000,000 $2,519,750 Kemah $500,000 part of$5,000,000 $450,000 London $1,647,500 part of $744,325 $5,000,000 Layer 2(Excludes Named Storm Wind and Flood Coverage) RLI $5,000,000 1 $142,500 1 $5,000,000 $142,500 Layer 3 (Excludes Named Storm Wind and Flood Coverage) RSUI $40,000,000 $100,000 $40,000,000 $100,000 3512 Subtotal $50,000,000 1 $2,762,250 $50,000,000 Parametric Insurance National Fire and $5,000,000 $1,000,000 $5,000,000 $1,000,000 Marine Grand Total $3,762,250 Parametric Insurance is a relatively new form of insurance that bases its coverage on wind speed(expressed by category of the storm)rather than the physical damage to insured property. The program is subject to the following deductibles. Property/Peril Amount Building&Personal Property $50,000 Named Windstorm $1 million EDP Equipment&Media $5,000 except$50,000 for wind Contractors Equipment $5,000 except$50,000 for wind Communication Towers $5,000 except $50,000 for wind 5%of TIV at each location, Flood subject to $1 million per occurrence Boiler and Machinery $5,000 All of the insurers participating in the expiring program enjoys a favorable rating from the AM Best Company. Marsh USA serves as the County's agent/broker for the coverages. Marsh is the largest insurance broker in the world and has the technical expertise to respond to the County's needs. Last year the insurance market place was extremely difficult. Capacity has increased considerably that has driven insurance rates down. Insurers are also offering improved terms and conditions. Marsh has submitted the following renewal program for the 2024/2025 policy year. Layer 1 (Includes Named Storm Wind and Flood Coverage) Annual Total Layer Total Insurer Limits Provided Premium Limits Layer Premiums Fast Track $375,000 part of$5,000,000 $156,749 AWAC $1,650,000 part of $627,000 $5,000,000 London—Conopius $888,900 part of$5,000,000 $346,671 $5,000,000 $2,139,562 Kemah $500,000 Part of$5,000,000 $216,092 Westchester $1,586,100 part of $793,050 $5,000,000 Layer 2(Excludes Named Storm Wind and Flood Coverage) RLI $5,000,000 1 $165,000 $5,000,000 $165,000 Layer 3 (Excludes Named Storm Wind and Flood Coverage) RSUI $40,000,000 $122,822 $40,000,000 $122,822 Subtotal $50,000,000 +—$2,427,384 $50,000,000 Parametric Insurance National Fire and $5,000,000 $1,000,000 $5,000,000 $1,000,000 Marine Grand Total $3,427,384 Marsh is continuing to negotiate with insurers which could result in minor improvements in the premiums. 3513 At the request of the Airport,discussions were held with Marsh to eliminate Airport properties from the program and establish a stand-alone program for them. While no confirmed proposals have been received yet,Marsh estimates that the premiums can be reduced by approximately$800,000 if the Airport properties are eliminated from the program. Marsh is estimating that the Airport's stand-alone program would cost approximately$1,100,000. In addition,the terms and conditions of the policy would not be as broad as the main program. For example,the new terminal construction project scares insurers. They understand that a current Builders Risk policy has been purchased for the project,however the Master Property Program includes$5 million of Builders Risk Coverage. The insurers interested in providing a stand-alone policy for the Airport are concerned they may be drug into a Builders Risk claim at the Airport and are not willing to offer Builders Risk coverage in the stand-alone policy. It is believed that purchasing a stand-alone policy for the Airport is not a cost effective option. Marsh is also exploring an option to increasing the Named Windstorm/Flood limits from$5 million to$10 million. Possible adjustments to the Parametric policy may be made to defer a portion of the cost. I think it may be wise to consider the additional Named Windstorm/Flood limits. It is believed that Marsh's renewal proposal is attractive for the following reasons. ➢ As of a result of a recent appraisal of the County's properties their values have increased from nearly$284 million to almost$308 million. ➢ The terms and conditions of the expiring program will be retained for the 2024/25 policy year. It is believed the terms and conditions are broader than normally be retained. ➢ Premiums are being reduced by nearly$340,000. This despite the fact that the County's Property values have increased by nearly 9%. The following recommendations are offered. 1. Renew the Master Property Program as being proposed by Marsh for the 2024/25 policy year. 2. Continue exploring the option of increasing the Named Windstorm/Flood limits to$10 million. 3. Evaluate any changes Marsh recommends to their current proposal to determine if they are in the best interests of the County. 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 3514 Page Left Intentionally Blank 3515 cfl LO M M s. G1 O • Ff3 '� O W Rr� Ff3 � � M � O �' vi � O vi vi O O w � v3 U � cn �! ^; ^; o0 00 0 0 _ � L a a w 0 . n H w pww ¢ p" o � o � _ i on�pw i N � a ly � � N � Q O N � U N � � O vi '� •� a ti LO M N o z °o o o o z °o 0 0 o . o o y N N ly ly ly � .fl .fl z o o o o z o � � � ra F •� O O p "� p "� p "� O O � � t1r a � z z z a y3 0 0 0 0 w a o a w o w ¢ a z z z a N o 0 0 o M N N :n a � co T- LO M v, 00 � N o o N N M N M ly ly ly a N O O N M O M O 00 N M ly ly a O � � M N Vl 1p O �O N N ct � � O �a H a sue. 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