Agenda 03/27/2018 Item #11D03/27/2018
EXECUTIVE SUMMARY
Recommendation to approve the purchase of property insurance effective April 1, 2018 in the
estimated amount of $3,157,523.
OBJECTIVE: To purchase property insurance to protect the County’s real and personal property assets
against losses caused by natural and man-made perils and to comply with the Stafford Act.
CONSIDERATIONS: The Board of Commissioners purchases property insurance to protect the
County’s real and personal property assets against losses caused by natural and man -made perils and to
comply with the Stafford Act.
The current property insurance program expires on April 1, 2018 and contains the following provisions.
Insurable replacement values are $962,469,096. The total limit of coverage purchased (a/k/a the Loss
Limit) is $75,000,000. The named storm wind deductible is 3% per building and contents with a
minimum named storm deductible of $250,000. Retained losses are capped at $5,000,000 per named
storm. For all other perils the deductible is $50,000 per occurrence. Primary flood coverage is purchased
through the National Flood Insurance Program (NFIP) on properties in special flood hazard zones. The
property insurance program provides an additional $75,000,000 of flood coverage in excess of the NFIP
coverage of $500,000 per building maximum.
Both the property and flood insurance programs are purchased in accordance with Section 311 (42 U.S.C.
5154) of the Stafford Act which requires that an applicant for FEMA assistance “shall comply with
regulations prescribed by the President to assure that, with respect to any property to be replaced,
restored, repaired, or constructed with such assistance, such types and extent of insurance will be
obtained and maintained as may be reasonably available, adequate, and necessary, to protect against
future loss to such property.” Staff submits the program to the Florida Department of Insurance for
approval on an annual basis to assure compliance with the Act.
Although total insured values are $962,469,096, it is unlikely that the county will suffer a total loss.
Therefore, the county purchases what is known as a “loss limit” that is commensurate with the probable
maximum loss (PML) for a 100-year wind event. A study is completed for the underwriters by Risk
Management Solutions, Inc. to determine the appropriate loss limit to purchase. For FY 18, the PML is
$80,700,053 for a 100-year wind event. Staff recommends that the County continue to purchase a
$75,000,000 loss limit.
The FY 18 renewal was expected to be difficult due to Hurricane Irma. The County’s broker, Insurance
and Risk Management Services, approached forty-one (41) carriers for proposals, but only nine (9)
carriers submitted quotes. Of those that declined to quote, the most common reasons were 1) they could
not offer terms at the requested pricing; 2) they could not support the broad scope of the current
manuscript property policy form; and 3) they are not willing to participate in a program that includes a
named storm deductible cap.
Reinsurance treaties are negotiated in January and July each year. Thus, renewals after January 1, 2018
have begun to reflect the effects of Hurricane Irma on the reinsurance markets. This was not unexpected
as property insurance pricing is cyclical. Based upon the responses received from the market, the cost to
maintain the current program at the current replacement values, current loss limit and at the existing terms
and conditions is $3,157,523. This represents an increase of 29.1% in the rate and a gross premium
increase of $827,224 over the FY 17 renewal. This increase in rate compares to a cumulative rate
decrease of 45.9% over the past four years.
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In terms of financial stability, each of the carriers possess a minimum Best’s rating of A - or higher.
Covered perils are written on an “All Risk of Loss” basis. Loss valuation is on a replacement cost basis.
Terrorism coverage is included in the proposal. There are no other substantial changes to the program.
Staff does not recommend an inflation adjustment to the current property schedule at this time.
The renewal comparison over a five-year period is illustrated below:
Renewal Date Deductible Terms Annual
Premium
Composite
Rate per
$100
% Change
in Rate per
$100
$ Change % Change
in Gross
Premium
FY 14 Renewal 5% Named Storm
Deductible with
$5,000,000 Cap
$3,309,048 .380 -8.9% -$234,614 -6.86%
FY 15 Renewal 5% Named Storm
Deductible with
$5,000,000 Cap
$3,027,599 .331 -13.1% -$281,449 -8.5%
FY 16 Renewal 3% Named Storm
Deductible with
$5,000,000 Cap
$2,407,799 .263 -20.5% -$619,800 -20.5%
FY 17 Renewal 3% Named Storm
Deductible with
$5,000,000 Cap
$2,330,299*
$2,441,920**
.254 -3.4% -$77,500 -3.3%
FY 18 Renewal 3% Named Storm
Deductible with
$5,000,000 Cap
$3,157,523 .328 +29.1% +827,224 +35.4%
*Reflects the April 1, 2017 renewal. **Reflects the addition of the Golden Gate Utility and the Orange Tree Utility
properties.
The rate per $100 and annual premium are as of the submission date of the Executive Summary and are
worst case. The broker and staff will continue to pursue options to lower the cost of the program prior to
the April 1, 2018 effective date.
