STATEMENT OF ISSUE
The City purchases commercial insurance to transfer loss exposures for Property and Boiler/Machinery for all City-owned buildings and contents. The coverages are solicited through Requests for Proposals (method used for professional services) on a three (3) year term with annual renewals. The current program expires at midnight (12:01 a.m.), March 31, 2009.

In January 2009, the Treasurer-Clerk's Risk Management office developed and released Requests for Proposals (RFP) 0072-09-KR-RC for both the placement of its commercial property and boiler machinery coverages with the brokerage to be effective April 1, 2009. The RFP was released in mid January and was downloaded by several large brokers and agents. One proposal was received on February 17, 2009. City staff consisting of representatives from Budget, Electric, Risk and the former chairman of the City’s Risk Management Advisory Board reviewed the one proposal from the brokerage firm J Smith Lanier and deemed it compliant to the specifications. There were no protests or declinations to quote, and there was only one formal inquiry requesting clarification. Market indications continue to reflect a hardening of the market for various reasons and some public entities are still unable to obtain needed coverages. This proposal provides the risk protections specified by the City and also preserves the existing terms and conditions and provides reduced pricing. We are requesting the City Commission to award the coverage for the insurance program detailed in Exhibit A to brokerage firm J Smith Lanier.

RECOMMENDED ACTION
1. Approve the recommendation to award the coverage for the insurance program as outlined in Exhibit A to brokerage firm J Smith Lanier.

FISCAL IMPACT
Funding of the $2,530,748 premium is provided from the FY2009 Risk Management Budget Account 740–120. Although the City's total insured values increased, the proposed annual premium represents a reduction of $158,290 from the expiring program while preserving the deductibles, terms, and conditions.

Gail Shuffler, Risk Manager, Treasurer/Clerk’s Office

Gary Herndon, City Treasurer/Clerk

For information, please contact: Gail Shuffler, 891–2117.

SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES
The City purchases commercial insurance to transfer its loss exposures for blanket All-Risk Property and Boiler/Machinery for buildings and contents owned by the City. Historically, the program coverages were solicited in summer to be awarded in late September and bearing effective dates of October 1. The awards are three (3) year terms with annual renewals. In 2003, Risk Management recommended and the Commission approved a change in the effective date of the property and boiler & machinery program from October 1 to April 1 of each year. The recommendation was made to avoid adverse timing issues in the insurance market related to hurricane season and the traditional re-insurance treaty pricing cycles.

Since Hurricane Andrew, the Florida property insurance market has been far less predictable than in decades past. Many other factors that have since impacted the market include: shrinking capacity, additional costly natural disasters, the September 11, 2001 tragedy, carrier withdrawals, market hardening, tighter underwriting for public risks, and carrier mergers and acquisitions—all of which have contributed to a shrinking domestic market.

In 2004, the City's Purdom 8 generating unit sustained a significant large loss, and Florida had record four hurricanes in a single season, causing extensive damage. Some of the large losses were commercial risks, including municipally owned properties. Single carrier placements for large programs with utility exposures are now rare. The City's exposures include substantial values in the electric generating category, which further limits market availability. The recent investigations of broker and carrier practices by various Attorneys Generals and Insurance Commissioners' Offices, both in Florida and other states, may also have a negative impact on the market.

The solicitation process to obtain commercial property coverages is very detailed, and underwriters require site inspections, loss prevention engineering and significant underwriting and historical data. City Risk Management obtained an extensive commercial insurance appraisal to not only validate the total insured values, but to photograph and describe the City's properties in detail. The selected appraisers specialized in the establishment of insurable values for the purpose of replacement costs. The detailed descriptions included many significant construction and loss prevention details that provided the foundation for and resulted in a very large solicitation document for commercial property coverage. Brokers and carrier underwriters were provided this extensive information in these solicitation documents.

The City's RFP not only described the program of coverage, including the terms and conditions of the coverage, but also detailed the requirements for broker qualifications. A single proposal was received and deemed compliant by the evaluation committee.

CHARITABLE CONTRIBUTIONS
N/A

OPTIONS

1. Approve the recommendation to award the coverage for the insurance program as outlined in Exhibit A to brokerage firm J Smith Lanier.

2. Provide staff guidance.

ATTACHMENTS/REFERENCES
Exhibit A: Proposed Property Program