HomeMy WebLinkAboutResolution - 2007-R0025 - Agreement - ACE Fire Underwriters Insurance Company - Montford Dam - 01/25/2007Resolution No. 2007-R0025
January 25, 2007
Item No. 5.13
RESOLUTION
1E IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF LUBBOCK:
THAT the Mayor of the City of Lubbock BE and is hereby authorized and directed to
atify the agreement between the City of Lubbock and ACE Fire Underwriters Insurance
'ompany for the purchase of $50,000,000 in property insurance coverage for Montford Dam,
pursuant to the terms and conditions attached hereto as Exhibit "A," for a total premium in an
amount not to exceed $144,506; and
THAT THE City Manager or designee may execute any routine documents and forms
associated with said insurance coverage.
Passed by the City Council this 25th
ATTEST:
Retie a Garza, City Secretary
APPROVED AS TO CONTENT:
Q
isa Hutcheson, Risk Manager
APPROVED AS TO FORM:
day of January, 2007.
DAVID A11LER, MAYOR
City Attorney
gs/ccdoes-Agrmnt-COL & ACE Fire Underwriters Ins Cores
.Ian. 16, 2007
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Property Insurance Renewal Proposal
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January 18, 2007 to January 18, 2008
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Presented by:
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WACHOVIA -
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L JOHN T. MONTFORD DAM
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Table of Contents
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L 1. Executive Summary
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2. Authorization of Property Insurance
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L 3. Account Team
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JOHN T. MONTFORD DAM
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Executive Summary
Napco LLC is pleased to continue our partnership with Wachovia Insurance Services, Inc. and
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John T. Montford Dam / City of Lubbock, TX / Lake Alan Henry, and we are grateful to
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have been given the opportunity to provide our Property Insurance Renewal Proposal. Napco
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prides itself on providing our clients with the highest level of professional program design and
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marketing. Our goal is to continue our long-term business partnership with Wachovia Insurance
Services, Inc. and John T. Montford Dam / City of Lubbock, TX / Lake Alan Henry. We
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recognize that in order to achieve this goal, we must continue to establish trust and commitment
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to positively impact our mutual relationship.
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BRIEF -MARKET UPDATE
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Over the last year, the property insurance market in catastrophe -prone areas was transformed by
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the devastating 2005 Atlantic hurricane season—a transformation that some characterize as
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than that following Hurricane Andrew in 1992 and the 9/11 terrorist attacks. The triple
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threat of Hurricanes Katrina, Rita and Wilma—following, as they did, on the heels of a four-
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storm sweep in 2004—gave a new sense of urgency to climatologists' warnings that the Atlantic
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and Gulf coasts face an increased risk of more frequent major hurricanes over the next few years.
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Given the growing concentration of property along the U.S. coasts, the potential property losses
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are staggering.
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As such, the 2005 storm season served as a clarion call for more prudent management of
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catastrophe exposure and disciplined underwriting by insurers and reinsurers; a recalibration of
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computer models that project losses from natural disasters; and demands from rating agencies for
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larger cash reserves to back property insurance policies with catastrophe exposure. And while all
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of these steps have the ultimate goal of safeguarding the claims -paying ability of insurance
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companies, property insurance buyers bear the consequences in the form of higher rates, larger
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deductibles and more restrictive terms and conditions. In some places, such as Florida, dramatic
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cost increases or a lack of available insurance is scuttling projects and forcing companies to go
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bare.
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• Capacity for catastrophe coverage is in short supply, as insurers retreat from coastal
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windstorm, flood and—to a lesser degree—earthquake coverage. Capacity is generally
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unavailable to cover total insured values for large accounts, forcing companies to retain
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much higher levels of risk.
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• After two years of falling property insurance rates, insureds face premium increases
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ranging from 50% to 500+% in catastrophe -prone areas. Pricing for some properties
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without catastrophe exposure may still be seeing small decreases, but more commonly
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rates are flat or increasing up to 10% to 15%.
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• Terms and conditions are tightening like a noose. Wind deductibles are rising beyond the
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standard 5%. Some insurers now apply wind deductibles outside the most high-risk (Tier
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1) ones. Deductibles are also higher for floods resulting from windstorms. Taking a page
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from reinsurance contracts, some property policies are imposing aggregate wind limits. If
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and when insurers offer one-time reinstatements, they are close to the original program
price.
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• Key factors in the capacity shortage and price hikes: A retrenchment among reinsurers,
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recalibrated catastrophe models, and tighter scrutiny from rating agencies. All are forcing
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primary insurers to re-evaluate their accumulation of catastrophe risk, and consequently
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many underwriters are pulling back from cat zones.
