HomeMy WebLinkAboutPR 20776: THE PURCHASE OF WINDSTORM COVERAGE RENEWAL FROM USI - EFFECTIVE MAY 1, 2019 City of City
ort rthur
Texas
INTEROFFICE MEMORANDUM
Office of Safety & Risk Management
Date: April 2, 2019
To: Harvey Robinson, Interim City Manager \
From: Trameka A. Williams, Asst. Director of Human Resources
RE: A ,Resolution Authorizing the Purchase of Windstorm Coverage Renewal from USI —
Effective May 1, 2019
Nature of the request: This insurance provides Commercial Windstorm coverage for all
City properties in the event of Windstorm damage (hurricane, tornado, etc.) with an aggregate
limit of $20,000,000 per occurrence. The total estimated value of listed City properties is
$202,768,678. The annual renewal amount for the coverage for the period of May 1, 2019 to
May 1, 2020 is $583,727.55. This amount represents an approximate $128,210.55 when
compared to last year's annualized premium of$455,517.
In the past, City Council has opted, due to cost restraints, to cover only $15,000,000 of listed
City properties, assuming, in the case of catastrophic disaster, the Federal Government will
provide additional assistance necessary to replace such facilities. This policy will provide
coverage of$20,000,000 per occurrence. A named storm carries a deductible of three percent of
the total insurable value per affected unit, subject to a $25,000 minimum/$1,000,000 maximum
per named storm, or a$25,000 per occurrence deductible (wind/hail) for a non-named storm.
Staff Analysis, Considerations: The City advertised for bids for Windstorm coverage. Five
agencies requested and received bid packets. Only one response was received back and was
analyzed by RWL Group, The City's Risk Management Consultant. RWL Group and City staff
recommend that the City accept the Commercial Windstorm bid received and underwritten on a
quota share basis by certain Underwriters at Lloyd's of London, Starr and Sompo Endurance for
$20,000,000 limit per occurrence, with USI Southwest, Inc. which provides coverage'on all City
properties, including streetlights and the Water Treatment Plant.
"Remember we are here to serve the Citizens of Port Arthur"
Recommendation: I recommend approval of Proposed Resolution No. 20776 authorizing the
purchase of Commercial Windstorm Insurance (limit of $20,000,000 per occurrence) with a
projected budgetary impact of $583,727.55, underwritten on a quota share basis by certain
Underwriters at Lloyd's of London, Starr and Sompo Endurance from USI Southwest, Inc. This
amount represents an approximate $128,210.55 when compared to last year's annualized
premium of$455,517. This is considered a fair and reasonable settlement.
The damages sustained during Tropical Storm/Hurricane Harvey were less than the $20,000,000
limit carried. The proposed $20,000,000 limit is recommended as sufficient for coverage.
Budget Considerations: General Liability Insurance Fund #612-1702-581.52-00,
$583,727.55
"Remember we are here to serve the Citizens of Port Arthur"
P.R. No. 20776
04/02/19 TAW
RESOLUTION NO.
A RESOLUTION AUTHORIZING THE PURCHASE OF COMMERCIAL WINDSTORM
COVERAGE IN AN AMOUNT NOT TO EXCEED $538,727.55 PER ANNUM
PROPOSED FUNDING BY: General Liability Insurance Fund
612-1702-581.52-00 $583,727.55
WHEREAS, bid specifications pertaining to the insurance coverage specified below
were made available to interested parties on January 23, 2019, and sealed bids for the same
were accepted until 3:00 p.m. on March 13, 2019 (at which time all bids were opened and
read aloud) in accordance with State law and the City Charter; and,
WHEREAS, two (2) bids were received back and subsequently reviewed, as shown in
Attachment "A" (attached); and,
WHEREAS, after due consideration, RWL Group and City staff recommends that the
City bind Commercial Windstorm Insurance (limit of $20,000,000 per occurrence)
underwritten on a quota share basis by certain Lloyd's of London (Primary $5,000,000), Starr
(Excess of Primary 66.67% of $15,000,000) and Sompo Endurance (Excess of Primary
33.33% of $15.000,000) from USI Southwest, Inc. with a projected budgetary impact of
$583,727.55 per annum.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
PORT ARTHUR, TEXAS:
Section 1 . That, the facts and opinions in the preamble are true and correct.
