HomeMy WebLinkAboutPR 21350: PURCHASE OF WINDSTORM COVERAGE RENEWAL city of - s `\
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INTEROFFICE MEMORANDUM
Office of Safety & Risk Management
Date: April 3, 2020
To: Ronald Burton, City Manager
From: Trameka A. Williams, Director of Human Re
L4W-
RE: A Resolution Authorizing the Purchase of Windstorm Coverage Renewal from USI —
Effective May 1, 2020 .
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 $701,391.61. This amount represents an approximate increase in the amount of
$117,664.06 when compared to last year's annualized premium of$583,727.55.
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.
StaffAnalysis, Considerations: The City advertised for bids for Windstorm coverage. One
agency requested and received a bid packet. 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. 21350 authorizing the
purchase of Commercial Windstorm Insurance (limit of $20,000,000 per occurrence) with a
projected budgetary impact of $701,391.61, 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 $117,664.06 increase when compared to last year's
annualized premium of$583.727.55. This is considered to be fair and reasonable.
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,
$701,391.61
"Remember we are here to serve the Citizens of Port Arthur"
P.R. No. 21350
04/03/20 TAW
RESOLUTION NO.
A RESOLUTION AUTHORIZING THE PURCHASE OF COMMERCIAL WINDSTORM
COVERAGE IN AN AMOUNT NOT TO EXCEED $701,391.61 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 13, 2020, and sealed bids for the same
were accepted until 3:00 p.m. on March 4, 2020 (at which time all bids were opened and
read aloud) in accordance with State law and the City Charter; and,
WHEREAS, one (1) bid was 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$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$701,391.61 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 , 2020, 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, 2020, at a
Meeting of the City Council of the City of Port Arthur, Texas, by the following vote:
AYES: Mayor , Councilmembers
NOES:
Thurman "Bill" Bartle, Mayor
ATTEST:
Sherri Bellard, City Secretary
APPROVED AS TO THE AVAILABILITY OF FUNDS:
Kandy Daniel, Interim Director of Finance
APPROVED AS TO FORM:
Val Tizeno, C' y Att. ey
APPROVED FOR AD I► TR. TION:
Ronald Burton, City Mana•e►'.
Attachment "A"
R IPTJGROJP Independent Risk Management and Insurance Consultants
300 N. Colt Road,Suite 810,Richardson,Texas 75080-5456
Phone: 972-907-9095
Fax:972-907-9198
E-mail:rwlgroup@rwlgroup.com
Internet:www.rwlgroup.com
2020 WINDSTORM RFP RESPONSE ANALYSIS AND RECOMMENDATION
MARCH 13,2020
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 premium at inception for this coverage was $583,727.55. Although four agents requested market
assignments, only the incumbent agent, USI, provided a response to the 2020 Wind RFP.
A broker interview was not held this year for various reasons, not the least of which is the COVID 19 problem
facing the Country this year. However, we did discuss the RFP response with USI and requested: 1) Premium
relief for the one options that was quoted, which was the same limits, terms and conditions as the expiring
program, but with a $2,000,000 maximum named storm deductible rather than $1,000,000; 2) an option for a
$1,000,000 maximum named storm deductible at the $20,000,000 loss limit; and 3) an option for a
$15,000,000 loss limit with a 3% named storm deductible, subject to a $25,000 minimum and $1,000,000
maximum.
Following our discussion, USI approached their underwriters and was advised that there was no premium relief
available on the initial offering submitted. However, the underwriters did provide quotes for the additional two
options as requested. The $20,000,000 per occurrence limit with 3%, minimum $25,000 maximum $1,000,000
deductible option was priced at $720,578.05, which is only $19,186 more than the maximum $2,000,000
deductible option; and the $15,000,000 per occurrence limit with 3%, minimum $25,000 maximum $1,000,000
deductible option was priced at $694,377.61. Each option includes $5,000,000 excess flood coverage.
Considering the limits and coverages offered, I feel either the $20,000,000 loss limit with the 3% minimum
$25,000 deductible/$1,000,000 maximum deductible, or the $15,000,000 loss limit with the 3% minimum
$25,000/$1,000,000 maximum deductible would serve the City's needs. If the City is focused on maintaining
the $20,000,000 limit, the lower deductible is in the City's best interest. If the City is focused on budget
concerns, the $15,000,000 loss limit is the better option. Keep in mind that although the damage from Harvey
exceeded $20,000,000 almost all of the damage was caused by flood, not wind. The largest loss the City has
sustained due to wind in recent years was from Hurricane Rita, and the loss was around $8,000,000.
Consequently, the $15,000,000 loss limit is likely sufficient.
Please let me know if you have any questions.
Sincerely yours,
/02-6//itj
Carolyn A. Miller, CPCU
Senior Consultant
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