EXCESS LIABILITY INSURANCE COVERAGE THROUGH PUBLIC RISK INNOVATION, SOLUTIONS, AND MANAGEMENT (PRISM) JPA July 21, 2020
BACKGROUND • The City is self-insured for the first $2 million of liability coverage and has historically carried $20 million of excess liability insurance, insured by a variety of carriers. • Global catastrophic events, civil unrest related to excessive force cases, and years of low rates have created some instability in the overall marketplace. • Certain lines of insurance coverage have been impacted more heavily than others and there has been a significant shift in the liability market.
BACKGROUND • The City’s insurance broker, Alliant Insurance Services, solicits options for excess liability insurance coverage on an annual basis. • For FY 2020/2021, the City’s current liability carrier, Allied World Assurance Company (AWAC), revised its quotes for coverage including Law Enforcement due to excessive force exposure occurring nationally. • AWAC initially increased the self-insured retention (SIR) requirement for police professional retention from a $2M SIR to a $5M SIR for law enforcement liability with a 75% increase in premiums. • The City’s insurance broker, Alliant, subsequently requested additional proposals and options including a revised proposal from AWAC.
ANALYSIS • AWAC subsequently quoted a stand alone option to reduce the police related retention from $5M to $3M. However, this still represents a $1M increase in SIR with a 75% increase in premiums. • A proposal was also received from the Public Risk Innovation, Solutions, and Management (PRISM) JPA. PRISM Is a member directed risk sharing pool with 40 years of liability and risk management experience. The proposal retains the City’s $2M SIR.
ANALYSIS • PRISM’S program also provides these additional benefits: o $25M limit as opposed to our current limit of $20M o Limit is not aggregated, limit applies per occurrence o Additional risk control services including a loss control subsidy and actuarial fund • PRISM membership includes 95% of California Counties and 70% of California Cities and has also been accredited with excellence continuously by the California Association of Joint Powers Authority (CAJPA).
FISCAL ANALYSIS • The proposal from PRISM retains the City’s $2M SIR and increases coverage to $25M at a premium of $346,869 which represents an increase of $106,566 over AWAC’s proposal. • Funds totaling $92,153 are included in the self insurance fund in the FY 2020/2021 budget.
RECOMMENDATION • Adopt Resolution Number 20-44 to join Public Risk Innovation, Solutions and Management JPA • Authorize the City Manager and City Clerk to execute the Joint Powers Agreement • Authorize the City Manager and City Clerk to execute the Memorandum of Understanding for the General Liability Program and appropriate additional funds to cover increased premium costs.
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