|
<br />'"
<br />
<br />.
<br />
<br />3. Make a conscious effort to build the fund balance of Fund No. 230 to such a degree that it
<br />becomes economically viable to self-insure.
<br />
<br />.
<br />
<br />.
<br />
<br />Pricine Options Evaluation
<br />Agent Mark Lenz ofT.C. Field has provided the City with four (4) price options for increasing
<br />the deductible from $1,000 to $5,000; $10,000; $15,000; or $25,000 (Exhibit A). He has
<br />highlighted approximate premium savings of each option but has not considered the associated
<br />loss of expected LMCIT dividends. The following table attempts to identifY the net costs to the
<br />City ofa two-occurrence loss of $50,000 and a two-occurrence loss of $3,000 in 1999 with the
<br />various options:
<br />
<br />$50,000 Losses
<br />
<br />Option A (1,000)
<br />Option B (5,000)
<br />Option C (10,000)
<br />Option D (15,000)
<br />Option E (25,000)
<br />
<br />$3,000 Losses
<br />
<br />Option A
<br />Option B
<br />Option C
<br />Option D
<br />Option E
<br />
<br />Premium
<br />Rednction
<br />
<br />Dividend
<br />Rednction
<br />
<br />City Claim Net Impact to
<br />Exposure #230 Fund
<br /> Balance
<br /><1,000> <1,000>
<br /><5,000> <2,030>
<br /><20,000> <15,435>
<br /><30,000) <23,818>
<br /><50,000> <39,550>
<br />City Claim Net Impact to .
<br />Exposure #230 Fund
<br /> Balance
<br /><1,000> <1,000>
<br /><3,000> <30>
<br /><3,000> 1,565
<br /><3,000> 3,182
<br /><3,000> 7,450
<br />
<br />Based purely on an interpretation of the risk/reward outcomes of these two cases, and not on
<br />endorsement of any of the three risk management philosophies, it does not appear that a strategy
<br />of increasing deductible levels has a commensurately higher reward level associated with it.
<br />
<br />5,400 <2,430>
<br />8,300 <3,735>
<br />11,240 <5,058>
<br />19,000 <8,550>
<br />Premium Dividend
<br />Reduction Reduction
<br />
<br />5,400
<br />8,300
<br />11,240
<br />19,000
<br />
<br /><2,430>
<br /><3,735>
<br /><5,058>
<br /><8,550>
<br />
<br />With regards to the options of increasing the excess liability with and without waiver, this
<br />decision hinges on Council's comfort level of relying on the statutory levels and the likelihood of
<br />a suit advancing to Federal Court.
<br />
<br />Recommendation
<br />It is hoped that this memorandum has framed some basic issues concerning the City's insurance _
<br />coverage such that it will facilitate discussion at the February 16, 1999, Council Work Session. .,
<br />
<br />Enclosure
<br />
|