HomeMy WebLinkAbout2021-07-13; City Council; ; Purchase of $100 million of property insurance coverage through Aon for Fiscal Year 2021-22 in an amount not to exceed $386,834Meeting Date: July 13, 2021
To: Mayor and City Council
From: Scott Chadwick, City Manager
Staff Contact: Ed Garbo, Risk Manager
ed.garbo@carlsbadca.gov, 760-602-2471
Subject:
District:
Purchase of $100 million of property insurance coverage through Aon for
Fiscal Year 2021-22 in an amount not to exceed $386,834
All
Recommended Action
Adopt a resolution authorizing the purchase of $100 million of property insurance through Aon
for fiscal year 2021-22 in an amount not to exceed $386,834.
Executive Summary/Discussion
The city is purchasing its annual property insurance coverage in the amount of $100 million
through Aon for fiscal year 2021-22 in an amount not to exceed $386,834. This purchase must
be approved by the City Council because the cost exceeds $100,000 for the agreement year, a
requirement set forth in Carlsbad Municipal Code Section 3.28.040(D)(1).
In the past, the city participated in the Alliant Insurance Services joint purchase program known
as APIP, the Alliant Property Insurance Program. On June 10, 2021, Alliant provided an initial
proposal for coverage for FY 2021-22 for an amount not to exceed $417,696. On June 28, an
unexpected revised proposal was received, and the estimated premium was reduced by
approximately $52,000. The new estimated premium will not exceed $365,812. This is about a
33% increase over last year’s premium however, and policy-wide coverages are significantly
decreased.
The city obtained a second proposal through Aon, which is currently the broker for the city’s
excess liability insurance pool program. The estimated premium will not exceed $386,834. This
is about a 40% increase over last year’s premium. For an additional cost of $21,022, the city will
receive broader coverage in comparison to Alliant’s policy. A summary of notable differences
between the two proposals can be found in Exhibit 2.
The policy period will run from July 1, 2021, to June 30, 2022.
July 13, 2021 Item #4 Page 1 of 4
Options
If the city should renew its property insurance coverage through Alliant’s APIP, it would be
obtaining reduced coverage for a nominal financial difference. Aon’s property insurance
program proposes to provide more coverage, especially in the areas of Auto and Cyber Liability.
Staff recommends accepting Aon’s offer.
The City Council can approve staff’s recommendation or direct staff to pursue other potential
options, which could result in increased costs to the city because of market conditions, and
leave the city without property insurance for a period.
Fiscal Analysis
Fiscal year 2021-22 premiums for Aon property insurance coverage will not exceed $386,834.
This represents a $111,380 increase over last year’s actual cost. The premiums will be paid with
funds from the FY 2021-22 Risk Management Fund. Sufficient funds for this premium have been
approved in the FY 2021-22 budget.
Next Steps
With the City Council’s approval, staff will create a purchase order for payment of these
premiums.
Environmental Evaluation (CEQA)
Pursuant to California Public Resources Code Section 21065, this action does not constitute a
“project” within the meaning of CEQA 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 therefore, does not require environmental review.
Public Notification and Outreach
This item was noticed in accordance with the Ralph M. Brown Act and was available for viewing
at least 72 hours prior to the meeting.
Exhibits
1. City Council Resolution
2. Key differences between Aon and APIP proposals
July 13, 2021 Item #4 Page 2 of 4
RESOLUTION NO. 2021-161
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING THE PURCHASE OF $100 MILLION OF PROPERTY
INSURANCE COVERAGE THROUGH AON FOR FY 21-22 IN AN AMOUNT NOT
TO EXCEED $386,834
WHEREAS, the City Council of the City of Carlsbad, California has determined that it has a desire
to purchase its annual property insurance through Aon; and
WHEREAS, Aon has negotiated a purchase of $100 million of property coverage for the next
fiscal year beginningJuly 1, 2021 and concluding on June 30, 2022, for an annual premium in an amount
not to exceed $386,834.
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 $100 million of property coverage through Aon, effective July 1,
2021 to June 30, 2022, is approved in an amount not to exceed $386,834.
3.That the City Manager or a designee is authorized to take any further action necessary
and appropriate to carry out the purpose and intent of this resolution.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 13th day of July, 2021, by the following vote, to wit:
AYES: Hall, Blackburn, Acosta, Bhat-Patel.
NAYS: None.
ABSENT: None.
MATT HALL, Mayor
/171/V1
BARBARA ENGLESON, City Clerk
(SEAL)
July 13, 2021 Item #4 Page 3 of 4
City of Carlsbad Property Insurance Renewal FY21-22
Line of Coverage Aon Alliant
All Risk
Property, Auto & Boiler/Machinery $ 355,565 $ 358,299
Pollution $ 17,647 $ 2,043
Cyber $ 13,621 $ 5,470
Total $ 386,834 $ 365,812
Difference $ 21,022
Below are some notable differences between the Aon and Alliant proposals for property insurance
coverage. For an increase of $21,022, Aon’s policy will provide:
Property
• Wildfire Claim Deductible:
o Aon – $25,000
o Alliant – $100,000 (due to 2014 wildfire claim)
Auto
• Aon calculated using Replacement Cost, the value to replace with new like-vehicles.
• Alliant calculated using Actual Cost Value (ACV), the value to replace with vehicles valued in
today’s retail used car market.
• Impact – 1 total loss could cover the increased premium
Cyber
• Aon's proposal includes:
o $2M Occurrence/$5M Aggregate limits;
o $500,000 Self-Insured Retention (deductible);
o 12-hour waiting period
• Alliant's proposal includes:
o $2M per member annual aggregate limit;
o Varying occurrence limits based on event;
o SIR varies from $50,000 – $250,000 based on Total Insured Values (tiered system)
o 8-hour waiting period
Pollution
• Aon’s proposal includes much lower Self-Insured Retention limits (deductibles):
o $50,000 SIR per pollution condition
o $100,000 SIR for sewer back-up occurrences
• Alliant’s proposal includes:
o $250,000 SIR for pollution incidents
o $500,000 SIR for sewer back-up occurrences
July 13, 2021 Item #4 Page 4 of 4