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HomeMy WebLinkAboutRESOLUTION 1994-33Suggested by: Administration City of Kenai X~BSOLOTXON NO. 04-33 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASKA AUTHORIZING THE EXECUTION OF COOPERATIVE PARTICIPATION AGREEMENTS AMONG ALASKA MUNICIPALITIES AND SCHOOL DISTRICTS CREATING THE ALASKA MUNICIPAL LEAGUE JOINT INSURANCE ARRANGENENTo WHEREAS, AS 21.76 enacted by the 1986 Alaska Legislature provides a means for local governments and school districts to join together An a Joint insurance arrangement intended to mitigate the cyclical and erratic nature of the conventional insurance market; and WHEREAS, a not-for-profit Association has been established pursuant to AS 21.76 by the Alaska Municipal League to provide risk management services for Alaska municipalities, city and borough school districts and regional education attendance areas; and WHEREAS, thisAssooiation will provide pooling of risks, self- insurance management, Joint purchase of insurance, claims administration, loss prevention and control, insurance defense and other related risk management services on behalf of its' members; and · · WHEREAS, similar local government associations throughout the United States have been able to assure insurance coverages while obtaining significant long-term economic savings for their m~mbers due ~o the joint buying power of the members, the non profit tax exempt status of the Association, the pooling and investment of premiums paid, .and risk management services provided for members; and WHEREAS, AS 21.76.010 provides that two or more local governmental entities may enter into ~ooperative agreements for these purposes; and WHEREAS, the City wishes to participate in the Joint Insurance Arrangement; NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA AS FOLLOWS: Section_l: The City of Kenai hereby indicates its ~ommitment to become a member of the Alaska Municipal League Joint Resolution No. Page T~o 94-33 Insurance ~ssoctatton, organized pursuant to AS 21.76. By making this commitment t~le City ~Counctl hereb~ accepts and approves the. bylaws of ~e Association,. a copy of which tm: '. a~taohed hereto and incorporated by reference. section_ 25 The City Council hereby authorizes .the execution of a Cooperative Participation Agreement, and a second Cooperative Participation Agreement for the Law Enforcement Joint Liability Protection Program (hereinafter the "Agreements") among municipalities' school districts and regional educational attendance areas creating the Alaska Nunicipal League Joint Insurance Association. The City Nanager is hereby authorized and directed to execute said "Agreements" and such other documents as maybe, necessary to effectuate participation of the City as a me~ber of the Joint Insurance Association. ~ectton 35 The City Council pledges to appropriate sufficient. funds for annual premiums and assessments under the "Agreements". The "&qreements# will qo into effect upon receipt by the &ssociation of a signed copy of this resolution and signed "Agreements#. The City's participation in. the. AsSociation continues for a te~ of three years commencing.on July l'of the Calendar year in which coverage begins-, mounts payable to~he~sooiation, as encumbered by the #AgreementS".' shall be classi£ied as "operating expenses" and are subject't° annual appropriation by the City Council. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALAS~, this day of June, 1994. ATTEST: JOHN J. WILLIAMS, NAYOR carol L' Freas, city Clerk Approved by Finance: (5/24/94) kl CITY OF KENAI 210 FIDALGO AVE., SUITE 200 KENAI, ALASKA 99611-7794 TELEPHONE 907-283-7535 FAX 907-283-3014 ~, 1992 MBXORAHDU)f To 8 From: The Honorable Hayer John Williams & Kenai City Council Thomas J. Mar~inen, City Manager~~ May 25, 1994 Rooonmond&t~on to Adopt the MlL/~ZA Three Yoar ZnsuEanoo Proposal Znoluding ~aso~ng the RJq[uirod Resolution £or the MiL/~ZA ~ool The City Administration has requested quotes for the City*s ne~c three year insurance coverages. These insurance quotes were due on May 16, 1994 and they were tabulated and analyzed by the Cityts Finance Director (see the attached insurance memorandum). ~XTY ADMXNXBTR~TXONtB XNBURA~CB. RB~O.)fX. RNDATZON FOR,, The City of Kenai's Administration (City Attorney, Finance Director and City Manager), having reviewed the FY95 insurance coverages, deductibles and cost quotations, unanimously and without reservation recommend that the City of Kenai*s City Council adopt the FY95 three year AHL/~IA I~8UBANCB PLANS AS PROPOBRD. Furthermore, it is recommended that the City Council, at itts regular City Council meeting, Jun~ 1, 1994, adopt a resolution required by the JIA pool for the City of Kenai*s participation in the pool and authorize its execution. It is the City Administration*s strong recommendation that the time is right to switch insurance coverages based on the cost of existing coverages, the deductibles, cost savings/cost avoidance and potential credits available for good performance, i.e. small losses. The City Finance Director*s insurance memorandum, summarizing