5.2. SR 10-27-2003River
TO:
FROM:
DATE:
SUBJECT:
Item ~ 5.2.
PIEPIORANDUPI
Mayor and City Council
Lori Johnson, Finance Director
October 27, 2003
Consider Insurance Renewal with League of Minnesota Cities
Insurance Trust
Although city insurance agent Mary Eberley and I started working on the renewal of the city's policy
with the League of Minnesota Cities Insurance Trust (LMCIT) in May for the July 1 renewal, we
have just recently received the renewal quote from the LMCIT. A binder was issued on July 1, 2003,
to cover the city until the formal policy renewal was completed. Mary Eberley and I will be present
at Monday's meeting to discuss the renewal, and in particular to address some of the increases in the
premium.
Attached is information regarding the renewal including a memo from Mary Eberley which briefly
addresses the premium increase and several other pertinent issues. The total premium for this
contract period is $251,065 including Elk River Municipal Utilities and a full year of liquor liability
coverage.
Action Requested
The City Council is asked to renew city's property/casualty insurance policy with the League of
Minnesota Cities Insurance Trust for the period of july 1, 2003 through June 30, 2004.
S:~Council~Lori~2003~LMC IT renewal.doc
FIRST NATIONAL INSURANCE AGENCY OF ELK RIVER
812 MAIN STREET
ELK RIVER, MN 55330
763-441-2500
October 22, 2003
To: Honorable Mayor & Council Persons
City of Elk River
Thank you for allowing me to take some time on your agenda to present the League of
Minnesota Cities Insurance Trust (LMCIT) insurance renewal for the City. The
presentation will be brief, but I will be available for questions either at your meeting, or
at another time more convenient for you or the council members who are not able to
attend the meeting on the 27th.
Your LMCIT renewal this year is late in arriving, and is also significantly increased over
the cost of your coverage for the July, 2002 renewal. It is, however, an excellent
renewal proposal and the increases are largely due to increased City assets and activity.
The LMCIT program continues to provide a stable program which is well funded and
offers superior claims service to its member cities.
The League continues to be slow at preparing proposals, but is particularly late this year
as the Property Appraisal program for the City of Elk River was nearing completion and
the final figures were necessary to price the property exposures. This appraisal is now
complete and the property values have been used for your renewal. Also, the City of Elk
River has been assigned to one of two senior underwriters. This is good - we get the
expertise, but also means we wait for that expertise. Your coverage has been bound with
LMCIT since your normal anniversary date of July 1, 2003.
It is always a pleasure to work with good people, and your City staff is no exception.
Lori Johnson and her staff have developed a thorough and complete approach to
preparing the necessary information to arrive at appropriate coverages and pricing. The
task this past year has been even greater due to the appraisal process, construction
projects, and non-renewal by your previous company for the liquor store. I appreciate the
opportunity to work with your City professionals, and would like to take this opportunity
express my compliments to you and your staff.
I have attached a brief outline of the premium costs for this renewal, and will list several
additional points to help explain the increases in cost and other changes. If you have any
questions or concerns, I will address them at your meeting or any other convenient time.
Page 2
Special points of interest include:
1)
Rates - the basic property rates have increased an average of 10% - due primarily
to reinsurance costs for the LMCIT program. Other lines have remained fairly
stable this year
-Ratable expenditures are higher than last year by about $830,000.
-Property values insured have risen from about $45.6 million to $63.4 million.
Maximus appraised values increased the scheduled values and Public Safety
Center, City Hall and other construction projects are now complete.
2)
Liquor Liability coverage and the liquor store facility and contents have been
added to the schedule. Prior carrier non-renewed in April and coverage was
added on pro-rated basis as of April 1,2003. This year's renewal includes a full
annual premium cost of about $12,000.
3)
Workers compensation coverage - also with LMCIT, renewed on October 1 st.
This year's Experience Modifier is again excellent at .78. Payroll has increased
by about $135,000 over last year's renewal. Firefighters are also included.
Dividends - LMCIT paid the City a dividend of $44,557, last December.
Continued attention to safety & loss control under the League programs will
continue to control costs for the League's self-insured program. Any possible
dividends for this year will be announced this coming December.
4)
Deductible Options - we have not quoted deductible options this year as a change
was made last year. The overall deductible was raised to $1,000. We will
continue with this plan for another year or two before considering another change.
Generally, several years experience are required to determine impacts.
5)
An optional quote for Excess Liability coverage in the amount of $1,000,000 has
been secured. The additional cost would be $ 44,672. The City has elected not to
purchase these additional limits in the past. I offer the option again for your
consideration.
6) Also an option - an increase to $300,000 on the Faithful Performance Bond limit
would cost an additional $194 annually. Your current limit is $200,000.
