HomeMy WebLinkAboutPR 23122: PURCHASE OF WINDSTORM COVERAGE RENEWAL FORM USI-EFFECTIVE MAY 1, 2023 sill
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INTEROFFICE MEMORANDUM
Office of Safety & Risk Management
Date: April 14, 2023
To: Ronald Burton, City Manager
ia From: Trameka A. Williams, Director of Human Re urc
RE: A Resolution Authorizing the Purchase of Windstorm Coverage Renewal from USI —
Effective May 1, 2023
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, 2023 to
May 1, 2024 is $1,847,229.81. This amount represents an approximate 65.4% increase when
compared to last year's annualized premium of$905,933.99.
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.
The recommendation from RWL Group is to allow USI to be given the authority to approach all
available markets to secure a better option for the renewal wind coverage. Approving Proposed
Resolution is recommended with the intent of the broker to secure a lower offer between now
and May 1, 2023.
Staff Analysis, Considerations: The City advertised for bids for Windstorm coverage. One
response was received 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
"Remember we are here to serve the Citizens of Port Arthur."
Lloyd's of London and RSUI, 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.
Recommendation: I recommend approval of Proposed Resolution No. 23122 authorizing the
purchase of Commercial Windstorm Insurance (limit of $20,000,000 per occurrence) with a
projected budgetary impact of $1,847,229.81, underwritten on a quota share basis by certain
Underwriters at Lloyd's of London and RSUI, RLI, Berkshire Hathaway, Starr and Sompo
Endurance from USI Southwest, Inc. This amount represents an approximate 65.4% increase
when compared to last year's annualized premium of$905,933.99.
The damages sustained during Tropical Storm/Hurricane Harvey, Hurricanes Delta and Laura
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 #612-11-025-5410-00-00-000,
$1,847,229.81.
"Remember we are here to serve the Citizens of Port Arthur."
P.R. No. 23122
04/01//21 TAW
RESOLUTION NO.
A RESOLUTION AUTHORIZING THE PURCHASE OF COMMERCIAL WINDSTORM
COVERAGE IN AN AMOUNT NOT TO EXCEED $1,847,229.81 PER ANNUM
PROPOSED FUNDING BY: General Liability Insurance Fund
612-11-025-5410-00-00-000, $1,847,229.81
WHEREAS, bid specifications pertaining to the insurance coverage specified
below were made available to interested parties on January 4, 2023, and sealed bids
for the same were accepted until 3:00 p.m. on March 15, 2023 (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 and RLI each 25%
and RSUI with 50% (Primary $5,000,000), Berkshire Hathaway (Excess of Primary 33%
of $15,000,000), Starr (Excess of Primary 33% of $15,000,000), Sompo Endurance
(Excess of Primary 25% of $5,000,000) and RLI (Excess Primary 8.333% of $15,000,000)
from USI Southwest, Inc. with a projected budgetary impact of $1,847,229.81 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 and
RLI each 25% and RSUI with 50% (Primary $5,000,000), Berkshire Hathaway (Excess of
Primary 33% of $15,000,000), Starr (Excess of Primary 33% of $15,000,000), Sompo
Endurance (Excess of Primary 25% of $5,000,000) and RLI (Excess Primary 8.333% of
$15,000,000) from USI Southwest, Inc. with a projected budgetary impact of
$1,847,229.81 per annum, with a deductible of three (3%) 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,
2023, pending receipt of the Contracts of Insurance.
Section 4. That a copy of this Resolution be spread upon the minutes of the City
Council.
1
READ, ADOPTED, AND APPROVED this day of , AD, 2023, at a
Meeting of the City Council of the City of Port Arthur, Texas, by the following
vote: AYES: Mayor , Councilmembers
NOES:
Thurman Bill- Bartie, Mayor
ATTEST:
Sherri Bellard, City Secretary
APPROVED AS TO THE AVAILABILITY OF FUNDS:
Kandy Daniel, irector of Finance
APPROVED AS TO FORM:
-Val Tizeno, ity Attorney
APPROVED FOR ADMINISTRATION:
Ronald Burton, City Manager
Attachment "A"
RWLGRo1PIndependent Risk Management and Insurance Consulting, LLC
300 N. Coit Road, Suite 810, Richardson, Texas 75080-5456
15201 Lucian Street, Austin, Texas 78725-1751
Phone: 972-907-9095
512-904-0048
E-mail: carolync rwlgroup.com
Internet: www.rwlgrouo.com
CITY OF PORT ARTHUR
2023 WINDSTORM RFP RESPONSE ANALYSIS AND RECOMMENDATION
APRIL 14, 2023
RWL Group conducted an RFP for the City of Port Arthur for Windstorm coverage to be effective from May 1, 2023,to
May 1,2024. Although markets were assigned to four agents,only one response to the RFP was received, and that was
from USI Southwest, Inc. (USI),the incumbent agent.The one viable proposal is through insurance companies that meet
our A.M. Best financial rating requirements. However,the limit of coverage offered was$20,000,000 at a premium of
$1,847,229.81,subject to a 3%deductible. This is a 65.4%increase in cost over the 2022/2023 coverage.