Section 2. That the City Manager is hereby authorized to purchase an insurance
contract and bind coverage for Commercial Windstorm Insurance (limit of S20,000,000 per
$20,000,000 per occurrence) underwritten on a quota share basis by certain Lloyd's of
London (Primary $5,000,000), Starr (Excess of Primary 66.67% of $15,000,000) and Sompo
Endurance (Excess of Primary 33.33% of $15,000,000) from USI Southwest, Inc. with a
projected budgetary impact of $583,727.55 per annum, with a deductible of three percent of
the total insurable value per unit of insurance, subject to a $25,000 minimum/$1,000,000
maximum per named storm, or a $25,000 per occurrence deductible (wind/hail only) for a
non-named storm.
Section 3. That the City Manager is hereby further authorized to execute all necessary
instruments on behalf of the City of Port Arthur, with approval of the City Attorney, and to make
payment of necessary premiums to bind coverage effective May 1, 2019, pending receipt of the
Contracts of Insurance.
Section 4. That, a copy of this Resolution be spread upon the minutes of the City
Council.
READ, ADOPTED, AND APPROVED this day of , AD, 2019, at a
Meeting of the City Council of the City of Port Arthur, Texas, by the following vote:
AYES: Mayor , Councilmembers
NOES:
Derrick Ford Freeman, Mayor
ATTEST:
Sherri Bellard, City Secretary
A"ROVED AS TO THE AVAILABILITY OF FUNDS:
c_.
Rebecca Underhill, Interim Director of Finance
APPROVED AS TO FORM:
//41
Val Tizeno, City At"4ey
APPROVED FOR ADMINISTRATION:
Harvey Robinson, Interim City Manager
Attachment "A"
RWLGROUJ Independent Risk Management, Insurance, and Employee Benefits Consultants
300 N. Coit Road, Suite 810, Richardson, Texas 75080-5456
15201 Lucian Street, Austin, Texas 78725-1751
Phone: 972-907-9095;512-904-0048
Fax: 972-907-9198
E-mail: carolynerwlgroup.com
Internet: www.rwlgroup.com
2019 WINDSTORM RFP RESPONSE ANALYSIS AND RECOMMENDATION
APRIL 1, 2019
Five agents requested market assignments. However, only two agents provided a response to the 2019 Wind
RFP. Currently, the City's wind coverage is $20,000,000 per occurrence subject to a 3% per occurrence
deductible, minimum $25,000, maximum $1,000,000 for named storm wind, and $25,000 deductible for all
other wind losses. The annualized premium for this coverage was $661,974.60. Annualized premium was
used in this analysis because $5,000,000 of flood coverage was added effective October 1, 2018. In addition,
some properties were added mid-term because repairs from Hurricane Harvey were completed after the
beginning of the 2018 policy term. The annualized premium allows for a better comparison to the limits and
premiums from the current RFP.
Following interviews, each agent was given the opportunity to submit a best and final offer. The incumbent
agent, USI, offered two options. The first option was for $20,000,000 limit subject to a 2% minimum $25,000,
maximum $1,000,000 deductible for named storm, and $25,000 deductible for all other wind at a premium of
$634,038.05. The second option was for a 3% minimum $25,000, maximum $1,000,000 deductible for named
storm, and $25,000 deductible for all other wind at a premium of$583,727.55. Both options include $5,000,000
excess flood.
McGriff, Williams and Seibels, Inc. offered three options. The first option was for a $20,000,000 limit, subject
to a 2% named storm deductible, subject to a $50,000 minimum and $4,081,423 maximum per occurrence;
and 2% per occurrence, per location deductible for all other wind, subject to a $50,000 minimum. The
premium for option one is $499,842. The second option was for a $30,000,000 limit with the same deductible
options as the first option at a premium of$568,890. The final option was for a limit of $20,000,000 with the
same named storm deductible, but a 2% minimum $50,000/maximum of$1,000,000 for all other wind losses.
The premium for this option is $562,842. None of the options provided by McGriff included flood coverage.
Last year it cost an annualized premium of just under $110,000 to add the $5,000,000 flood.
Considering the limits and coverages offered, I feel the $20,000,000 limit with the 3% deductible/$1,000,000
maximum deductible offered by USI is the best option for the City. The annual premium is $583,727.55. This
offer represents a cost savings of just over $50,000 based on the annualized premiums for 2018 versus the
renewal offer at $583,727.55. Although the premiums offered by McGriff were less, the deductibles offered
were much less favorable, and there was no flood coverage included.
Please let me know if you have any questions.
Sincerely yours,
Carolyn A. Miller, CPCU
Senior Consultant
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