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HomeMy WebLinkAboutResolution No. 2016-25Suggested by: Administration CITY OF KENAI RESOLUTION NO. 2016 -25 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA, AUTHORIZING THE CITY MANAGER TO RENEW THE CITY'S INSURANCE COVERAGE WITH ALASKA PUBLIC ENTITY INSURANCE (APEI) FOR JULY 1, 2016 THROUGH JUNE 30, 2017 AND AMEND THE AGREEMENT TO REMAIN IN THE APEI PROGRAM UNDER CERTAIN SPECIFIC CONDITIONS THROUGH JUNE 30, 2019. WHEREAS, the City has been a member of APEI since July 1, 2000 receiving competitive rates and quality insurance coverage for the City; and, WHEREAS, the City has entered into a three year commitment with APEI for insurance coverage for the period of July 1, 2014 through June 30, 2017; and, WHEREAS, the three year commitment with APEI entitles the City to a 3% annual discount, $15,471.69 for FY17, on renewal premiums; and, WHEREAS, APEI is offering a 5% annual discount, $25,786.15 for FY17, on renewal premiums with amendment to the existing commitment to remain in the APEI program through June 30, 2019; and, WHEREAS, as a long -term member of APEI the City receives annual premium renewal credits based upon APEI's prescribed member dividend program. The City's FY17 member dividend is $49,472.23 and is based upon the City's longevity with APEI and the City's insurance loss history; and, WHEREAS, in addition to receiving a member dividend the City will also receive a premium credit of $50,661.23 for its loss control programs; and, WHEREAS, the current and proposed APEI, three -year commitment allows the City to terminate the agreement should the City's net premium increase by more than 10% in any single year; and, WHEREAS, coverage for FY2017 will include new flood and insurance coverage for City facilities at a cost of $19,177.02. Earthquake and flood coverage was added in FY16 and was declined prior to that; and, WHEREAS, based upon the high quality coverage, competitive premiums and credits totaling $125,919.61 for FY17 it is in the City's best interest to retain coverage with APEI for the City's insurance needs and to extend the City's commitment to be part of the APEI program through June 30, 2019. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, the Council authorizes the City Manager to renew its coverage for FY2017 with APEI, and enter into a new the three year commitment for coverage to commence July 1, 2016 and end June 30, 2019. Resolution 2016 -25 Page 2 of 2 PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this lst day of June, 2016. rLV PAT PORTER, MAYOR "Villaye with a Past, C# with a Future" To: Rick Koch, City Manager From: Terry Eubank, Finance Director Date: May 24, 2016 FINANCE DEPARTMENT 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 - 283 -7535 / FAX: 907 - 283 -3014 Re: Resolution No. 2016 -25 Annual Insurance Renewal. Each year the City goes through a process of renewing its insurance coverage's. The City has purchased its coverage for Alaska Public Entity Insurance (APEI) since July 1, 2000 and has always received quality insurance at competitive rates. As an insurance pool, APEI provides insurance coverage to its members. APEI has implemented a premium credit program to return excess equity to its members. Excess equity is created when insurance premiums are in excess of actual claims and reinsurance costs. APEI has determined its retained earnings are in excess of its needs and has instituted a rebate program to its members. The program rewards members for longevity with APEI and for a positive loss history. The credit is only available to entities that renew their coverage with APEI. The FY17 City credit will be $49,472.23 upon renewal. APEI provides a premium credit for active safety programs of its insured. The credit is for up to a 4.0% of the City's property insurance premium, 15% of the City's liability insurance premium, and 15% of the City's workers compensation premium, all credits are net of APEI's premiums for reinsurance. Reinsurance is coverage provided by other insurance companies for liability in excess of APEI self - retention. The City will receive the maximum for each insurance type in FYI totaling $50,661.23. The loss control credit requires the City to establish and operate a safety committee and provide safety training for its employees. APEI also provides a 3% longevity premium credit to members who enter into a three year commitment for coverage with APEI. The FYI longevity credit offered to the City is $15,471.69. The three -year agreement required to receive the credit allows the City to terminate the agreement at any time should the net premium for coverage increase by more than 10% from one fiscal year to the next. Exclusion to this limit are increases in declared property values, vehicle counts or covered payroll. APEI is offering to increase the longevity credit to 5% with amendment to the City's commitment extending the commitment period from June 30, 2017 to June 30, 2019, a two year extension. The additional 2% longevity credit will be $10,314.46 in FY17 and will continue for the additional two year of the extended commitment. Based upon the quality coverage, competitive rates, excellent service, and $125,919.61 in credits offered to the City for renewing it coverage, I recommend renewing coverage with APEI and amendment to the current three year coverage commitment to extend the commitment to June 30, 2019 and increase the City's discount under the agreement to 5 %.