7)
We did not include the option for No-Fault Sewer Back-Up coverage, since the
City decided not to purchase this coverage last year. The premium rating has
remained at about 8-8.5% of the underlying liability premiums. The approximate
premium charge for this coverage would $13,500. If the City wishes to purchase
this coverage this year, we can update the application materials, get a new "firm"
quote, and bring it back for your consideration.
Page 3
This completes the summary. If you have additional questions, I will be happy to
respond Monday evening, or research and come back with additional information. Based
on the stability of the LMCIT program, and the updated coverages and exposures for the
City of Elk River, we are recommending the Council pass a motion to accept the LMCIT
renewal proposal for property, liability and package coverages at $251,065 for the July
1, 2003 - 2004 renewal period. Any options you might choose to add would be
additional to this figure.
Thank you for your attention to this important matter for the City, and for allowing First
National Insurance Agency to assist you. We appreciate the City's business, and thank
the Council members for their service to the City and for time on the agenda.
Respectfully,
Mary Eberley, CPCU
Agency Mgr.
CITY OF ELK RIVER
PREMIUM COMPARISON - 2003
PROPERTY
MOBILE PROPERTY
MUNICIPAL LIABILITY
AUTO LIABILITY
UM/UIM
PHYSICAL DAMAGE
CRIME
BONDS
($200,000 limit)
EQUIPMENT BREAKDOWN $
(excludes electrical generation
equipment)
PETROFUND REIMB . $
OPEN MEETING LAW $
(100%)
LIQUOR LIABILITY
2001-2002
$ 27,397.00
($36,253,650 blanket limit)
$ 4774.00
$115,512.00
$ 17,070.00
$ 1111.00
$17,625.00
INCLUDED
$ 2293.00
4776.00
502.00
1385.00
2002-2003
$ 34,015.00
($47,086,000 blanket limit)
INCLUDED
$113,907.00
$ 17,932.00
INCLUDED
$ 20,843.00
INCLUDED
$ 1632.00
$ 6033.00
$ 502.00
$ 1688.00
TOTALS
$192,445.00
$196,552.00'
(2.1%increase)
2003-2004
$ 42,910
(63,391,644 blanket-by-locmion values)
$ 6,204
$141,078
$17,390
INCLUDED.
$ 22,011 ( 119 units)
INCLUDED
$ 1,701
$ 8,845
$ 502
$ 1,688
$ 8,210
$ 250,539 **
(27.4%incre~e)
Pg.2
· 2002 PREMIUM REDUCED TO $196,552 BY CHANGING TO $1,000 DEDUCTIBLE - INCREASE REDUCED TO APPROX.2.1%
CHANGES RESULTING IN PREMIUM INCREASE IN 2003:
INCREASE IN PROPERTY SCHEDULE OF ABOUT $17,800,000 - PROPERTY PREM INCREASE OF APPROX. $15,100 INCLUDING-
A) ADDITION OF LIQUOR STORE PROPERTY FOR $1.3 MILLION - ADD'L. $ 3,150 IN PREMIUM
B) PUBLIC SAFETY CENTER & CITY HALL ADDITION ADDED TO SCHEDULE - APPROX $10,000,000 IN VALUE & APPROX. INC. OF $5,415
C) MOBILE EQUIPMENT INCREASE IN VALUE RESULTING IN ABOUT $1,000 INCREASE IN PREMIUM
D) MAXIMUS PROPERTY APPRAISALS COMPLETED RESULTING IN INCREASED PROPERTY VALUES ACROSS THE PROPERTY SCHEDULE OF
APPROXIMATELY $5 MILLION & CORRESPONDING PREMIUM INCREASE OF ABOUT $4,500
E) LANDFILL GENERATION FACILITY MOVED FROM BUILDER'S RISK STATUS TO COMPLETED & IN USE - RESULTS IN FULL CHARGE FOR THE
FACILITY, OR ABOUT ANOTHER $ 850 OVER LAST YEAR
2) $15,450,000 INCREASE 1N VALUES INSURED UNDER EQUIPMENT BREAKDOWN COVERAGE - ADDL PREM OF APPROX. $2,400
3) INCREASE IN RATEABLE OPERATING EXPENDITURES OF ABOUT $830,000, E & O, EXPOSURE, UTILITY EXPOSURES - RESULTS IN PREMIUM INCREASE
FOR MUNICIPAL LIABILITY OF $27,170
4) ADDED LIQUOR LIABILITY FOR ADDITIONAL PREMIUM THIS YEAR OF $ 8,210
5) NO CHARGE MADE FOR CITY ATTORNEY IN LAST YEAR'S PROPOSAL (ERROR) -THIS YEAR'S CHARGE IS $ 637
6) AVERAGE PROPERTY RATE INCREASE OF ABOUT 10% DUE TO REINSURANCE COSTS FOR LMCIT PROGRAM
10/16/03me