HomeMy WebLinkAboutRESOLUTION 1993-51Suggested by:
FinanCe
City of Kenai
RESOLUTION NO.
A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALASK~ ~"'
AUTHORIZING THE EXECUTION OF COOPERATIVE PARTICIPATION.~. "-.' .'.:.'
AGREEMENTS AMONG ALASKA MUNICIPALITIES AND SCHOOL DISTRICTs :
CREATING THE ALASKA MUNICIPAL LEAGUE JOINT INSURANCE
ARRANGEMENT o
WHEREAS, AS 21.76 enacted by the 1986 Alaska Legislature``
provides a means for local governments and school d-~stricts
to Join toqether in a Joint insurance arrangement intendsd
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, this Association will provide pooling of riskS,.
self-insurance management, Joint purchase of insurance,"~'
claims administrati~n, loss prevention and control, .-"~.'
insurance defense and other related risk ~anagement 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 members due to 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 cooperative 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:
~_~. The city of Kenai hereby indicates its
commitment to become a member of the Alaska Mt~nici~al League
Joint Insurance Association, organized pursuant to AS 21.76.
By making this commitment the City Council hereby accepts
Resolution No. 93-51
Page Two
and approves the bylaws of the Association, a copy of which .
is attached hereto and incorporated by reference ':".~.'.~'~
~. The City Council hereby authorizes the exeoution "
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'
Municipal League ~oint Insurance Association. The City
Manager is hereby authorized and directed to execute said
"Agreements" and such other documents as may be necessary to
effectuate part~cipation of t~e City as a me.er of the
Joint Insurance Association.
Section..3. The City Council pledges to appropriate
sufficient funds for annual premiums and assessments under
the "Agreements". The "Agreements" will go into effect upon
receipt by the Association of a signed copy of this
resolution and signed "Agreements". Amounts payable to the
Association, as encumbered by the "Agreements" shall be
classified as "operating expenses" and are subject to annual...~
appropriation by the City Council.
PASSED BY THE COUNCIL OF
lSth day of June, 1993.
THE CITY OF KENAI, ALASKA, this
ATTEST:
JOHN J. WILLIAMS,
car°f"L~ Freas, ~ity ci6rk
Approved by Finance
(6/9/9:3)
kl
I?B~-IBB1
,DJITY .0 F
ENAI
210 FIDALGO KENAI, ALABKA 8Nll
TELEPHONE ~83 - 7538
FAX 907-283-3014
TO: Kenai City Council
FROM: Charles A. Brown, Finance
DATE: June 10, 1993
SUBJECT: Insurance
Director
As I briefly discussed in.a memo to Council on May 27, 1993,
have been spending cons%derable time evaluating the City's
Insurance program, including the possibility of joining the
AML Joint Insurance Association (Pool).
First, let's summarize current coverages and July 1, 1993
renewal quotes:
Property (L.F. Last Frontier), Alaska National,
$25,000 deductible
$ 37,600
General Liability (L.F.), Alaska National,
$0 deductible, $1,000,000/occurence,
$2,000,000 aggregate
42,342
Auto (L.F.), Alaska National, $0 deductible,
$1,000,000/accident
41,569
Public Officials (L.F.), Lloyds of London,
Claims made form, $5,000 deductible, $1,000,000/
occurence, $1,000,000 aggregate
18,420
Police (L.F.), Lloyds of London, Claims made
form, $25,000 deductible, $1,000,O00/occurence,
$1,000,000 aggregate
31,450
Excess (L.F.), National Union Fire, $3,000,000
36,000
Airport (W. & O. Walters & Olson), National Union,
$1,000 deductible, $50,000,000
32,975
Contractor's Equipment (W. & O.), Phoenix
Assurance, $1,500 deductible
8,169
Memorandum
Kenai City Council
'June 10, 1993
Page Two
Worker's Comp. (W. & 0.),
Subtotal (Renewals)
To the abOve figure, we
that renew in mid-year=
Ambulance Malpractice (W.
$1,000,000
Physician Sponsors (EMT)
Total, FY94 estimate
Ind~strial Indemnity
should add two policies
& 0.), $500,000/
(Renewals)
2,738',,'.'_
1,728
s370'.?04
The AML/JIA pool offers some interesting possibilities. The
City administration has never seriously considered the pool
before now. There has been an underlying belief, perhaps
false, that the City of Kenai would become a deep pocket for'
losses of a multitude of bush co~munities. After evaluating.
the plan, its pooling formula, its stop-losses, its .. :
reinsurance, and its management, I believe it can be a valid.
option to consider. .....
There are actually two Pools, one for police and one for
everything else (excluding airport). Let's look at the
general pool first. This includes everything listed abOve
except police, airport, and excess. If we Joined this pool,.
I'd recommend buying airport through a broker for next year;
I'd also recommend passing on the excess.
