AgdaPkt 2002-07-01 - Laserfiche WebLink

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To the Honorable Mayor and City Council From the City [VIanagerJ July 1,2002 Subject Renewal of Workers' Compensation Excess Insurance Policy Recommendation Approve the renewal of the City's excess workers' compensation insurance policy with Employers Reinsurance Corporation effective July 1,2002. Background The City of Redwood City is a self-insured employer under the workers' compensation program. As a self-insured employer, whenever there is a workers' compensation injury, the City covers the amount up to the designated self-insurance retention cap. When the costs of an injury exceed the self-insurance retention cap, the City is insured through its excess workers' compensation insurance policy for expenses up to a maximum of twenty-five million ($25,000,000) per incident. Historically we have set the self-insurance retention limit at the first three hundred fifty thousand dollars ($350,000) of expenses relating to the injury. In the wake of September 11, the insurance industry has experience huge losses with many insurance companies unwilling to underwrite this type of insurance. As a result, the market is producing higher premiums and increasing self-insurance retention levels. Jack Castle Insurance Agency, the broker of record for this policy, has made coverage comparisons with all of the excess workers' compensation underwriters that are still willing to write excess insurance. He has determined that the Employers Reinsurance Corporation provides the best premium and coverage available at this time. The estimated annual premium based on estimatedPayroll figures for F/Y 02-03 is $122,734 or .2664 per $100 of payroll (this represents a 241.3% increase from last year's premium) and with a self insurance retention level of $500,000. Alternative Staff explored the possible effects of joining a group pool for excess insurance. Our interest in keeping the self-insurance retention at 350K and lowering our costs over the long term was appealing under the group pumhasing pool; however; administrative fees and turbulence in the workers' compensation industry made it difficult to get competitive quotes even under a group pool. If we joined a group pool the total cost would be $164,339.46, this includes the premium, administrative fees and provides the $350,000 self insurance retention cap. Given our claims history staff recommends we not join the pool this year and see if the insurance market eases up next year.