the insurance quotes, is well thought through and summarizes the City*s current insurance, preferred insurance, the insurance quote comparisons, as well as financial comfort zone and analysis of the AML/JIA recommendation. The bottom line is straight forward. There is a net $20,000 annual cost savings on the insurance quotations comparing AML/JIA with the traditional insurance plan. As pointed out in the memorandum, this would be approximately $52,000 less than the City of Kenai paid in FY94. Furthermore, adopting the AML/JIA plan will result in a substantial cost savings of $147,000 from the FY95 budgeted insurance cost. Several reservations and questions about switching to a .pooling, concept# were answered _satisfactorily by the .Fin. an.ce. D. ir.e. ctor'~. memorandum and discussions. Some of these ~nc~uaeu ca~s'ana deductibles, prior acts coverages, cost savings/cost avoidance', strength of reinsurance carriers .and $3.225 million for all claims that occur. Also, AML/JIA credit or assessment is limited to 10t-, of the liability premiums for all but Police. Finally, the Cityts' po61ing obligation would be that the City would have the first $25,000 of each loss for general liability, public officials, and- auto. Between $1 and $25,000 losses, the City would not participate in loss pooling with other municipalities~ loss pooling' with other municipalities, based on experience and exposure, w°Ul~ occur between $25,000 and $225,000 of Kenai~s individual losses' Losses above $225,000 would be covered 100% by the AML/JIA pool and reinsurance provisions. This is somewhat different for the PoliCe' pool, but the principal and concept of pooling above a $25,000 loss remains basically the same in the JIA Police pool. Finally, as pointed out in the Finance Director's memorandum, .the AML/JIA pool reserves include over $11 million cash and a projected $2 million surplus. The AML\JIA is now a financially stable and viable insurance pool, strictly specializing in municipal business. By providing municipal loss and safety training and keeping each year's losses separate for pooling purposes, it has a specialized niche and it's time for Kenai to Join the ANL/JIA plan. TO: FROI~: DATE: ,, CITY OF KP. NAI 210 E., $UITE 200 KENAI, ALASKA TELEPHONE g07'~83.755S F~ 907'28~3014 May 19, 1994 InSUrance QUotes, ~'homas j. Nanninen, City Manager Charles A. Brown, Finance Director FY95 Quotes for next ea , ~eceived renewa~¥~.~s inSUrance _ . ~equested. e._i'.~u?ces, With ~,,~ dU~ Nay Z6_ _ great effor~ ~ow.. Not every __..An ~nalYsts and ~..~e . e~ .... _~. ~.uo select t~- _[.~p=aon is dtscusse -~a~,.,.arles of -~'~-r.aze with one anot~;r~C'ons the City needS'an{ ye made -gJtlll~L~nsur~c~ U that are '~=, our CU 1/ability ~ol~_.__rre~t Policte . __ ~ -v~es. We do aveSd~cZero or low deduct Property, $5,000 on h t i $1,000 o · Public tbles bls n Air or Off/c/ of $25 0 P t als , 00 o Ambulance. , $1,500 on mo~-- ' $~5,000 on p~__, n zn tota! ~__. -, ~ ou on , ~-c~Uazng w?rkers COmp., we aid ooo ins~r~' Last YearT"~slng l~s deductibi ~=e recommen _unctl agree es ~nd asstt~ Policies -~ .... dations. ~ _ d with th~- _ . o-oulu hay a recomme ~u aspec~ o ~O~ic¥ shOUld ~ ....e ~25,000 ded,, n? that most (and'.~°s=anttal. B;'~I~y~ aeducttble."~.~na= ~he tible ), we s lb/es higher de~,,~. ¢i" the ~ro-~~ about $77_ 00^ -- ~y $2~, 000 ~ ~elE- ,. ..... ~enera~ Fun 30, Memorandum Thomas J. Manninen May 19, 1994 Page Two Next Year's Ouotes General Liability, Auto., Police; OCCUr. forla; $4,000,000/ocCUro & aggreg.; $25,000 ded,; · Mt. Airy Traditional Insurance $ 123,00'0 General Liability, Auto, Police, Public Officials; occur, form; $3,225,000/occur., no aqqreg; $25,000 ded. Property; scheduled values; $50,000 deductible; AK National (Trad.) 23,600 $ 112,910 22,028 Public Officials; claims' made form; $4,000,000/claim .& .aggreg, $5,000 ded.; Mt. Airy. (Trad. Workers Comp.; statutory;. $500,000 Employer's Liab. ($1,000,000 in JiA); Industrial Inde~nity (Trad.). 15,000 125,889 Included 142,465 Mobile Equipment; schedUle's values; $25,000 deductible; Phoenix Assur. (Trad.) 7,275 Incl. in Prop. Airport; occur, form; $50,000,000 C.S.L~ products; $25,000,000. C.S.L./occur. & agqreg, personal injury; deducttbles;'$1,000! occur., $5,000!property.damage; National Union Fire (either". program) Ambulance; mid-year renewal, Jan., 1994 quote; $500,000/0CCuro, $1,000,000 aggreg.; $250 ded.; Northland (Trad.) 35,000 2,374 35,000' Incl. in Memorandum Thomas J. Manninen Kay 19, 1994 Page Three Physician Sponsors Medical Malpractice Totals* As you can see, 513 Inol,' .in' $20,000 less the ANL/JIA is about expensive~. In addition, with good claims experience, the City can expect up tO $34,500 in credits from the JlA toward future premiUms. The JIA credit or assessment is limited to 10% of liability.. premiums (except Police, which credit generally would not .exceed 70%). While I will not guarantee a credit, some credit is extremely likely because the calculation is against each line independently. For example, had the City Joined the ANL/JIA pool for the current year under the plan I recommended, the City would likely be receiving a credit from FY94 of about $41,000. When added to the reduced premium for that plan, the Oit~would h&ve saved about $90,000 t~ PY94 insurance costs had we Joined the Financial CaDabilities With regard to financial capabilities, I am uncomfortable.wit~ the companies backing the "traditional'* insurance quote. Airy is an A- company. Until the quarter ending September,~. 