The URL can be used to link to this page

Home My WebLink AboutCS 11-02 (}44 REPORT TO COUNCIL FROM: Gillis A. Paterson Director, Corporate Services & Treasurer DATE: May 21,2002 - REPORT NUMBER: CS 11-02 SUBJECT: 2002/2003 Property and Liability Insurance RECOMMENDATION: It is recommended that Report CS 11-02 of the Director, Corporate Services & Treasurer be received by Council and that: 1. the City of Pickering renew its property, liability and other coverages through the Frank Cowan Company at a 2002/03 renewal premium of approximately $329,352 plus applicable taxes for the period July 1, 2002 to July 1,2003 inclusive; 2. 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 within the total deductible limit where it is in the City's interest to do so; 3. the Director, Corporate Services & Treasurer be authorized to pay the total cost of .any insurance claims settled that fall between the previous deductible and the new one, including any adjusting and legal fees, from the Self Insurance Reserve; - 4. the Director, Corporate Services & Treasurer be authorized to purchase additional insurance, make changes to deductibles and existing coverages, and alter tenus 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. ORIGIN: Director, Corporate Services & Treasurer AUTHORITY: The Municipal Act, Sections 251 and 252, RS.O. 1990 as amended FINANCIAL IMPLICATIONS: .- This year's premium increase is mainly the result of the tragic September 11 event. (Insurance companies sell their risk portfolio to reinsurers to diversify their risk. The reinsurers did not foresee and therefore, did not charge premiums to cover a September 11 occurrence. Estimated claims from September 11 range from $45 to approximately $75 billion, and, the reinsurers have raised their premiums to help cover the September 11 costs,) The City's premium has increased by 27.9% of which approximately 23.9% is related to September 11 and 4.0% is due to an increase in the value of the City's assets. Corporate staff have looked at increasing the current deductible from $10,000 to $50,000 but the corresponding savings in premiums did not warrant the additional risk/cost. Report to Council CS 11-02 Date: May 21,2002 045 Subject: 2002/2003 Property and Liability Insurance Page 2 EXECUTIVE SUMMARY: Not applicable - 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 ofthe 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, The 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. In 2000, 2001 and. 2002, the review of deductibles, coverages, policies, procedures, and adjusting services has continued. In 1999 approximately $92,000 was transfeITed to the Self 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. Approximately $392,000 has been saved as a result of the City's risk management program, - As previously mentioned, this year's renewal premium is considerably less than that of the mid 1990s as noted below: 1989 - $255,512 1990 - $270,842 1991 - $266,341 1992 - $245,656 1993 - $238,392 1994 - $257,363 1995 - $294,166 1996 - $356,865 1997 - $377,586 1998 - $302,589 1999 - $245,485 2000 - $246,628 2001 - $259,721 2002 - $329,352 September 11 and Impact on Insurance Costs 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 Frank Cowan Insurance Company in a "hard" market. Many organizations have experienced substantially larger increases than the City, but our insurer recognizes the value of long standing business relationships, - Attachment# 1 provides a comparison of the insurance costs between 2001 and 2002 and reflects APTA's share of the insurance costs, The major increases are in the liability, property and eITors and omission policies, The increases to the these policies are a direct result of the higher costs associated with the re-insurance market. The fe-insurance companies are trying to recover their costs from the September 11 OCCUITence. These companies have to payout the claims from September 11 and they have to also be in a financial position to cover future losses. The insurance industry describes September 11 as a catastrophic man-made loss. The other type of catastrophic loss is natural such as earthquakes and floods. Re-insurance companies are able to diversify their risk from natural catastrophe risk through geographical diversification. In other words, they do not have all of their insurance risk in one area such as Asia, Unfortunately, large Report to Council CS 11-02 n4f> Date: May 21,2002 Subject: 2002/2003 Property and Liability Insurance Page 3 scale terrorist attacks usually occur in high density populated areas and economic centers and therefore, future claims have the potential of being very large. This year's increase may be the start of a future trend in order for insurance companies to build up their reserves. Self Insurance Reserve - This years renewal maintains the higher levels of deductible approved by Council in 1998. By putting the savings aside in the Self Insurance Reserve, funds should be available to finance predictable losses resulting from the increase in deductibles, By building up the reserve financial flexibility to assist with future possible options is also made available. The Self Insurance Reserve currently has a balance of $972,489. In the area of Risk Management, reference should be made to the 1998 report to Council No. TR23/98. Conclusion The City's Insurance and Risk Management Programs appear to be working satisfactory. The City's higher deductib1es have assisted greatly in keeping the City's premiums constant for the last few years. Therefore, renewal through the Frank Cowan Company with our present carriers is recommended. A TT ACHMENTS: 1. Comparison of2001 & 2002 Insurance Costs, - Prepared 1 Approved / Endorsed By: ~Yh~~ Gillis A. Paterson, Director, Corporate Services & Treasurer GAP:vw Recommended for the consideration of Pickering City Council u - 04'7 Attachment#1 To Report # CS 11-02 COMPARISON OF 2001 & 2002 INSURANCE COSTS - 2001 2002 RENEW AL % Inc. LIABILITY $ 64,031.00 $ 96,047.00 50.0 ERRORS & OMISSIONS $ 15,706.00 $ 20,418,00 30.0 NON-OWNED AUTOMOBILE $ 269,00 $ 269.00 0 ENVIRONMENTAL LIABILITY $ 8,180,00 $ 9,286,00 13.5 CRIME $ 5,145.00 $ 5,.145,00 0 COUNCILLOR ACCIDENT $ 1,366,00 $ 1,366.00 0 CONFLICT OF INTEREST $ 800.00 $ 800.00 0 LEGAL EXPENSE $ 3,618.00 $ 3,618.00 0 AUTOMOBILE FLEET $ 25,816.00 $ 28,390.00 10.0 - GARAGE AUTOMOBILE $ 1,493.00 $ 1,642.00 10.0 EXCESS' AUTO LIABILITY * $ 215.00 $ 228,00 6.0 EXCESS LIABILITY $ 5,936,00 $ 5,842.00 (1.6) PROPERTY $ 55,242.00 $ 79,692.00 44,5 ENGINEERING (B&M) $ 7,644.00 $ 8,180,00 7.0 CITY TOTALS $195,461.00 $260,563.00 33.3 PICKERING TRANSIT * $ 62,068,00 . $ 68,789.00 10.8 TOTAL ANNUAL PREMIUMS $257,529.00 $329,352.00 27,9 * Premiums paid by APT A -