Loading...
HomeMy WebLinkAboutFND-031-19Clarftwn 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 Report Number: FND-031-19 Date of Meeting: November 25, 2019 Submitted By: Trevor Pinn, Director of Finance/Treasurer Reviewed By: Andrew C. Allison, CAO By-law Number: File Number: Resolution#: Report Subject: Market Review of Municipal Insurance Program Recommendations: 1. That Report FND-031-19 be received; and 2. That Staff inform the Durham Municipal Insurance Pool that the Municipality of Clarington will be renewing for the July 1, 2020 to June 30, 2021 policy year; and 3. That the Director of Finance have the discretion to determine when a review of the Municipality's insurance program may next be conducted, such time not to exceed five policy years. Municipality of Clarington Page 2 Report FND-031-19 Report Overview At its July 2, 2019 meeting, Council directed Staff to proceed with a market review of the Municipality's insurance program for the July 1, 2020 renewal period. The Municipality is required to give six months notice prior to leaving the Pool, notice is therefore required by December 31, 2019. The RFP process resulted in no proposals from insurers, therefore, it is recommended that the Municipality remain in the Durham Municipal Insurance Pool for the 2020-2021 policy year. 1. Background Durham Municipal Insurance Pool 1.1 Clarington is a founding member of the Durham Municipal Insurance Pool (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. 1.2 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. 1.3 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. Further, as Clarington has both Municipal and Regional roads, there is the ability to better coordinate claims to ensure that the proper authority is responding and that legal costs are mitigated. 1.4 An advantage with the Pool is that surplus funds within the Pool are retained by the Pool and returned to the member municipalities. The DMIP Board of Directors approves the annual budget and member contributions based on the actuarial study and recommendation. The actuarial study determines what funds are required to safeguard DMIP assets and to manage its financial affairs through proper controls and processes to ensure the integrity and stability of financial operations over the long-term. This mitigates the need for the Pool to go back to its members for supplementary funding. Subject to annual approval by the DMIP Board of Directors, it is anticipated that the Municipality of Clarington, if it stays with the Pool, will receive approximately $90,000 per year for the next 7 years (paid up to 2028) from the positive results in the Municipality of Clarington Report FND-031-19 Page 3 Pool up to the financial year ending June 30, 2017. This surplus draw resulted from favourable investment income and better than expected claims experience and ensures that the Pool has sufficient resources for unexpected or adverse development of claims. These funds may be used to offset risk management activities and investments throughout the Municipality. This is consistent with how the Municipality has used previous surplus draws from the Pool. These surplus draws would not be available to the Municipality in a traditional insurance program. 1.5 The Municipality's insurance coverage renews on July 1 of every year. As part of the subscribers' agreement the Municipality must give six months notice if it wishes to leave the Pool and may only do so on the renewal date. Therefore any decision to leave the Pool must be made prior to December 31 of any year. Council directed staff to complete a market review of the insurance for the 2020-2021 renewal. An RFP was completed in the fall of 2019 to determine by December 31, 2019 the best course of action for the Municipality. Insurance Consultant 1.6 Given that this was the first review of the Municipality's insurance coverage since 2000, staff felt that it was important to have an independent industry expert providing guidance through the process to ensure that the market review was not seen to favour (or punish) the existing pool relationship. 1.7 As a result staff engaged Axxima Insurance Services to review the Municipality's current insurance program, determine the needs of the Municipality, assist with drafting the RFP document and to assist in assessing any proposals received. 1.8 Axxima's expertise is in insurance programs including both pooled risk programs and traditional insurance programs and came recommended from several partner organizations. Other Municipal Insurance News 1.9 In 2019, the Municipal Insurance market in Ontario has been hardening. Municipalities have seen escalating costs for insurance, in part due to joint and several liability. A 1 % fault on the part of the Municipality could result in being liable for 100% of the liability. As claims become higher, the payer with the deepest pockets is often the Municipality. 1.10 According to an August 7, 2019 article on Bradfordtoday.ca, the Town of Bradford West Gwillimbury faced a 59% premium increase in 2019. The article also notes that municipalities are no longer being offered "long-term" policies (such as a 3 year term). Municipality of Clarington Page 4 Report FND-031-19 1.12 An April 30, 2019 Ottawa Citizen article "Westboro bus crash skyrockets city insurance expenses" indicated that the City of Ottawa had its premiums increase 25% from 2017 to 2018 (with a potential 10% increase in 2019). After a bus accident, the premium on the renewal for 2019 was 84% while also lowering liability limits from $25 million to $10 million. It should be noted that the Durham Region Transit is not part of the claims history in the DMIP. Therefore, any impact from a transit claim would be borne by their insurance. 1.13 Participation in a pool spreads the risk of exposure over the entire body rather than individuals. While the likelihood of a major claim against the Pool may be higher than any one individual municipality, the impact to any given municipality is significantly lower. The Municipality has benefited over the past several years by being able to take advantage of claims history of the other municipalities in the DMIP 2. Purchasing Process Background 2.1 The proposal specifications for Municipal Insurance Services was prepared by the Finance Department, Axxima Insurance Services and provided to the Purchasing Services Division. 2.2 The purpose of this Request for Proposal is to select a qualified Insurance Broker with the skills, resources and experience necessary to provide insurance and risk advisory services for the Municipality. 2.3 A Request for Proposal RFP2019-15 was issued by the Purchasing Services Division and advertised electronically on the Municipality's website. Notification of the availability of the document was also posted on the Ontario Public Buyer's Association website. 2.4 Staff advertised the RFP for the standard three weeks and provided as much information as possible while respecting confidentiality. 2.5 Four companies downloaded the document. 2.6 The RFP closed on November 14, 2019. Analysis 2.7 The Purchasing Services Division did not receive any proposals in response to the RFP. 2.8 Purchasing Services Division staff have reached out to those companies who downloaded the RFP to determine why they did not provide a proposal. 2.9 Three of the four companies that downloaded the RFP provided responses regarding their decision to not provide a proposal. Municipality of Clarington Page 5 Report FND-031-19 2.10 Two companies advised that there was insufficient time to provide a proposal. The RFP provided the standard three week period. Due to the time constraints, having to be completed for the December 9, 2019 Council meeting, there was insufficient time to extend the process. It was also felt that issuing the RFP too early (e.g. in September) would have resulted in fewer proposals as the time between proposal date and renewal date would have been almost one year. 2.11 All three companies felt that more detailed information could have been provided. Addendums were provided with additional information upon request where it was feasible to ensure confidentiality was maintained. A claims history was provided, including the year of claim. Certain coverages only had one claim in the past 10 years, therefore providing that information could have resulted in a breach of confidentiality. A request was made for historical insurance applications however this was unavailable as the Municipality self -insures through the DMIP and therefore does not have any for the coverages requested. 2.12 One company did not respond to our request for information. 3. Concurrence This report has been reviewed by the Director of Corporate Services who concurs with the recommendations. 4. Conclusion It is respectfully recommended that having received no proposals for RFP2019-15, that the Municipality remains within the Durham Municipal Insurance Pool. Staff Contact: Trevor Pinn, Director of Finance / Treasurer, (905) 623-3379 x2602 or tpinn@clarington.net. The following interested parties will be notified of Council's decision: 4.1 Durham Municipal Insurance Pool