Agenda 03/25/2008 Item #10B
Agenda Item No. 10B
March 25, 2008
Page 1 of 3
EXECUTIVE SUMMARY
Recommendation to approve the purchase of property insurance for the period
April 1, 2008 through March 31, 2009 in the amount of $3,571,427, a reduction of
$510,262.
OBJECTIVE: To gain approval from the Board of County Commissioners (Board) to purchase
property Insurance for the period April 1, 2008 through March 31, 2009 in the amount of
$3,571,427.
CONSIDERATIONS: Pursuant to Florida Statutes 768.28 and 440, the Risk Management
Department operates two risk management funds (Fund 516 and Fund 518) to finance its
Property, Casualty and Workers' Compensation insurance programs. The purchase of property
insurance is part of this program.
The current property insurance program expires on April 1, 2008. Insurable values are
$779,043,880. The total coverage limits purchased are $150,000,000. The wind deductible is
5% per building and contents per named storm with a minimum named storm deductible of
$250,000. There is no maximum deductible cap, There is a $50,000 deductible for all other
perils. Primary flood coverage is purchased through the National Flood Insurance Program
(NFIP) on properties in flood zones to comply with the provisions of the Stafford Act. The
property insurance program provides an additional $50,000,000 in flood coverage in excess of
the NFIP coverage, The cost of the current program is $4,081,689 per year.
The Risk Management staff, through the County's property casualty broker, IRMS, requested a
variety of coverage options for the 2008 renewal. Risk Management staff also requested a
maximum probable loss study through Risk Management Solutions, Inc, to evaluate the
appropriate coverage limit to purchase.
The proposais indicate that the commercial property insurance market has softened
considerably since the 2007 renewal. This is illustrated below:
Annual Annual
Option Terms Premium @ Savings @ Premium @ Savings @
$150,000,000 $150,000,000 $125,000,000 $125,000,000
Limit Limit Limit Limit
Current 5% Wind Oed. with $4,081,689 NA NA NA
Program No Cap
Option 1 5% Wind Ded, with $3,176,427 $905,262 $3,111,427 $970,262
No Cap
Option 2 5% Wind Ded. with $3,636,427 $445,262 $3,571,427 $510,262
$5,000,000 Cap
Option 3 5% Wind Ded. with $3,576,427 $505,262 $3,511,427 $570,262
$10,000,000 Cap
Option 4 4% Wind Ded, with $3,276,427 $805,262 $3,211,427 $870,262
No Cap
Option 5 4% Wind Ded. with $3,691,427 $390,262 $3,626,427 $455,262
$5,000,000 Cap
Executive Summary - 10 F
Purchase of Property Insurance
Paae 2
Agenda Item NO.1 OB
March 25, 2008
Page 2 of 3
Risk Management Solutions, Inc. prepared a probable maximum loss study which indicated that
the probable maximum loss to County property ranged from $52,919,567 for a 100-year event
to $90,641,787 for a 250-year event. Based upon the modeling provided by Risk Management
Solutions, staff recommends the purchase of a $125,000,000 loss limit.
Staff then reviewed the various premium and coverage options, Options 1 and 4 offer the
greatest premium savings however; they do not offer a named storm deductible cap. Options 2,
3 and 5 offer substantial premium savings while also offering a $5,000,000 or $10,000,000
deductible cap.
To determine the appropriate purchase, Risk staff modeled the actual losses experienced
during Hurricane Wilma to determine the financial outcomes. These are illustrated below:
Hurricane Wilma Scenario
Retained
Loss plus
Net Premium
Difference=
ODtlon Terms Total Cost
Option 1 5% Wind Oed. with No Can $7,371,906
Option 2 5% Wind Oed. with $5,000,000 Cap $5,460,000
5% Wind Oed. with $10,000,000
Option 3 Cap $7,771,906
Option 4 4% Wind Oed. with No Cap $7,471,906
Option 5 4% Wind Oed. With $5,000,000 Cap $5,515,000
Based upon this analysis, Option 2 offers the lowest total cost under a Hurricane Wilma
Scenario. Therefore, staff recommends the purchase of Option 2 with a loss limit of
$125,000,000.
FISCAL IMPACT: Staff recommends the purchase of Option 2. This option results in a
decrease in the rate per $100 of 12.5% and a reduction in program costs of $510,262. Funds
have been budgeted within Fund 516 for this purchase.
GROWTH MANAGEMENT IMPACT: There is no growth management impact associated with
this item.
RECOMMENDATION: That the Board approves the purchase of property insurance as outlined
in this Executive Summary and authorizes the Director of Risk Management to complete any
applications or other documents necessary to bind coverage and services effective April 1,
2008.
PREPARED BY: Jeffrey A. Walker, CPCU, ARM, Director, Risk Management Department
Page I of I
Agenda Item NO.1 OB
March 25, 2008
Page 3 of 3
COLLIER COUNTY
BOARD OF COUNTY COMMISSIONERS
Item Number:
Item Summary:
10B
Recommendation to approve the purchase of property insurance for the period April 1 , 2008
through March 31,2009 In the amount of $3,571 ,427, a reduction of $510,262. (Jeff Walker,
Director, Risk Management)
Meeting Date:
3/25/2008 9:0000 AM
Prepared By
Jeffrey A. Walker, CPCU,
ARM
Risk Management Director
Date
Administrative Services
Risk Management
3/10/20089:26:17 AM
Approved By
Jeffrey A. Walker, CPCU,
ARM
Risk Management Director
Date
Administrative Services
Risk Management
3/10/2008 9:31 AM
Approved By
Raymond Carter
Operations Manager
Date
Public Services
Parks and Recreation
3/10/200810:37 AM
Approved By
Len Golden Price
Administrative Services Administrator
Date
Administrative Services
Administrative Services Admin.
3/11/200811:31 AM
A pproved By
OMS Coordinator
Applications Analyst
Date
Administrative Services
Information Technology
3/11/20081:47 PM
Approved By
John A. Yonkosky
Director of the Office of Management
Date
County Manager's Office
Office of Management & Budget
3/13/20086:09 PM
Approved By
James V. Mudd
County Manager
Date
Board of County
Commissioners
County Manager's Office
3/13/20088:05 PM
file://C:\AgendaTest\Export\1 03-March%2025,%202008\ 1 0.%20COUNTY%20MANAGE... 3/19/2008