We recommended that USI be given authority to approach all available markets in an attempt to secure a better option
for the renewal wind coverage. With the City's agreement, a Broker of Record letter was issued, releasing all markets
previously assigned to other agents who had not offered a response to the RFP. Unfortunately, at the time of this
writing, no better option has been negotiated.
The proposal is essentially the same coverage as the expiring program: $20,000,000 loss limit subject to a 3%minimum
$25,000 maximum $1,000,000 deductible for named storm damage,$25,000 for all other wind damage. Flood
coverage, including storm surge, is$5,000,000 subject to the following deductibles: SFHA Flood the maximum NFIP
coverage available whether purchased or not, plus$2,500,000 SFHA locations, plus 1%of TIV of affected locations;
$5,000,000 all other flood plus 1%of affected locations per unit. TML coverage is primary except any NFIP coverage
whether purchased or not is primary before TML.
I am recommending the City authorize the renewal wind coverage as presented with the understanding that USI will
continue working on bettering the offering between now and May 1, 2023.
In addition to the significant losses the City of Port Arthur has sustained,over the past few years there have been several
catastrophic events that have adversely affected the cost of windstorm coverage for coastal properties. Unfortunately,
the pricing reflected in the option provided by USI,as well as the inability of the other agents to obtain and present
quotes this year, reflect the reality of the current market.
Please let me know if you have any questions.
Respectfully submitted,
&JA2iiir • IAL(,k
Carolyn A. Miller, CPU
President/Senior Consultant
CITY OF PORT ARTHUR 2023 WIND RFP INITIAL COMPARISON
USI Southwest,Inc.
Current Coverage May 1,2022/2023 Proposed Renewal Coverage May 1,2023/2024
RLI 25%-Primary$5M;Lloyd's of London 25%of
RSUI 50%-Primary$5M;Lloyd's of London Primary$5M;RSUI 50%-Primary$5M;Berkshire
33.33%of Primary$5M;RLI 16.67%of$20M; Hathaway 33%-$15M x of$5M;Starr 33%-
Starr 50%of$15M excess of$5M;Sompo $15M x of$5M;Sompo 25%-$15M x of$5M;RLI
Carrier 33.33%of$15M excess of$5M 8.333%of$15M x of$5M
Total Limit $ 20,000,000.00 $ 20,000,000.00
Premium $ 1,054,598.46 $ 1,847,229.81
Coverages 175%
Limit subject to underlying schedule of Limit subject to underlying schedule of
$209,025,021;Replacement cost;No $252,990,740;Replacement cost;No
coinsurance;No exclusion for signal lights and coinsurance;No exclusion for signal lights and
poles,street lights and poles,decorative poles,street lights and poles,decorative lighting
lighting or fences and no separate deductible; or fences and no separate deductible;$1,000,000
$1,000,000 EE; Ordinance or Law coverage A EE; Ordinance or Law coverage A included in
included in limit,coverage B&C$1,000,000; limit,coverage B&C$1,000,000;$5,000,000
$5,000,000 flood coverage including SFHA flood coverage including SFHA locations subject
locations subject to$5,000,000 annual to$5,000,000 annual aggregate;storm surge is
aggregate;storm surge is included. No included. No coverage for buildings with pre-
coverage for buildings with pre-existing existing damage. DEDUCTIBLES: 3%minimum
damage. DEDUCTIBLES: 3%minimum $25,000 named storm deductible with a
$25,000 named storm deductible with a maximum$1,000,000;wind other than named
maximum$1,000,000;wind other than storm subject to$25,000 deductible;SFHA Flood
named storm subject to$25,000 deductible; the maximum NFIP coverage available whether
SFHA Flood the maximum NFIP coverage purchased or not,plus $2,500,00 SFHA locations,
available whether purchased or not,plus plus 1%of TIV of affected locations;$5,000,000
$2,500,00 SFHA locations,plus 1%of TIV of all other flood plus 1%of affected locations per
affected locations;$5,000,000 all other flood unit. TML coverage is primary except any NFIP
plus 1%of affected locations per unit. TML coverage whether purchased or not is primary
coverage is primary except any NFIP coverage before TML.
whether purchased or not is primary before
TML.
USI