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Report To: General Government Committee
Date of Meeting: June 21, 2021 Report Number: FSD-032-21
Submitted By: Trevor Pinn, Director of Financial Services/Treasurer
Reviewed By: Andrew C. Allison, CAO Resolution#: GG-423-21, C-239-21
File Number: By-law Number:
Report Subject: 2021 – 2022 Insurance Report
Recommendations:
1.That Report FSD-032-21 be received;
2.That the general insurance placement, in conjunction with the other member
municipalities of the Durham Municipal Insurance Pool, with Intact Insurance
(formerly Frank Cowan Company) for an integrated pooling arrangement that
includes integrated insurance coverages and common self- retention deductible
levels for the period July 1, 2021 to June 30, 2021, at a cost to Clarington of
$996,351 be confirmed; and
3.That the purchase of cyber liability coverage through Ascent at a cost of $42,000 be
confirmed.
Municipality of Clarington Page 2
Report FSD-032-21
Report Overview
2020/2021 has been another successful year for the Durham Municipal Insurance Pool
(DMIP) and the Municipality of Clarington has benefitted through a premium increase of 7.3
per cent (2020 – 3.2 per cent decrease).
This report is primarily an update on the status of the DMIP and current initiatives being
undertaken.
1. Background
1.1 The purpose of this report is to provide an update to the General Government
Committee regarding the status of the Municipality’s insurance program.
1.2 This report also includes a review and update of the Durham Municipal Insurance Pool,
which is now entering its twenty-first year of successful operation.
1.3 Clarington is a founding member of the DMIP which was established to achieve financial
savings by co-operatively purchasing insurance coverages with local and pool level
deductibles and by implementing common risk management practices. The pool
protects participating municipalities from increasing insurance premium costs through
an alternative risk-financing program with a higher single deductible and collectively
self-insuring claims within that deductible.
1.4 Clarington’s Treasurer held the position of Chair of the Board of DMIP from inception to
September 2019. The current chair of the Board is Laura Barta, Director of
Finance/Treasurer for the Township of Scugog.
1.5 The DMIP was launched in July 2000 with the participation of the Town of Ajax, Town of
Whitby, Municipality of Clarington, Township of Brock, Township of Scugog, Township
of Uxbridge and the Region of Durham. The City of Oshawa joined the pool effective
July 1, 2017.
1.6 Member municipalities are provided coverage in the areas of general liability, errors and
omissions, auto liability and property insurance. The DMIP provides municipal spec ific
resources such as loss prevention programs, claims handling, advice for boards and
committees, site audits, review of contracts and training.
1.7 The Municipality’s insurance coverage renewed on July 1, 2020. GGC passed
resolution #GG-547-19 at its meeting on November 25, 2019,which provided approval to
remain in the DMIP for the 2020/21 renewal term and provided the Director of Financ ial
Services/Treasurer (at the time Director of Finance/Treasurer) the discretion to
determine when a review of the Municipality’s insurance may next be conducted, such
time not to exceed five years.
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Report FSD-032-21
1.8 Given the current state of insurance in Ontario (as noted below), that being one with
escalated prices or even the refusal of coverage, I do not feel that this is the right time to
conduct a market review given we attempted one a year ago. Staff will continue to
monitor the market to determine the appropriate time to conduct the next review.
2. 2021/2022 Insurance Coverage Renewal
2.1 Within the terms of the subscribers’ agreement, DMIP members agree to make a
contribution sufficient enough to pay administration costs, expenses (including actuarial
and audit), premiums and a claim funding amount that is supported by full actuarial
projections and analyses.
2.2 DMIP members are also required to give a minimum six months’ notice of termination if
they wish to leave the pool. To date no member of the pool has asked to leave while
one of the two Durham municipalities that did not originally found the pool have asked to
be admitted.
2.3 The DMIP has been able to position itself to minimize the impact of increases in
insurance premiums paid to insurance companies related to property, casualty and
liability coverages.
2.4 For 2021/2022, the DMIP negotiated with the insurer and has secured the broadest and
most comprehensive coverage available to municipalities. The Municipality’s increase is
7.3 per cent, or $68,064.
2.5 The allocation methodology was reviewed for 2020/2021. The DMIP reviews the
allocation approximately every three years. The Municipality saw a decrease in its
participation rate from 12.42 per cent to 11.06 per cent. Overall, the net cost for the
annual DMIP insurance program for the Municipality decreased by 3.2 per cent in
2020/2021.
