HomeMy WebLinkAboutCS 28-03
REPORT TO FINANCE &
OPERATIONS COMMITTEE
Report Number: CS 28-03
Date: June 11,2003
From:
Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject:
2003/2004 Property and Liability Insurance
Recommendation:
1.
It is recommended that Report CS 28-03 of the Director, Corporate Services &
Treasurer be received and that;
2.
the City of Pickering renew its property, liability and other coverages through the
Frank Cowan Company at a 2003/04 renewal premium of approximately $306,431
plus applicable taxes for the period July 1, 2003 to July 1, 2004 inclusive;
3.
the Director, Corporate Services & Treasurer, as part of the Risk Management
Program, be authorized to continue the Reimbursable Deductible Program
through the Insurance Adjuster and the Frank Cowan Company and further, that
the Director be authorized to settle any claims including any adjusting and legal
fees within the total deductible limit where it is in the City's interest to do so;
4.
the Director, Corporate Services & Treasurer be authorized to purchase additional
insurance, make changes to deductibles and existing coverages, and alter terms
and conditions as becomes desirable or necessary in order to protect the assets
of the City and it's elected officials and staff; and,
5.
the appropriate officials of the City of Pickering be given authority to give effect
thereto.
Executive Summary:
Not applicable
Financial Implications: The renewal premium of approximately $307,000 compares
to approximately $267,000 for the 2002-3 premium period. T he City's premium has
increased by 14.7% of which approximately 10.7% is related to global insurance claims
and 4.0% is due to inflationary increase in asset values and additional assets such as
the Third Ice Pad - Don Beer Arena. This increase was provided for in the 2003
Report CS 28-03
Date: June 11, 2003
Subject: 2003/2004 Property & Liability Insurance
Page 2
Current Budget. Staff examined increasing the current deductible from $10,000 to
$50,000 but the corresponding savings in premiums did not warrant the additional
risk/cost.
Background: Each year on July 1, the City's general liability and property insurance
policies come up for renewal. As approved by Council at the time of the 1998 renewal,
the Treasurer undertook an extensive review of all aspects of the City's insurance
program. The City of Pickering embarked in a Risk Management Program, the initial
phase of which involved negotiating renewing premiums with the City's broker. T he
result of the negotiations was a decrease of approximately $75,000 or 20 percent, in
the premiums from that of the prior year. This premium was also approximately
$98,000 less than the 1998 budget provision which, after claims under the increased
deductible were paid, resulted in a transfer of approximately $50,000 to the Self
Insurance Reserve.
From 1999 to 2003, staff have reviewed the deductibles, coverages, policies and
procedures to ensure that the City is financially protected. In 1999 approximately
$92,000 was transferred to the Insurance Reserve as a result of the continued savings.
In 2000 and 2001, the amount of $100,000 in each year was included as a revenue
item in the annual budget. For the 2002 budget, $50,000 was included as revenue
with the balance being used to offset premium increases. The 2003 Budget anticipated
the premium increase and therefore, no savings were budgeted which will offset the
actual increase in premiums.
Current External Insurance Market
This year's premium increase is mainly the result of significant global catastrophic
events over the last two years that have required the major reinsures to pay significant
claims. The current estimated of the total of the claims resulting from September 11,
2001 is $60 Billion US and the floods in Europe and an oil spill off the coast of Spain is
estimated to be $70 Billion US. These large claims require insurers and reinsurers to
increase their premiums to cover the cost of these and other claims. Furthermore, in
the past, insurance companies have used investment returns to increase their income
and reduce the need for larger premium increases investing. During the last two years,
investment returns have been quite low and therefore, investment income has not been
available to offset premium increases to the same degree.
After September 11, many insurance companies have reviewed their insurance
portfolios from the perspective of reducing their risk. Some insurance companies have
gone as far as not renewing polices once they have expired. In this situation,
organizations are scrambling to find insurance coverage in a very "hard" market. The
City of Pickering does not find itself in this position. In fact, the City finds itself in the
enviable position of having maintained a long standing business relationship with the
Report CS 28-03
Date: June 11, 2003
Subject: 2003/2004 Property & Liability Insurance
Page 3
Frank Cowan Company which helps greatly in a "hard" market. Many
organizations/municipalities have experienced substantially larger increases than the
City, but our insurers recognizes the value of long standing business relationships. This
year our insurer has notified the City that they are imposing a fungi and asbestos
exclusion for the City's policies. The insurance industry is applying these exclusionary
clauses to everyone.
Attachment 1 provides a comparison of the insurance costs between 2002 and 2003.
You will notice that the insurance costs for transit are no longer reflected in the City's
accounts. Starting this year, APT A's insurance policies will now be issued directly to
APT A in contrast to previous years where the insurance policy/premium for Pickering's
transit fleet were issued to the City. Under this new structure, APT A will have its own
policies covering the assets of the former Ajax and Pickering transit fleets. The 2003
Current Budget for APT A contained a provision for their costs.
Self Insurance Reserve
This year's renewal maintains the higher levels of deductible approved by Council in
1998. The higher deductible limit from 1998, has allowed the City to build-up the Self
Insurance Reserve to $949,106 as of December 31S\ 2002. Due to the City's tight
budget requirements, no further contributions to this Reserve at this time are being
recommended.
Conclusion
The City's Insurance and Risk Management Programs appear to be working
satisfactory. The City has benefited from its long standing relationship with the Frank
Cowan Company especially during the current "hard" insurance market. Therefore,
renewal through the Frank Cowan Company with our present carriers is recommended.
Attachments:
1.
Comparison of 2002 and 2003 Costs
Report CS 28-03
Date: June 11, 2003
Subject: 2003/2004 Property & Liability Insurance
Page 4
Prepared By:
Approved I Endorsed By:
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Stan Karwowski
Manager, Finance & Taxation
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Gillis A. Paterson
Director, Corporate Services & Treasurer
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Attachment
Copy: Chief Administrative Officer
Recommended for the consideration of
Pickering City Council
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CORPORATION OF THE CITY OF PICKERING
REVISED COST ANALYSIS
EXPIRING
PROGRAM RENEWAL PROGRAM
2002-2003 TERM 2003-2004 TERM
PART A -CASUAL TV
NON-OWNED AUTOMOBILE
$ 96,047. $ 124,861.
20,418. 24,502.
269. 269.
5,482. 6,320.
9,286. 10,678.
5,145. 5,145.
1,366. 1,366.
800. 800.
3,618. 3,618.
MUNICIPAL LIABILITY
ERRORS AND OMISSIONS
FOLLOW FORM EXCESS
ENVIRONMENTAL LIABILITY
COMPREHENSIVE CRIME
COUNCILLORS' ACCIDENT
CONFLICT OF INTEREST
LEGAL EXPENSE
PART B - PROPERTY
PROPERTY/DATA PROCESSING
83,800.
8,069.
77,589.
8,876.
BOILER AND MACHINERY
PART C- AUTOMOBILE
OWNED AUTOMOBILE (CITY)
30,965. 40,307.
228. 458.
65,703. NOT APPLICABLE
2,907. NOT APPLICABLE
1,642. 1,642.
EXCESS AUTOMOBILE (CITY)
OWNED AUTOMOBILE (TRANSIT)
EXCESS AUTOMOBILE (TRANSIT)
GARAGE AUTOMOBILE
ANNUAL PREMIUM
$
335,745.
$
306,431.
PLUS APPLICABLE TAXES