Key provisions of the general Pool are=
1)
First dollar coverage for all liabilities (note the' ....,
deductibles on our renewing public officials and pOlice
coverages). :
2)
$2,250,000 per occurrence,
limit is the reason why I
coverage in the Pool.
no aggregates. This high'
believe we do not need excess
3) All occurrence form; no claims made (no tail needed).
4) No Lloyds of London.
5) The reinsurance is placed with "A" rated companies.
· ' . , · . . ,' , ' ,'. ,, , , .. -'., ~:,-k-: ::.,-. ,,f~. 4.~-"m'~'.-..',(),.::,':..~ .....
::: .. '. '~.'" ~'' ,,'.". -. .. -, - ,',.,".' ,'" ., =.: ,' · , .... ' .... .. ,. , :,'-. · c. "'~i.'-" ':,:'""-.:~,~.:','~?,~:~,;~;:,~t.".?,:%'~:.,.;~:.~..,:~:,.'- :'
Memorandum
Kenai City Council
Jt~e 10, 1993
Page Three
For the first time, only a one-year commitment is
req~ired. This was a three-year commitment.
Refund or surcharge is limited to +/- 30%,
individually, per line.
In its basic for~, losses greater than $10,000 are
pooled based on exposure (payroll). However, for. the
first time, we can select a deductible to escape
pooling until a higher level. I'll explain later.
The police Pool also provides $2~250,000 of coverage. There
is no deductible. The first $100,000 of losses are charged
to the affected municipality. Losses over $100,000 are
pooled based on exposure. Anything over $250,000 is
reinsured. This pool is riskier than the general pool~
surcharges and refunds are not limited to 30% of premiu~s...
This isn't as bad as it sounds. In most years, I'd
significant refunds. It should work out ....
in the long/..rUn,f",~... ..
And, don't be misled into thinking we are not surcharged, or
losses now. Our renewal quote from Last Frontier £or.p~ltCe~
went up 59%. The only event was a justified shooting for'
which no claims were made or paid.
In its basic form, the Pool will not initially save the City
money. But, refunds should result in savings in the long..
run. For comparison purposes, I have to add back the
airport coverage. Comparable (but not exactly the sa~e)
coverages in both Pools will require an annual deposit 'of
about $348,000. Adding the airport brings the FY94 total~to
about $381,000. Another $1,000 is saved from inclusion of
some training materials that we now purchase. This brings
the pool cost to about $9,000 more than the renewal quotes.
But, that's not what I'd recommend. The City of Kenai is
large enough, with adequate reserves, to modify its
insurance program. We can safely assume more risk. When~'.
possible, I have avoided deductibles on liability lines
because the insurance companies are likely to settle Claims
below the deductible level~ it's not their money. But,'in
the Pool, deductibles can make more sense. The City can
participate in adjusting decisions. This is the first year
that the Pool has offered deductibles.
Memorandum
Kenai City Council
June. 10, 1993
Page FOur
recommend the follOWing deduc=tibles in the-POols,..'
General Liability and .!~'Iic o£ficials .:.... $25'000
Auto. Liability . . . ~' 25,000
W0rkers. compensation 0
PoliCe Liability -.0'
PrOperty and heavy..equipment . .50,000.
Using $25,000 deductibles on general liability, public
officials, and auto will save'the City about $59,000.
Increasing the property and heavy equipment.deductibles from
$25,000 to $50,000 will save about $6,000 more. Based on..
our experience, the City'will save money ·over the long term
using these deductibles.
With regard to the general pool,
would work this way:
2)
the $25,000 deductible
The City would pay .the:"first $25,000 of each los
(General Liability,.i..'Publ!co£ficialS and. Auto),
The'City would~not.'ParticiPate in'any loss pooling of
the£irst $25,000 Of each loSs'incurred by Other
3)
Individual lOsses between $25,000 and $25.0,000, of the
City and other municipalities, will be .pooled based
on exposure.
This will reduce the City's exposure to.pooled .(other
municipalities,) losses in two ways. First, we won,t
participate in their losses of less than .$25,000. Second,
the 30% maximum surcharge, is based on premimm; we 'Just
reduced our premiums with the 'higher dedUCtibles.
There are a variety of reasons, that haveperSuaded me to
recommend the Pool to~he Council..I-be'lieve coverages,-
companies, and forms are better. We WOUld have'more
flexibility, and the service is expected"to be good. The
Pool has adequate reserves..This is the.direCtion the City
sh°uldbeheadinq, pooling its'losses in what is now a
stable Pool and assuming more risk.
For me, there is an added bene£it. I will be able to avoid
the annual insurance application and shopping procesS, the
'resolUtiOn,. .'X£: so.,.. Z 'vil. I'.Proceed.as oUt~Iinecl'above'. ":. . .
regarding 'the. h~gher 'deduo~ibleS', . Zf '.the. reSolutiOn ."fa~ls,'
coverages and' deductibles) ..~