2.6 The Board of Directors of the Durham Municipal Insurance Pool has placed coverage
with Intact Insurance (formerly Frank Cowan Company) for an integrated pooling
arrangement. During 2020/2021, Frank Cowan was purchased by Intact Insurance and
is being integrated into their insurance offerings. There has not been a cha nge in the
insurance coverage or services received by the DMIP.
2.7 For 2021/2022 the cyber insurance coverage will change from AXA XL to Ascent. The
deductible has increased from $40,000 to $75,000, with the premium being $42,000.
The premiums are not completely comparable to AXA XL as there are additional
coverages which were not part of the previous coverage. Overall, Staff feel that the
value is fair for the Municipality and it provides protection against cyber risks .
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Report FSD-032-21
3. Benefits of an Insurance Pool
3.1 The main components of the structure of the Durham Municipal Insurance Pool
arrangements are summarized as follows:
Each municipality retains their respective current deductibles ranging from $5,000 to
$100,000 (Clarington’s deductibles are primarily $25,000 (liability) and $5,000 (fleet);
The pool self-insures losses between these local deductibles and a per claim limit of
$500,000 (on a group basis) for integrated coverages;
Under this structure, local municipalities are responsible for funding losses from $0 to
their individual deductible amounts ($25,000 in the case of Clarington);
Between these local municipal deductibles and the pooled retention limit of $500,000,
the eight (8) members share the cost on a collective basis; and
Excess of a $500,000 per claim loss, the members purchase insurance from
municipal insurers for protection on a collective basis against catastrophic claim
losses.
3.2 During its 20 years of existence, this innovative risk financing vent ure continues to be a
highly effective method by which the municipalities have enjoyed:
Broader insurance coverage;
Control over the costs of insurance claims below the $500,000 deductible;
Pro-active, comprehensive and coordinated risk management services to reduce
property and liability exposures;
Increased investment income on the retained portion of the pre-funded claims loss
reserve; and
Increased price stability.
3.3 As the DMIP is self-funded to a degree, there are opportunities for surpluses to be
refunded to the Municipality. The Municipality has received refunds in 2014 ($202,950),
2016 ($223,500), 2017 ($544,740) and 2020 ($91,155) for a total refund of $1,062,345.
Staff are anticipating a refund of approximately $91,200 to be received in the summer of
2021 for the previous year.
3.4 At the May 2019 DMIP Board meeting it was approved that from 2020 to 2028 the
founding members (including Clarington) would receive an annual payment from the
accumulated surplus in the pool. It is estimated, subject to annual review, that the
Municipality will receive $91,100 per year. In keeping with past practice, this will be used
to fund risk management initiatives (including safety audits, sign replacement, and other
projects which lowers the risk to the Municipality and residents).
3.5 The estimated rebate in 2021/2022 is $91,684 which is in excess of the insurance
increase for the year. These funds will be placed into the reserve fund for future use in
risk mitigation activities. These funds will be received in June 2022.
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Report FSD-032-21
3.6 At December 31, 2020 the balance in the Self-Insured Losses Reserve was
approximately $716,000. These funds can be utilized for risk-mitigation activities
throughout the Municipality. In the past, funds have been used to conduct risk audits,
additional sidewalk repairs and other similar capital activities to reduce risk. These funds
are primarily used to fund the Municipality’s deductible. Staff will be working with
departments to identify risk-mitigation activities, such as risk-audits or capital
improvements, to be considered to be funded from this reserve in the draft 2022 budget.
Insurance Market in Ontario
3.7 The past two years have seen a hardening of the insurance market in Ontario. This
hardening is cyclical, and similar situation was the reason why the DMIP was created.
3.8 Municipalities are seeing premium increased that can be in excess of 50 per cent, with
many municipalities seeing at least 10 per cent increases.
3.9 The hardening markets and increased premiums have resulted in several municipa lities,
as well as the Association of Municipalities of Ontario (AMO), look at developing their
own insurance pools modeled after the two existing pools in the Region of Durham and
the Region of Waterloo.
3.10 There continues to be advocacy from municipal associations for reform to the joint and
several liability legislation that currently exists in Ontario. Staff at Clarington and at the
DMIP continue to monitor this development.
4. Concurrence
Not Applicable.
5. Conclusion
It is respectfully recommended that Council approve the renewal of insurance services
with the Durham Municipal Insurance Pool.
Staff Contact: Trevor Pinn, Director of Financial Services/Treasurer, 905-623-3379 ext. 2602,
tpinn@clarington.net
Attachments:
Not Applicable
Interested Parties:
List of interested parties available from department.