FISCAL IMPACT: The final premium is subject to the Statement of Values submitted to the carriers as
well as additions and deletions of property from the Statement of Values as they occur. Based upon the
current property schedule, the estimated annual premium is $3,157,523. Property reinsurance premiums
were budgeted in the amount of $2,662,600. Therefore, an amendment to Fund 516-121650-645910,
Reinsurance Premium, in the amount of $494,900 is requested to assure there are sufficient funds
available to pay the renewal premium. A corresponding amendment to Reserves for Insurance, Fund 516 -
919010-996400, in the amount of $494,900 is sought to transfer funds to the Reinsurance Premium
budget. Sufficient funds remain in Reserves for Insurance to fund the outstanding liabilities of the Fund.
GROWTH MANAGEMENT IMPACT: There is no growth management impact associated with this
item.
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is approved as to
form and legality, and requires majority vote for approval. -JAK
RECOMMENDATION: That the Board approves the purchase of property insurance as outlined in the
Executive Summary and authorizes the County Manager or designee to complete any applications or
other documents necessary to bind coverage for a one-year period effective April 1, 2018. Further, it is
recommended that the Board approves a budget amendment to Fund 518, Property and Casualty
Insurance to assure sufficient reinsurance premiums for FY 18.
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PREPARED BY: Jeffrey A. Walker, CPCU, ARM, Division Director, Risk Management Division
ATTACHMENT(S)
1. IRMS 2018 Property Marketing Summary (PDF)
2. Risk Management Solutions 2018 Modeling 3% 5M max ground up REV 3 8 18 (PDF)
3. BA 516-121650 Risk $494900 (PDF)
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COLLIER COUNTY
Board of County Commissioners
Item Number: 11.D
Doc ID: 5041
Item Summary: Recommendation to approve the purchase of property insurance effective April
1, 2018 in the estimated amount of $3,157,523. (Jeff Walker, Risk Management Director)
Meeting Date: 03/27/2018
Prepared by:
Title: Division Director - Risk Management – Risk Management
Name: Jeff Walker
03/06/2018 4:53 PM
Submitted by:
Title: Division Director - Risk Management – Risk Management
Name: Jeff Walker
03/06/2018 4:53 PM
Approved By:
Review:
Administrative Services Department Paula Brethauer Level 1 Division Reviewer Completed 03/08/2018 3:45 PM
Administrative Services Department Len Price Level 2 Division Administrator Review Completed 03/12/2018 12:58 PM
Office of Management and Budget Valerie Fleming Level 3 OMB Gatekeeper Review Completed 03/12/2018 1:47 PM
County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 03/12/2018 4:43 PM
Office of Management and Budget Laura Wells Additional Reviewer Completed 03/14/2018 9:12 AM
County Manager's Office Nick Casalanguida Level 4 County Manager Review Completed 03/18/2018 10:50 AM
Board of County Commissioners MaryJo Brock Meeting Pending 03/27/2018 9:00 AM
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Market Status as of March 6, 2018
Collier County, FL
MarketName Status
AmRisc Companies Indicated annual premium of $4,600,000
Underwriters at Lloyds*Working on all layers
Arch Specialty Insurance*Quoted Renewal $25M primary layer
Chubb/ACE/Westchester*Indicated $5M part of $75M primary, policy form going through legal review now
Brit Global Specialty*Quoted 20% of $25 x $50
Colony Group Indicated $2.5M premium on $50 x $25 layer for renewal
Liberty*Indicated expiring line on $25 x $25
Markel Insurance*Quoted 20% of $25 x $50
RSUI / Landmark American*Quoted $75M primary expiring participation
AIG / Lexington Still reviewing
Arrowhead Insurance Interested and would be competitive on $25 x $50, but cannot do zone A Flood
Aspen Specialty Still in modeling
AWAC (Allied World)Declined due to deductible cap and target pricing based on modeling
Axis U.S. Insurance Still reviewing
Beazley USA Declined in US since they are the leader in London
Berkshire Hathaway Specialty Unable to support the $5M cap
Catalytic Risk Managers Significantly higher on all layers than target pricing
Crum & Forster Insurance*Quoted 10% part of $25 x $25, reviewed to see if they could do more and cannot
Diamond State Group Likely to decline due to pricing and modeling
Endurance Specialty Marketing Still reviewing - London participation may interfere
Everest Insurance Still reviewing
GEP Still reviewing
Hallmark Excess & Surplus Declined- nearly double the pricing
James River Specialty Declined due to flood exposure and modeling results
Kemah Declined $25M primary but willing to offer $2.5M part of $5M @ $1.35M
Kinsale Insurance Declined due to $5M deductible cap
Maxum Indemnity Still reviewing
Mitsui Insurance Declined - would need to be well in excess of $75M attachment point
Munich Re Declined due to target pricing - prefer higher attachment on this risk
Scottsdale Insurance Declined - would need to be well in excess of $75M attachment point
Navigators Insurance Still reviewing
OneBeacon Declined - would need to be well in excess of $75M attachment point
Pioneer Insurance Still reviewing
Rivington*25M x 25M for 895,000; 25M x 50M for 750,000
Rockhill Insurance Expiring carrier, but now in run-off
Starr Still reviewing
Swiss Re Having difficulty getting anywhere near our targets
TRU Declined due to modeling
Windward Still reviewing
XL Catlin Group Declined due to London participation
Zurich Declined due to the deductible cap
* Carriers Expected to Participate
11.D.1
Packet Pg. 245 Attachment: IRMS 2018 Property Marketing Summary (5041 : Recomendation to purchase property insurance effective April 1, 2018.)
