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Home My WebLink About2020-06-23; City Council; ; Purchase of $500 Million of Property Insurance Coverage Through Alliant Insurance Services, Inc.’s Alliant Property Insurance Program for Fiscal Year 2020-2021 in the AmoCA Review CKM Meeting Date: June 23, 2020 To: Mayor and City Council From: Scott Chadwick, City Manager Staff Contact: Ed Garbo, Risk Manager ed.garbo@carlsbadca.gov, 760‐602‐2471 Subject: Purchase of $500 Million of Property Insurance Coverage Through Alliant Insurance Services, Inc.’s Alliant Property Insurance Program for Fiscal Year 2020‐2021 in the Amount Not to Exceed $275,454.29 Recommended Action Adopt a resolution authorizing the purchase of $500 million of property insurance through Alliant Insurance Services, Inc.’s Alliant Property Insurance Program for fiscal year 2020‐21 in an amount not to exceed $275,454.29. Executive Summary The city is renewing its annual property insurance coverage in the amount of $500 million through Alliant Property Insurance Program for fiscal year 2020‐21 for an amount not to exceed $275,454.29. This renewal must be approved by the City Council because the cost exceeds $100,000 per agreement year. (See Carlsbad Municipal Code Section 3.28.040 (D)(1).) Discussion The city participates in the Alliant Insurance Services joint purchase program known as APIP – Alliant Property Insurance Program. The $500 million limit on a claim is per occurrence and is shared with approximately 47 other government agencies. None of the other agencies is in San Diego County. The overall limit was reduced by half this year because insurance carriers are trying to stem ongoing losses and tighten underwriting requirements. Alliant is negotiating the city’s property insurance renewal with APIP for fiscal year 2020‐21. A summary of the property coverage is shown in Attachment A of Exhibit 1. This coverage is similar to coverage in the current policy, with the exception of the lower policy limit. The policy period will run July 1, 2020 to June 30, 2021 and the estimated premium will not exceed $275,454.29. This is about a 21 percent increase over last year’s premium. This increase is due to an overall hardening of the property insurance market – prices are higher and policies are becoming more strict and harder to get. This is due to the continued large increases in catastrophic losses nationwide. June 23, 2020 Item #1 Page 1 of 6 Fiscal Analysis The premiums for APIP property insurance coverage will not exceed $275,454.29 in fiscal year 2020‐21. This is a $47,425 increase over prior year. The premiums will be paid with funds from the fiscal year 2020‐21 Liability Fund. Sufficient funds have been requested in the fiscal year 2020‐21 for these premiums. The Carlsbad Municipal Water District is also insured under this coverage and contributes to the premium through the budget process. Next Steps With the City Council’s approval, staff will create a purchase order for payment. Environmental Evaluation (CEQA) This action does not constitute a “project” within the meaning of the California Environmental Quality Act under Public Resources Code Section 21065 in that it has no potential to cause either direct physical change to the environment, or a reasonably foreseeable indirect change in the environment, and does not require environmental review. Public Notification and Outreach Public notice of this item was posted in accordance with the Ralph M. Brown Act and it was available for viewing at least 72 hours prior to the meeting. Exhibits 1. City Council resolution June 23, 2020 Item #1 Page 2 of 6 RESOLUTION NO. 2020-118 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, APPROVING THE PURCHASE OF $500 MILLION OF PROPERTY INSURANCE COVERAGE THROUGH ALLIANT INSURANCE SERVICES, INC.'S ALLIANT PROPERTY INSURANCE PROGRAM (APIP) FOR FISCAL YEAR 2020- 2021 IN AN AMOUNT NOT TO EXCEED $275,454.29. EXHIBIT 1 WHEREAS, the City Council ofthe City of Carlsbad, California has determined that it has a desire to renew its annual property insurance through Alliant Insurance Services, lnc.'s Alliant Property Insurance Program (APIP); and WHEREAS, Alliant Insurance Services has negotiated a renewal of $500 million of property coverage for the next fiscal year beginning July 1, 2020 and concluding on June 30, 2021, for an annual premium in an amount not to exceed $275,454.29. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the purchase of $500 million of property coverage through Alliant Property Insurance Program, effective July 1, 2020 to June 30, 2021, is approved and the Deputy City Manager, Administrative Services is authorized to issue a warrant in the amount not to exceed $275,454.29 for payment of the premium to Alliant Insurance Services (Attachment A). PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 23rd day of June, 2020, by the following vote, to wit: AYES: NAYS: ABSENT: Hall, Blackburn, Bhat-Patel, Schumacher. None. None. MATT HALL, Mayor 'Jv f 1/, 1 . \ .