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TO: Mayor Richard C. Irvin
FROM: Alex A. Alexandrou - Chief Management Officer
Deborah A. Lang - Assistant Corporation Counsel III
Paola Hayes, Risk Management Administrative Assistant
DATE: December 17, 2024
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, and Liquor Liability insurance policies for the period of December 31, 2024, through December 31, 2025.
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 National Specialty Insurance Company, UAL Drone Liability from (AAIC) American Alternative Insurance Company, General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Excess General Liability/Law Enforcement/Auto Liability "towers" from Arch, HDI Global, Allied World, Starstone, and Great American Insurance Company, Excess Workers Compensation insurance from Safety National Casualty Insurance, and Liquor Liability insurance from National Specialty for the period of December 31, 2024 through December 31, 2025.
BACKGROUND:
The City has historically maintained these types of insurance coverages as part of its overall insurance and risk management program totaling $35M in overall excess liability coverage including self-insured retention level of $2M. 2022-2023 total program cost, including broker service fee, was $2,183,869.00. Last year's (2023-2024) total program cost, including broker service fee was $2,526,931.00.
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 Property, General and Excess General Liability insurance markets have yielded significantly higher premium cost renewals as indicated on the attached premium summary exhibit. Exhibit A (HUB Premium Summary) highlights in yellow the exposures for the City which include a 14.87% increase in total insured property values, an increase in full-time employees, an increase if fleet vehicles, payroll expenses totaling an increase in "net total expenditures" of 23.88%.
While the City has had a good year internally from the claim perspective, the global excess markets have been hammered by claims due to extreme weather and property loss of other municipalities across the nation. In addition to the current market conditions and the extreme weather, the City had to contend with the increase in inflation over the past two years. The cost of rebuilding any property damage is more now than it was two years ago. The City's exposures have increased with the acquisition of additional properties, expenditures as well as payroll increasing which are considered when determining risk for the insurance companies.
HUB went out and sought quotes from numerous carriers. As stated above, a few large carriers have exited the Excess insurance market which has caused a significant increase in insurance premiums to maintain the same coverage as years before. This increase is not unique to the City, but rather the entire market. HUB was able to get the same coverage as previous years by building our "excess tower" with a new carrier with the same coverage. Exhibit A shows the premiums/rates and the overall percentage changes from the prior year. The Exhibit highlights in yellow the exposures for the City which include a 14.87% increase in total insured property values, an increase in full-time employees, an increase if fleet vehicles, payroll expenses totaling an increase in "net total expenditures" of 23.88%. While the excess portions have increased drastically due to market conditions, HUB was able to negotiate decreases and better rates on other portions of the premiums while maintaining the same coverage for the City.
HUB is recommending a renewal of the casualty lines for our Excess General Liability coverages which would maintain the self-insured retention by the City of Aurora at $2M and have Safety National for the first $5M layer beyond the SIR and then Arch Insurance Company for the next $5 million layer (replacing HIC and Kinsale), HDI Global participating in the next $10M, Allied World for the next $5M to $15M. Starstone would have the next $5M layer and Great American would have the next $10M to complete the final layer to $35M total coverage. Attached are Exhibit A through Exhibit D demonstrating the City of Aurora 2024 Limit Structure. Approval of this six-layer coverage structure will maintain the desired excess liability coverage of $35M above the City of Aurora'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.
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. Chubb will require a 20.01% rate increase due to ongoing market conditions as well as an increase in the City's net total expenditures highlighted in yellow in Exhibit A.
Overall, the total cost including broker service fee for 2024-2025 is $3,119,723.00 a 23.46% increase from the 2023-2024 total which was $2,519.775.00 which was an increase from $2,183.869.00 for 2022-2023. 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 (AAIC) American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Arch, HDI Global, Allied World, StarStone, and Great American Insurance Company, Excess Workers Compensation from Safety National Casualty Insurance, and Liquor Liability insurance from National Specialty for the period of December 31, 2024 through December 31, 2025 for $3,119,723.00 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, 2024, through December 31, 2025.
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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 Compensation and Liquor Liability insurance policies for the period of December 31, 2024 through December 31, 2025; 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 (AAIC) American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Arch, HDI Global, Allied World, Starstone, and Great American Insurance Company, Excess Workers Compensation insurance from Safety National Casualty Insurance, and Liquor Liability insurance from National Specialty for the period of December 31, 2024, through December 31, 2025.
WHEREAS, the 2023 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 Nation Specialty Insurance (NSI), Drone Liability from (AAIC) American Alternative Insurance Company, Excess General Liability/Law Enforcement/Auto Liability Insurance from Safety National, Arch, HDI, Allied World, Starstone, and Great American Insurance Company Excess Workers Compensation insurance from Safety National Casualty Insurance, and Liquor Liability insurance from National Specialty for the period of December 31, 2024, through December 31, 2025 through broker HUB International Midwest Limited for $3,119723.00 inclusive of all applicable premiums, taxes, and broker service fees.