Ground Up Loss Deductible Loss Gross Loss
Return
Period GU OEP GU AEP CL OEP CL AEP GR OEP GR AEP
10,000 422,030,073 426,006,614 5,000,000 10,092,783 416,511,930 420,320,062
5,000 350,543,184 354,663,912 5,000,000 10,000,980 345,104,581 348,863,206
1,000 207,442,183 210,837,175 5,000,000 8,029,582 202,076,379 204,987,145
500 161,412,830 164,161,871 5,000,000 6,713,034 156,579,788 158,487,218
250 117,814,995 120,097,726 5,000,000 5,442,501 112,662,036 114,505,794
100 68,479,042 69,849,125 5,000,000 5,000,497 63,559,350 64,605,196
50 38,998,669 39,755,974 5,000,000 5,000,000 34,470,536 34,967,827
25 15,068,809 15,366,481 3,738,423 3,739,112 11,644,561 11,800,467
10 1,052,747 1,079,115 988,874 1,012,382 0 0
5 15,297 18,041 15,269 15,562 0 0
AAL 2,679,923 2,679,923 347,398 347,398 2,332,525 2,332,525
SD 16,110,599 16,110,599 1,104,505 1,104,505 15,399,379 15,399,379
CV 6 6 3 3 7 7
Key Losses - US Windstorm and Surge Analysis (USD)
11.D.2
Packet Pg. 246 Attachment: Risk Management Solutions 2018 Modeling 3% 5M max ground up REV 3 8 18 (5041 :
BUDGET AMENDMENT REQUEST For Budget/Finance Use Only
BA#
JE #
BAR#
APH Date
516 Property & Casualty
Fund No.Fund Description (type on line above)
Date Prepared:3/9/2018 (Attach Executive Summary)
Approved by BCC on: Item No.
Expense Budget Detail
Fund Center Title:Property & Casualty Fund Center No.:919010
Funded Program (Project) Title: 5-digit Fd Prog #:
(only one Fund Center/Funded Program should be entered into this section. If amendment is for Funded Program, must enter Fund Center info)
Fund Funded Commit Commitment Item Increase Current Revised
Center Program Item Description (Decrease)Budget Budget
919010 996400 Reserve for Property (494,900.00) 1,734,600.00 1,239,700.00
-
-
-
Net Change to Budget (494,900.00)$
Expense Budget Detail
Fund Center Title:Property & Casualty Fund Center No.:121650
Funded Program (Project) Title: 5-digit Fd Prog #:
(only one Fund Center/Funded Program should be entered into this section. If amendment is for Funded Program, must enter Fund Center info)
Fund Funded Commit Commitment Item Increase Current Revised
Center Program Item Description (Decrease)Budget Budget
121650 0 645910 Reinsurance Property 494,900.00 3,864,500.00 4,359,400.00
-
-
-
Net Change to Budget 494,900.00$
Expense Budget Detail
Fund Center Title:Fund Center No.:
Funded Program (Project) Title:5-digit Fd Prog #:
(only one Fund Center/Funded Program should be entered into this section. If amendment is for Funded Program, must enter Fund Center info)
Fund Funded Commit Commitment Item Increase Current Revised
Center Program Item Description (Decrease)Budget Budget
0 0 -
-
-
-
Net Change to Budget -$
11.D.3
Packet Pg. 247 Attachment: BA 516-121650 Risk $494900 (5041 : Recomendation to purchase property insurance effective April 1, 2018.)
EXPLANATION
Why are funds needed? (type below)
Funds are needed to pay for FY18 Property Insurance Premiums.
Where are funds available? (type below)
Funds are available in Reserves.
REVIEW PROCESS
Cost Center Director*:Date
Department Administrator*:Date
Budget Office:Date
Agency Manager Date
Finance Department:Date
Clerk to the Board Admin:Date
Inputted by:Date
BA number (SAP)
If this is uploaded into SIRE with an Executive Summary, no signatures are required from the Cost Center Director or
Department Administer.
If this is uploaded into Novus, please do NOT sent a paper copy of the Budget Amendment to the Office of Management and
Budget office, OMB will download all budget amendments from SIRE and will process after the BCC meeting.
I:\ Forms\ County Forms\ Budget\ Budget Amendment Form.xls (excel format)
11.D.3
Packet Pg. 248 Attachment: BA 516-121650 Risk $494900 (5041 : Recomendation to purchase property insurance effective April 1, 2018.)