1993, its size was quite small. During that single quarter,' policyholder surplus increased from about $12,000,000 to nearly $186,000,000 (1450%). Not long ago, in 1991, the company experienced a net underwriting loss of $80,000. Considering that the Mt. Airy quote is for $4,000,000 of coverage on the bulk of our liability lines, thus omitting an excess policy, I simply do not feel comfortable with the company. The proposing broker admits that Mt. Airy offers less strength and stability. At this point, I'll mention that we received an optional quote for "traditional" insurance. That quote, however, is even less appealing. It does not offer the deductible level I requested for public officials liability, it includes two A- companies, one company is non-admitted in Alaska, and it costs $4,500 more than the other "tradi~ional# option. It also would continue with Alaska National as our general liability carrier. Cary and I are both unhappy with Alaska National's response to claims. * Totals do not include Museum at about $7,120. Policy would have to be added at mid-year under any plan chosen. ~emorandum ?homas j. Manninen ~ay 19, 1994 Page Four ~ --~la nas sufficient resources to meet obl~gations of the pool. It and a projected 2 has over _ _~ $ ,000,000 s _~ , . ,000 in. cash $225,000 tn one mol --~ __,~__u~__~u~...L0_ss~s greater-than ~ . domestic company ~ith about $235,000,000 tn shareholders, equity. g, proven organization. I recommended entering the pool last year. This year, it is even more attractive. The refund or surcharge is now limited to 10% Instead of 30% (except for Police). Liability limits have been increased to $3,225,000 from $2,250,000. I will brtefl list my reasons for again recomme details of how the pool operates,nding the JIA pool and Y 1) All JIA coverages are occurrence form w made forms. Z , tth no o pro ra Prefer occurrence form. 1alms g m includes clai _ ~The traditt so no tail w ~s made.) Prior acts ~a~ ill be needed in the JIA. are cover.d,.I 2) 3) 4) 5) e) Limits of coverage are higher. The JIA has no aggregates; we'll be covered up to $3,225,000 for as many claims that occur. The traditional plan has an aggregate equal to one occurrence limit. .. As stated above, surcharges are now limited to 10% per year per line (except Police). The JIA costs less than the traditional options. Coverages appear at least as broad as the traditional program. The cost is Predictable. It Will be a simple matter to budget for insurance. 7) The rating is simple, based on easily identifiable dar such as payroll, auto ~c_o.u.nt_s:.and..property values. will allow for simple funds. ~'~ uaaoca=~on to the Memorandum Thomas J. Manninen May 19, 1994 Page Five 0) The JIA general pool a) b) (not Police) will work thisway=. The City will ~ay the first $25,000 of (G/L, Public Officials, Auto)'. each' :loss', The City would not participate in any loss .p. oOl~.ng of the first $25,000 of each loss incurred ~y .other municipalities. ". - -' "- 9) c) Individual losses between $25,000 and $225,000, of Kenai's and other municipalities, will be pooled based on experience and exposure. The JIA Police pool will work this way= a) The City will pay the first $25,'000 of each loss. b) c) d) The City will not participate in pooling other municipalities, losses of $25,000 or less. Losses between $25,000 and $100,000 will be pooled .... based on experience. Losses between $100,000 and $250,000 will be pooled. based on exposure. e) Excess losses are reinsured. lO) The above pooling methods substantially reduce our exposure to other cities' losses. 11) For my part, Joining the JIA will remove bidding and politics from the process. 12) 3.3) The JIA coverage memorandum is much easier to understand than our traditional insurance policies. I believe we may actually have a good idea what we are buying. JIA loss control is specifically tailored for municipalities. Without reservation, X reooauend that the City Join the Cary is also familiar with the City's insurance; he also recommends the JIA. The plan I've presiated w~11 cost Memorandum Thomas J. Nanninen ~ay ~9~ 1994 Page Six ~47,000 lees ~h&n ye budgeted for F~gS, ' Health ~nsuranc~ " Walters & Olson marketed our health insurance. ~ had budgeted for a 20% increase. It appears that they did a fine ~ob, Inetoad of a ~0% tnoreaee, we'll have We'll como tn ~ut O~SO,O00 uder budget, This matter should be placed on the June 1, 1994 Council agenda. That will be the last regular Council meeting whtch. I will attend this fiscal year. Or, if you want to handle this alone, you could wait for the June 15 Council meeting. ' If we move into the JlA pool, Council must adopt a resolution have the fora.