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• July 2006 renewal prices for catastrophe reinsurance treaties were double to those a year
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earlier while providing less protection. Overall, property catastrophe reinsurance is
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projected to rise 50% this year, with up to 400% rate hikes in areas prone to hurricanes.
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• While the overall property/casualty industry weathered the financial storm of 2005 fairly
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well, severe losses and subsequent downgrades by rating agencies proved devastating to a
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few companies, including Bermuda reinsurers PXRE and Quanta, aggravating the
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reinsurance capacity crunch.
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• Revised catastrophe models project far greater storm losses based on an increase in
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Atlantic hurricane activity, new assessments of building performance and a more detailed
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understanding of demand surges and super -catastrophes.
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• Underwriters will demand far more explicit, accurate and complete information—
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especially on high priority property characteristics, including occupancy type and year
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built—to properly evaluate and price risks.
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• As typically ensues following large storm losses, opportunistic investors have financed
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new vehicles—including reinsurance "sidecars"— to provide property catastrophe
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capacity at premium prices. But new capital could not keep up with demand. Investors
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may be deterred by severe losses after the 2005 storms and new capital requirements that
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make it harder to earn high enough returns. Concerns about the quality of capital in
upstarts may also cause some insured's to favor strong, established players.
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• The devastation of the 2005 storms overshadowed the crucial passage of the Terrorism
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Risk Insurance Extension Act, which extended the federal terrorism backstop an
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additional two years, through Dec. 31, 2007. With other property insurance so costly,
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terrorism insurance—which is generally priced as a percentage of underlying property
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coverage—may be out of reach for many clients who purchased it when property
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premiums were falling.
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In summary, the insurance marketplace is still experiencing a great degree of uncertainty. Many
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insurers are looking to the capital markets to bolster their balance sheets. Some new insurer
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entrants are also expected to impact the marketplace by making available new capacity
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(particularly Bermuda -based). In time, the market should stabilize.
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TERRORISM
Terrorism Risk Insurance Act of 2002 (TRIA) and TRIA Extension Act of 2005
The tragic events of September 11, 2001 caused Congress to pass the Terrorism Risk Insurance
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Act of 2002 (The Act). The Act provides that all property and casualty insurers must offer their
policyholders the opportunity to purchase coverage for acts of terrorism, and that there will be a
temporary (originally through the year 2005; extended for an additional two years through 2007)
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payment from the federal government of losses from such acts which exceed the statutorily
established deductible (an annually increasing percentage of the insurer's earned premium for the
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commercial lines of business of the previous year). This deductible must first be paid by each
insurance company. The following describes various aspects of the Act:
Under the Terrorism Risk Insurance Act of 2002 and Extension Act of 2005, Insurers are
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obliged to offer coverage for certified acts of terrorism through December 31, 2007. We
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have shown these premiums separately as required under the Act.
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An act of terrorism is defined as:
Any act that is certified by the Secretary of the Treasury:
• To be an act of terrorism
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• To be a violent act or an act that is dangerous to a human life, property or
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infrastructure;
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• To have resulted in damage within the United States or outside the United States in the
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case of certain aircraft or vessels, or on the premises of a U5 mission; and
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• To have been committed by an individual or individuals acting on behalf of any
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foreign person or foreign interest as part of an effort to coerce the civilian populations
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of the US or to influence the policy or effect the conduct of the US Government by
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coercion.
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♦ No act will be certified as an act of terrorism if:
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It does not meet the above criteria;
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• The act is committed as part of the course of war declared by Congress;
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• Property and casualty losses resulting from the act, in the aggregate do not
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exceed:
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- $5 million (through 3/31/06)
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- $50 million (for the period 411/06 through 12/31/06)
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$100 million (for the period l/l/07 through 12/31107)
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♦ TRIA is not a risk-attaching reinsurance vehicle. In other words, it will end on
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December 31, 2007 and will not follow the term of the insurance policy.
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Non- Certified Acts of Terrorism
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This coverage is available from many carriers now, though usually only if TRIA is purchased.
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As with TRIA, pricing and forms vary considerably from company to company. Some merely
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do not attach a terrorism exclusion; some have a special endorsement attached to the policy form.
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Additional information is available upon request.
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CONCLUSION
Once again, your Napco team extends its thanks for the privilege of partnering with Wachovia
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Insurance Services, Inc. and John T. Montford Dam / City of Lubbock, TX f Lake Alan
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Henry on this program. We appreciate all the help and information supplied to us by both
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Wachovia Insurance Services, Inc. and John T. Montford Dam / City of Lubbock, TX / Lake
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Alan Henry.
