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HomeMy WebLinkAboutFSD-033-23Clarftwn Staff Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: General Government Committee Date of Meeting: September 11, 2023 Submitted By: Trevor Pinn, Deputy CAO/Treasurer Reviewed By: Robert Maciver, Deputy CAO/Solicitor File Number: Report Subject: 2023 DMIP Insurance Renewal Recommendations: Report Number: FSD-033-23 Resolution#:GG-148-23 By-law Number: 1. That Report FSD-033-23 and any related delegations or communication items, be received; 2. That the general insurance placement, in conjunction with the other member municipalities of the Durham Municipal Insurance Pool, with Intact Insurance for an integrated pooling arrangement that includes integrated insurance coverages and common self -retention deductible levels for the period July 1, 2023 to June 30, 2024, at a cost of $1,160,614 to the Municipality of Clarington be confirmed; 3. That the purchase of cyber liability coverage through CFC at a cost of $70,750 be confirmed; and 4. That all interested parties listed in Report FSD-033-23 and any delegations be advised of Council's decision. Municipality of Clarington Report FSD-033-23 Report Overview Page 2 2021/2022 has been another successful year for the Durham Municipal Insurance Pool (DMIP) and the Municipality of Clarington has benefitted through a premium increase of 6.6 per cent (2022 — 9.3 percent increase). 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 through the Durham Municipal Insurance Pool (DMIP or the Pool). The DMIP is now entering its twenty-second year of successful operations. 1.2 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. 1.3 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. 1.4 Member municipalities are provided coverage in the areas of general liability, errors and omissions, auto liability and property insurance. The DMIP provides municipal specific resources such as loss prevention programs, claims handling, advice for boards and committees, site audits, review of contracts and training. 1.5 The Municipality's insurance coverage renewed on July 1, 2022. At its meeting on November 25, 2019, GGC passed resolution #GG-547-19 which provided approval to remain in the DMIP for the 2020/21 renewal term and provided the Deputy CAO/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. 1.6 Given the current state of insurance in Ontario (as noted below), that being one with escalated prices or even the refusal of coverage, Staff do not feel that this is the right time to conduct a market review given we attempted two years ago, and the insurance market has hardened more since that time. Staff will continue to monitor the market to determine the appropriate time to conduct the next review. Municipality of Clarington Page 3 Report FSD-033-23 2. 2023/2024 Insurance Coverage Renewal 2.1 Within the terms of the subscribers' agreement, DMIP members agree to contribute sufficient funds 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 2023/2024, the DMIP negotiated with the insurer and has secured the broadest and most comprehensive coverage available to municipalities. The Municipality's increase is 6.6 per cent, or $72,018 which is lower than the previous year's increase of over nine per cent. 2.5 The allocation methodology was reviewed for 2023/2024. The DMIP reviews the allocation approximately every three years. The Municipality saw a decrease in its participation rate from 9.41 per cent to 9.33 per cent. 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. There has not been a change in the insurance coverage or services received by the DMIP. 2.7 For 2023/2024 the cyber insurance coverage will remain with CFC. The deductible has remained at $50,000, with the premium being $70,750 (2022 - $50,500). Overall, Staff feel that the value is fair for the Municipality and it provides protection against cyber risks. 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 Municipality of Clarington Page 4 Report FSD-033-23 • 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 over 20 years of existence, this innovative risk financing venture 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. 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 lower the risk to the Municipality and residents). 3.4 The estimated rebate in 2023/2024 is $99,200 which is in excess of the insurance increase for the year. These funds will be placed into the reserve for future use in risk mitigation activities. These funds will be received in June 2024. 3.5 At December 31, 2022, the balance in the Self -Insured Losses Reserve was approximately $480,300. 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. In 2023, this reserve was used to fund the emergency repairs following a weather event at the Bowmanville Indoor Soccer Centre (the amount not covered by insurance). Insurance Market in Ontario 3.6 The past three 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. 3.7 Municipalities are seeing premium increases that can be in excess of 50 per cent, with many municipalities seeing at least 10 per cent increases. 3.8 The hardening markets and increased premiums have resulted in several municipalities, 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. Municipality of Clarington Report FSD-033-23 Page 5 3.9 There continues to be advocacy from municipal associations for reform to the joint and several liability legislations that currently exist in Ontario. Staff at Clarington and at the DMIP continue to monitor this development. 4. Financial Considerations 4.1 Insurance continues to be a prudent way to mitigate financial risk to the Municipality. The DMIP provides a stable form of insurance and risk management advice to the Municipality. 4.2 The rebate expected to be received in 2024 is in excess of the premium increase for the year; the increase in premium is below what other municipalities are experiencing in these markets and would therefore indicate that changing insurance providers is not advised at this time. 4.3 Insurance and deductible budgets for 2024 will be adjusted to reflect the increased cost of insurance. 5. Concurrence Not Applicable. 6. Conclusion It is respectfully recommended that Council endorses the 2023/2024 fiscal year insurance program. Staff Contact: Trevor Pinn, Deputy CAO/Treasurer, 905-623-3379 x2602 or tpinn@clarington.net. Attachments: Not Applicable Interested Parties: There are no interested parties to be notified of Council's decision.