· ~YrJ~w -:~ 11~ 11/ fAui_ _ _; t'...--ARARBARA ENGLESON, ~,li,1,iCilWk "':U i.::.:. ,,,,,,~ CA~,,,,,,. "'o~ 'Tl.. ~ (SEAL) §~ .. ·m··· •v•.~J\ ,:c-: ~ ·.-v~ \CJ(~ ~}CJ ~~-----~---·· ~ 'l,, -A1·············~\.~~ "",,'-fFoo:~' ~ '/,,,,, n \,,,,-... I/IJ/llitllli\\\\\l June 23, 2020 Item #1 Page 3 of 6 Attachment A Terie Rowley From: Sent: To: Cc: Subject: Hi Ed, Rennetta Poncy <rponcy@alliant.com> Monday, June 1, 2020 12:42 PM Ed Garbo Jennifer C. Rodriguez; Banesa Laird; Terie Rowley RE: APIP -Property Update We have an adjustment to the premium below. This is for ACV on the auto physical damage. We do not have a quotation with RC on the auto physical damage at this time. We will.check into that. The revised premium is $275,111,61 We will have the actual proposal before out meeting on the 10th. Please let us know if you have any questions. Regards and Thanks, Rennetta Poncy Senior Vice President Public Entity Group Alliant Insurance Services, Inc. License #OC36861 (949) 660-8107 Direct (949) 756-2713 Fax (714) 403-3767 Cell E-mail: rponcy@alliant.com * note new e-mail address This email and its attachments are for the exclusive use of the intended recipients, and may contain proprietary information and trade secrets of Alliant Insurance Services, Inc. and its subsidiaries. This email may also contain information that is confidential, or otherwise protected from disclosure by contract or law. Any unauthorized use, disclosure, or distribution of this email and its attachments is prohibited. If you are not the intended recipient, let us know by reply email and then destroy all electronic and physical copies of this message and attachments. Nothing in this email or its attachments is intended to be legal1 financial, or tax advice, and recipients are advised to consult with their appropriate advisors regarding any legal, financial1 or tax implications. From: Rennetta Poncy Sent: Friday, May 29, 2020 3:53 PM To: 'Ed Garbo' <Ed.Garbo@carlsbadca.gov> Cc: Jennifer C. Rodriguez <jcrodriguez@alliant.com>; Banesa Laird <blaird@alliant.com>; Terie Rowley <Terle.Rowley@carlsbadca.gov> Subject: RE: APIP -Property Update Hi Ed, The program is not yet finalized and as of today they would not provide rates. They are expected to have it complete next week. At this time I would estimate $274,000 based on your Total Insured Values of: $275,437,805, which represents a 25% rate increase. I also wanted to remind you that they will not be offering the $18 limit at renewal. We 1 June 23, 2020 Item #1 Page 4 of 6 are anticipating it being reduced to $500,000,000. I will let you know as soon as we have the final premium which I might be able to get ahead of the proposal. I have also attached a property market update that might be helpful as you write up your report. Hope you have a good weekend! I will touch base early next week. Thanks, Rennetta Poncy Senior Vice President Public Entity Group Alliant Insurance Services, Inc. License #OC36861 (949) 660-8107 Direct (949) 756-2713 Fax (714) 403-3767 Cell E-mail: rponcy@alliant.com * note new e-mail address From: Ed Garbo [mailto:Ed~Garbo@carlsbadca.gov] Sent: Friday, May 29, 2020 11:14 AM To: Rennetta Poncy <rponcy@alliant.com> Cc: Jennifer C. Rodriguez <jcrodriguez@alliant.com>; Banesa Laird <blaird@alliant.com>; Terie Rowley <Terie.Rowley@carlsbadca.gov> Subject: RE: APIP -Property Update Importance: High This message has originated outside the organization. Hi Renetta, I'm doing the Council memos for our property renewal. What number should I place for the estimated property premium. I will also need this in writing. I need the number no later than Monday. Thanks, {'cit:yof Carlsbad Ed Garbo Risk Manager 1635 Faraday Ave. Carlsbad, CA 92008 ed.garbo@carlsbadca.gov T-760-602-2471 F-760-602-8555 2 June 23, 2020 Item #1 Page 5 of 6 C-760-814-4288 From: Rennetta Poncy <rponcy@alliant.com> Sent: Tuesday, April 28, 2020 9:41 AM To: Ed Garbo <Ed.Garbo@carlsbadca.gov> Cc: Jennifer C.Rodriguez<jcrodriguez@alliant.com>; Banesa Laird <blaird@alliant.com>; Terie Rowley <Terie.Rowley@carlsbadca.gov> Subject: APIP -Property Update Hi Ed, I hope you are doing well. We are all doing good. Still working remotely full time. When we discussed the property renewal early on. I believe we discussed the possibility of an adjustment being made to the overall limit. We were just notified that the carriers no longer want to offer Carlsbad the $1Billion limit. At this point, we believe the limit will be reduced to $S00M. As you know, the City's TIV is approximately $280M. Therefore, I don't foresee this change to be an issue. As an FYI, this is not specific to Carlsbad. Limits are being adjusted for all members based on their values. Please give us a call wlth