Beyond taking great pride in the program we have negotiated on your behalf, we truly value our
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business relationship with Wachovia Insurance Services, Inc. and John T. Montford Dam /
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City of Lubbock, TX / Lake Alan Henry and look forward in continuing to add value in your
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Property Insurance Program.
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Page 6 of 10
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AUTHORIZATION OF PROPERTY INSURANCE
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THIS AUTHORIZATION OF INSURANCE MAY NOT COMPLY WITH THE SPECIFICATIONS
SUBMITTED FOR CONSIDERATION. PLEASE READ THIS AUTHORIZATION CAREFULLY AND
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REVIEW THE POLICY FORMS FOR THE ACTUAL COVERAGES PROVIDED. PLEASE PROVIDE
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WRITTEN INSTRUCTIONS TO NAPCO IN ORDER TO EFFECT SUCH COVERAGE
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WITH THE INSURANCE COMPANIES OUTLINED HEREIN
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Named Insured: John T. Montford Darn / City of Lubbock, TX / Lake Alan Henry
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Mailing Address: P.O. Box 2000
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Lubbock, TX 79457
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Policy Period: January 18, 2007 to January 18, 2008 at 12:01AM local time of the insured
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address.
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Coverages: Property Damage, Newly Acquired Property, Debris Removal, Pollutant Clean -
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L up, including Terrorism, and as more fully defined in the company policy form.
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L Perils: All risks of direct physical loss or damage including Flood, Earthmovement and
L Named Windstorm, excluding Boiler & Machinery.
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L Territory: This policy covers within the fifty states comprising the United States of
L America and the District of Columbia.
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L Limits of Liability: $ 50,000,000 per occurrence, except:
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L The following sublimits do not increase the above -stated per occurrence limit
L of liability:
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50,000,000 per occurrence as respects Property Damage;
10,000,000 per occurrence and in the annual aggregate as respects Flood;
10,000,000 per occurrence and in the annual aggregate as respects
Earthmovement;
5% of the amount of loss, subject to a maximum of $2,500,000 per
occurrence as respects Debris Removal.
2,500,000 per occurrence as respects Newly Acquired (90 Days Reporting);
1,000,000 per occurrence as respects Valuable Papers;
1,000,000 per occurrence as respects Accounts Receivable;
1,000,000 per occurrence as respects Demolition and Increased Cost of
Construction;
1,000,000 per occurrence as respects Intake Tower and Outlet Works;
100,000 per occurrence as respects Transit;
100,000 per occurrence as respects Intake Bridge;
L Date of Issuance: January 16, 2007
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L AUTHORIZATION OF PROPERTY INSURANCE
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THIS AUTHORIZATION OF INSURANCE MAY NOT COMPLY WITH THE SPECIFICATIONS L
L SUBMITTED FOR CONSIDERATION. PLEASE READ THIS AUTHORIZATION CAREFULLY AND L
L REVIEW THE POLICY FORMS FOR THE ACTUAL COVERAGES PROVIDED. PLEASE PROVIDE L
L WRITTEN INSTRUCTIONS TO NAPCO IN ORDER TO EFFECT SUCH COVERAGE L
L WITH THE INSURANCE COMPANIES OUTLINED HEREIN L
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Limits of Liability: $ 25,000 per occurrence and in the annual aggregate as respects Pollutant
L Continued... Clean-up and Removal; L
L And as more fully defined in the company policy form. L
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L Deductibles: $2,000,000 per occurrence; L
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L Valuation: Real and Personal Property - Replacement Cost if replaced, otherwise Actual
L Cash Value.
L And as more fully defined in the expiring ACE Engineered Risk Manuscript
h policy form.
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L Form: Per the expiring ACE Engineered Risk Manuscript Policy Form including, but
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L not limited to, the following mandatory company forms and endorsements:
h • ACE USA Pollution and Contamination Exclusion
h • Electronic Data/Cyber Risk Endorsement
• Asbestos Exclusion
• Mold/Fungus Exclusion
• Nuclear Exclusion
L • Biological and Chemical Exclusion
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L Cancellation: Notice of Cancellation or Non -Renewal:
L - 60 Days Written Notice.
L - 10 Days Written Notice for Non -Payment of Premium.
