Report Prepared by: Maggie Lemos, Risk Analyst
Title
SUBJECT: Approval of Property, Boiler and Machinery Insurance Renewal Through Alliant Property Insurance Program in the Amount of $1,049,070.11 for Program Year 2023/2024
REPORT IN BRIEF
Considers approving the renewal of the City’s policy through Alliant Property Insurance Programs (APIP) at 55.88% premium increase, amounting to $1,049,070.44 for program year 2023/2024.
RECOMMENDATION
City Council - Adopt a motion
A. Ratifying the renewal of the property and boiler and machinery insurance through the Alliant Property Insurance Programs (APIP), administered by Alliant Insurance Services for the period of July 1, 2023, through June 30, 2024; and,
B. Authorizing the City Manager or Deputy City Manager to execute the necessary documents.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Refer to staff for further study; or,
3. Take no action.
AUTHORITY
Charter of the City of Merced, Article XI, Fiscal Administration.
CITY COUNCIL PRIORITIES
As provided for in the 2023-24 Adopted Budget.
DISCUSSION
The City of Merced joined the Public Entity Property Insurance Program (PEPIP), a group purchasing program, as authorized by the City Council in 1993. The PEPIP program changed its name to Alliant Property Insurance Programs (APIP) after having merged with two other large Alliant Insurance purchasing pools. APIP now insures approximately 10,000 members with a total insurance value of $500 billion. The advantage of being a member of a purchasing group is that we can capitalize on lower premium rates based on the volume and value (per hundred dollars) of insured property.
The property market has been in an unprecedented hard cycle since 2017. Weather related events are problematic to the insurance industry and the frequency and severity of these events has increased over the last few years. Inflation, social inflation, natural disasters, and lack of capacity have had a huge impact on insurance rates. Insurance companies are incurring more claims and expenses on an overall basis. The increase in claims and the cost of claims drive the need for increased pricing across the board for insurance providers. In addition, underwriters are concerned about valuation and ensuring that an insured’s reported values properly and accurately reflect their exposure. APIP closely monitors insured values for accuracy including application of a 7.5% trend factor for real and personal property.
The City experienced an increase in account rate (per hundred dollars) of 55.88% in the amount of $1,049,070.11 for all premiums (based on today’s total insured values of $388,419,039 which increased 16.22%), the total account rate of $0.2700872 for program year 2023/2024. Last year the rate was $0.2013782.
The City experienced an increase in Property annual premium of 57.51% in the amount of $1,028,454.75. There was also an increase in Pollution Liability annual premium of 35.30% in the amount of $3,445.18, but a decrease in Cyber Liability annual premium of -2.06% in the amount of $17,170.18.
The City maintained a per occurrence; all Perils, Coverages of $500,000,000. The City maintained an all-risk deductible of $25,000. Vehicle physical damage deductible $25,000, except $50,000 for police vehicles under $250,000, $100,000 for all vehicles with RCV of $250,000 to $750,000, $250,000 for all vehicles with RCV more than $750,000.
IMPACT ON CITY RESOURCES
Actual cost for property insurance came in significantly higher than initially estimated for Fiscal Year 2023-24 budget. Once we receive actual costs of all insurance premiums we will need to determine if an additional appropriation will be needed and will come to Council at a later date. As of now funding is available within the proposed Fiscal Year 2023-2024 Budget.
ATTACHMENTS
1. City of Merced APIP Proposal 2023/2024
2. The makings of a Hard Insurance Market Timeline