any questions or concerns you may have. We will keep you updated as information becomes available. Stay safe and healthy! Rennetta Poncy Senior Vice President Public Entity Group Alliant Insurance Services, Inc. License #OC36861 (949) 660-8107 Direct (949) 756-2713 Fax (714) 403-3767 Cell E-mail: rponcy@alliant.com * note new e-mail address This email and its attachments are for the exclusive use of the intended recipients, and may contain proprietary information and trade secrets of Alliant Insurance Services, Inc. and its subsidiaries. This email may also contain information that is confidential, or otherwise protected from disclosure by contract or law. Any unauthorized use, disclosure, or distribution of this email and its attachments is prohibited. If you are not the intended recipient, let us know by reply email and then destroy all electronic and physical copies of this message and attachments. !\lathing in this email or its attachments is intended to be legal, financial, or tax advice, and recipients are advised to consult with their appropriate advisors regarding any legal, financial, or tax implications. CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content is safe. CAUTION: Do not open attachments or click on links unless you recognize the sender and know the content is safe. 3 June 23, 2020 Item #1 Page 6 of 6 All Receive -Agenda Item # J_ For the Information of the: CITY COUNCIL Date ~CA .f::.._CC .:b__ CM L ACM ~ DCM (3) .±_ June 23, 2020 Council Memorandum To: From: Via: Honorable Mayor Hall and Members of the City Council Laura Rocha, Deputy City Manager, Admini-trative Services Geoff Patnoe, Assistant City Manager (G,:::v {city of Carlsbad Re: Additional Materials Related to Staff Report Item No. 1 -Purchase of $500 Million of Property Insurance Coverage Through Alliant Insurance Services, Inc. This memorandum provides information related to staff report item no. 1 of the June 23, 2020 City Council agenda packet. There was a question regarding whether formal proposals had been . obtained for the renewal and purchase of $500 million of property insurance coverage for fiscal ye~r 2020-21. The city participates in pooled property insurance through the California Insurance Pool Authority {CIPA), a joint powers agreement for insurance, and property related coverages through the Alliant Property Insurance Program (APIP). By participating in this pool with other agencies, the city has been able to save significant cost over having an independent, standalone policy. City staff did not obtain formal premium quotes from other brokers for property insurance for fiscal year 2020-21 but rather reached out to other industry professionals for information regarding premiums and coverage. Based on these discussions, the property rates the city are paying are competitive. The insurance premium covers every single city building, including contents, every city vehicle, every library book and recording. Also covered are the city's water pumping stations and associated equipment. The yearly premium represents 1% of the actual value of the city's insured property. City staff did inquire of Alliant Insurance Services, Inc. (Alliant), the broker that administers the APIP program, regarding the large increase in premiums. The inforr,nation provided indicated that the insurance marketplace has changed drastically due to all the wildfire events in California. Insurance underwriters are taking a new view of wildfire exposure and raising rates, even if there have been no previous claims. Alliant also advised that for those agencies not in the APIP program, non-renewals and rate increases of 100% or more were occurring, even for insureds with no claims based on the wildfire exposure. Several municipal members of the APIP pool were dropped this year based on their negative loss histories. Alliant indicated that they are still unable to place these municipal members in other programs given the shrinking resources available in municipal property coverage. Administrative Services Branch 1635 Faraday Ave . I Carlsbad, CA 92008 I 760-602-2430 t Honorable Mayor Hall and Members of the City Council June 23, 2020 Page 2 After careful analysis and further discussion with CPIA and Alliant, staff determined that given the city's sizable claims paid out by Alliant over the last six years, and the uncertainty in the property insurance market, it was best for the city to renew with Alliant for fiscal year 2020-21. Staff also considered that the risk of a potential large claim occurring may cause a new insurance group to possibly cancel coverage. Obtaining new coverage after being cancelled can be extremely difficult. City staff will continue to stay engaged in the municipal insurance market to ensure that the rates paid for property insurance are competitive. cc: Scott Chadwick, City Manager Celia Brewer, City Attorney