CCP 02-16-1999 - Laserfiche WebLink

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..... , . , .' e e . CITY OF ARDEN HILLS MEMORANDUM DATE: February 12, 1999 TO: Brian Fritsinger, City Administrator Terrance Post, City Accountant ~ City Liability Insurance Premium Options FROM: SUBJECT: The City's insurance broker, T.C. Field & Company, has provided several pricing options for 1999 liability insurance coverage. Among the options are higher deductibles and higher excess liability coverages with and without waivers. For 1998, the City opted for $1,000 deductible coverage and a $1,000,000 excess liability coverage without waiver. Before evaluating the merits of these pricing options, some other factors should be discussed, including Insurance Deductible Fund No. 230, League of Minnesota Insurance Trust (LMCIT) dividends, and risk management philosophy. Insurance Deductible Fund No. 220 This special revenue frmd was created in 1996. Its purpose was to capture LMCIT dividends, frmd claim costs (instead of the department budgetary responsibility of where incurred), and to provide a vehicle to consider other deductible options or risk management philosophies. The Fund had a balance of$56,971 on January I, 1998, and an estimated balance of $89,240 on December 31,1998. The creation of Fund No. 230 marked a change in accounting practice. Prior to 1996, LMCIT dividends were recorded proportionately as miscellaneous revenue to the General Fund, Water Utility, and Sanitary Sewer Utility (on the basis of where the original premium cost was expended). This revenue source was approximately $9,000 per year to these frmds in 1994 and 1995. I ,MelT Dividends The group experience of this municipal pool has generally been very positive, with the City always participating in some level of dividend. The dividends paid to the City of Arden Hills have approximated forty-five percent of premium cost while the group average has been approximately thirty-three percent. This higher City payout percentage is attributable to our lower-than-average claims history. In 1998, LMCIT dividends totaled $32,862. Risk Management Philosophies There appears to be three distinct directions the City could go with respect to risk management: 1. Continue on the historical path of having low deductibles (i.e. $1,000) and go back to the policy of directing LMCIT dividend refrmds back as revenue to the Funds that incurred the premium expenditure. 2. Begin to utilize the current Fund No. 230 Insurance Deductible frmd balance by leveraging it against higher deductible options (e.g. $5,000 - $25,000) and the lower associated premium costs.