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TO: Mayor Richard C. Irvin
FROM: Alex G. Alexandrou, Chief Management Officer, Mayor's Office
DATE: December 14, 2021
SUBJECT:
A Resolution Authorizing Purchase of Property/Boiler Machinery, Fine Arts, Cyber and Excess Cyber Liability, Crime, Special Events Liability, Drone Liability, General Liability/Law Enforcement/Auto Liability, Excess Liability, Excess Workers Compensation, Liquor Liability insurance policies for the period of December 31, 2021 through December 31, 2022.
PURPOSE:
To obtain approval of the proposal from broker Hub International Midwest Limited for Property/Boiler Machinery insurance from Chubb Insurance Company, Fine Arts Insurance from Hanover Insurance Company, Cyber Liability Insurance from AIG, Excess Cyber from Coalition, Crime Insurance from Travelers, Special Events Liability from Cincinnati Specialty, E Drone Liability from American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Allied, HDI, Hallmark Insurance Company and Great American Insurance Company, Excess Workers Compensation insurance from Safety National Casualty Insurance, Liquor Liability insurance from Lloyds of London for the period of December 31, 2021 through December 31, 2022.
BACKGROUND:
The City has historically maintained these types of insurance coverages as part of its overall insurance and risk management program including self-insured retention levels. 2020-21 total program cost including broker service fee was $1,152,655.00.
DISCUSSION:
Our authorized broker Hub International reviewed our existing program and solicited additional market bids beyond renewal of the existing program. Despite extensive efforts by Hub, certain market conditions in the General and Excess General Liability and Cyber/Excess Cyber have yielded significantly higher premium cost renewals as indicated on the attached premium summary exhibit. It is imperative the city maintain all of its present coverages despite these results.
Hub is recommending a renewal of the casualty lines for our Excess General Liability coverages which would insert Safety National in lieu of Allied for the first $5M layer and then Allied and HDI participating in the next $15M. All excess layers above $20M will remain with incumbent carriers. Attached is the City of Aurora 2022 Program Structure. Approval of this five-layer coverage structure will maintain the desired excess liability coverage of $35M above the City's $2M self-insured retention. The public entity/municipality sector continues to experience severe capacity issues with a shrinking pool of what was already a very short list of variable markets. The increase in premiums reflects the market driven lack of capacity.
Cyber/Excess Cyber- The cyber market is in complete turmoil due to exponential increases in ransomware claims country-wide and overall poor loss results. The cyber market for municipalities is now almost non-existent which again drives shrinking capacity and increasing rates. Hub is recommending a renewal with AIG on the first $5M and inserting Coalition (in lieu of Swiss Re) on the $5M excess layer. AIG is currently the only viable alternative for the lead cyber policy, and they did agree to maintain full policy limits for ransomware which they have not otherwise been agreeable to during all of 2021. The only renewal caveat is that AIG did increate their minimum policy deductible to $250,000 in lieu of $100,000 expiring.
Property - Hub is recommending a renewal with Chubb as they continue to offer a very comprehensive coverage platform with certain coverage items that are not available with competing markets. Additionally, Chubb will require a 15% rate hike which is attributable to market conditions as well as adverse city claim losses over the past 3 years including a 2021 water damage claim that will settle out at nearly $1.5M.
The bottom-line premium for all lines of coverage has increased by approximately $620,000 over expiring, and when compared to an adjusted baseline to account for any exposure changes year over year, the renewal represents a bottom-line rate increase of 53%. This increase is indicative of current insurance market conditions in the public entity space where lack of capacity and a lack of viable market alternatives are driving exponential price increases in the excess casualty lines.
Overall, based on the increased renewal premium costs and increased coverage limits for General/Excess General Liability and Cyber/Excess Cyber coverages, the total cost including broker service fee for 2021-22 is $1,790,307.00 as compared to $1,152,655.00 for 2020-21. Funds for these insurance policies are budgeted for in the Property and Casualty Fund budget.
IMPACT STATEMENT:
N/A.
RECOMMENDATIONS:
That the City Council approve the resolution authorizing the purchase from broker Hub International Midwest Limited for Property/Boiler Machinery insurance from Chubb Insurance Company, Fine Arts Insurance from Hanover Insurance Company, Cyber Liability Insurance from AIG, Excess Cyber from Coalition, Crime Insurance from Travelers, Special Events Liability from Cincinnati Specialty, Drone Liability from American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Allied, HDI, Hallmark Insurance Company and Great American Insurance Company, Excess Workers Compensation insurance from Safety National Casualty Insurance and Liquor Liability insurance from Lloyds of London for the period of December 31, 2021 through December 31, 2022 for $1,790,307.00 inclusive of all applicable premiums, taxes and broker service fees.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution Authorizing Purchase of Property/Boiler Machinery, Fine Arts, Cyber and Excess Cyber Liability, Crime, Special Events Liability, Drone Liability, General Liability/Law Enforcement/Auto Liability, Excess Liability, Excess Workers Compensation, and Liquor Liability insurance policies for the period of December 31, 2021 through December 31, 2022.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, the City Council has determined it is the best interest of the citizens of Aurora that the City purchase Property/Boiler Machinery, Fine Arts, Cyber and Excess Cyber Liability, Crime, Special Events Liability, Drone Liability, General Liability/Law Enforcement/Auto Liability, Excess Liability, Excess Workers Compensation, and Liquor Liability insurance policies for the period of December 31, 2021 through December 31, 2022; and
WHEREAS, the renewal proposal from insurance broker Hub International Midwest Limited, for Property/Boiler Machinery insurance from Chubb Insurance Company, Fine Arts Insurance from Hanover Insurance Company, Cyber Liability Insurance from AIG, Excess Cyber from Coalition, Crime Insurance from Travelers, Special Events Liability from Cincinnati Specialty, Drone Liability from American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Allied, HDI, Hallmark Insurance Company and Great American Insurance Company, Excess Workers Compensation insurance from Safety National Casualty Insurance and Liquor Liability insurance from Lloyds of London for the period of December 31, 2021 through December 31, 2022 best meets the City's insurance policy and coverage requirements; and
WHEREAS, the 2022 City Budget provides for this item in account numbers 601-0000-410-40-10, 601-0000-410-40-40, and 601-0000-410-40-70.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that one (1) year of Property/Boiler Machinery insurance from Chubb Insurance Company, Fine Arts Insurance from Hanover Insurance Company, Cyber Liability Insurance from AIG, Excess Cyber from Coalition, Crime Insurance from Travelers, Special Events Liability from Cincinnati Specialty, Drone Liability from American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Allied, HDI, Hallmark Insurance Company and Great American Insurance Company, Excess Workers Compensation insurance from Safety National Casualty Insurance and Liquor Liability insurance from Lloyds of London be purchased for the period of December 31, 2021 through December 31, 2022 through broker Hub International Midwest Limited for $1,790,307.00 inclusive of all applicable premiums, taxes and broker service fees