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L TIV: $71,677,444
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LL Annual Premium: $ 131,369 All Risk
Jc $ 13,137 TRIA
$ 144,506 Total (plus any applicable taxes/surcharges/fees)
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L Minimum Earned: $250
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L Insurer: ACE Fire Underwriters Insurance Company (Admitted)
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L Best's Rating: A+ XV
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L Date of Issuance: January 16, 2007
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AUTHORIZATION OF PROPERTY INSURANCE
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THIS AUTHORIZATION OF INSURANCE MAY NOT COMPLY WITH THE SPECIFICATIONS
SUBMITTED FOR CONSIDERATION. PLEASE READ THIS AUTHORIZATION CAREFULLY AND
REVIEW THE POLICY FORMS FOR THE ACTUAL COVERAGES PROVIDED. PLEASE PROVIDE
WRITTEN INSTRUCTIONS TO NAPCO IN ORDER TO EFFECT SUCH COVERAGE
WITH THE INSURANCE COMPANIES OUTLINED HEREIN
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k Policy Number: To Follow.
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K Loss History: No known or reported losses.
This quote is valid only until inception date noted herein.
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L► Date of Issuance. January 16, 2007
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JOHN T. MONTFORD DAM
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Account Team
L Wachovia Insurance Services, Inc.
L 5956 Sherry Lane, Suite 2004
L Dallas, TX 75225-6531
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Contact Phone No. E -Mail
L Primary Contact: Robert Bookhammer 214-365-4703
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Contact
L Marketing Broker: John M. Carlsen
NAPCO TEAM
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L Account Manager: Jennifer Ryan
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L Placement Associate: Marco Perci
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L Claims Manager: Toni -Anne Caldaio
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Phone No.
732-603-2061
732-603-2083
732-603-2070
732-603-2095
L Napco LLC
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bob.bookhammer@wachovia.com L
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E -Mail
jcarlscn @ napcollc.com L
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LryanC0)napcollc.com L
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mperci@naDcollc.com L
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tcaldaio@napcollc.com L
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L 333 Thornall Street, 9`.' Floor, Edison, NJ 08818 L
L Tel: 732-549-5222 Fax: 732-549-0221 L
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L www.napcollc.com L
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L If any of these people are not available, anyone in the office will be glad to assist you. L
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L Napco has used due care in the preparation of this document. Our information has been obtained frons sources L
L we consider to be reliable, but its accuracy or completeness is not guaranteed Napco shall owe no liability L
L whatsoever to any person for any loss or damage caused by or resulting from any error in such information. L
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�`— Page 10 of 10 L
L►LILILLLLLLLLLLI►ILLIL►'L►LLLLLkLLLLL41WILLLLL► kLLL►iL a ►LL
THE STATE OF TEXAS,
COUNTY OF LUBBOCK
Before me Ashley C. McGaha a Notary Public in and for Lubbock County,QRe xas on this
CE NU. roar-Dams
day personally appeared Krista Ranfirel ' of the Southwesterr AN DDI NANCE
PRORHIBITING THE
POTABLE USE OF
Corporation, publishers of the Lubbock Avalanche-Journal - Morning, and Sunday, who bein t. DESIGNATED
g RESURCWING TRHE D
did dispose and say that said newspaper has run continuously for more than fifty-two weeks 1 BNON-POTABLE USE OF
ENEATH THE PROP RTY
LOCATED NEAR AVENUE J
insertion of this Legal Notice AND STH STREET IN
TC TEXAS, MORE
PARTICULARLY ARLY
DESCRIBED AS AN 8.84
No. at Lubbock County, Texas a ACRE TRACT OF LAND OUT
OF SECTION 1, BLOCK 0
AND SECTION 79, BLOCK A,
printed copy of the Legai Notice is a true copy of the original and was printed CITY OF LUBBOCK,
ID
LUBBOCK; PROVIDING FOR
y„n S PENALTY; PROVIDING A'
Avalanche Journal on the following date. SAVINGS CLAUSE AND
PROVIDING FOR
pUBLiCATIDN.
SECTION 9:7HAT any person
who knowingly violates any
provision of this ordinance
shall be 9uIIIY of o
f 1 misdameonor ono th tl Uptln
/ Conviction shall be punished
f ✓ on
amount al a fine owed by stp a law.
NOTARY PUBLle in and for the State of Texas
Inside Sales Manager my commission Expires 3/15/2010
LUBBOCK AVALANCHE-JOURNAL
Morris Communication Corporation
Subscribed and sworn to before me this day of CJ' f✓V�
ASHLEY C MCG AHA �+
t .aYRy p��r
Notary Public, State of Texas
FORM 58-10 j' - My Commission Expires
4 �'' March 15, 2010 f