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HomeMy WebLinkAboutFND-027-20Clarington 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: Joint Committees Date of Meeting: September 14, 2020 Report Number: FND-027-20 Submitted By: Trevor Pinn, Director of Finance/Treasurer Reviewed By: Andrew C. Allison, CAO By-law Number: File Number: [If applicable, enter File Number] Resolution#:JC-123-20 Report Subject: 2020 — 2021 Insurance Report Recommendations: 1. That Report FND-027-20 be received for information; 2. That the general insurance placement, in conjunction with the other member municipalities of the Durham Municipal Insurance Pool, with the Frank Cowan Company for an integrated pooling arrangement that includes integrated insurance coverages and common self -retention deductible levels for the period July 1, 2020 to June 30, 2021, at a cost to Clarington of $928,287 be confirmed; and 3. That the purchase of cyber liability coverage through the Frank Cowan Company at a cost of $20,000 be confirmed. Municipality of Clarington Report FND-027-20 Report Overview Page 2 2019/2020 has been another successful year for the Durham Municipal Insurance Pool (DMIP) and the Municipality of Clarington has benefitted through a premium decrease of 3.2 per cent (2019 — 2.9 per cent increase). This report is primarily an update to Council on the status of the Durham Municipal Insurance Pool 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 twentieth 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 Brock. 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 specific resources such as loss prevention programs, claims handling, advice for boards and committees, site audits, review of contracts and training. Municipality of Clarington Page 3 Report FND-027-20 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 Finance the discretion to determine when a review of the Municipality's insurance may next be conducted, such time not to exceed five years. Given the current state of insurance in Ontario, 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. 2020/2021 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 2020/2021, the DMIP negotiated with the insurer and has secured the broadest and most comprehensive coverage available to municipalities with a rate increase of 12.4 per cent in the insurance premium and claim funding for the 2020/2021 policy year. This increase is partially offset by an increase in investment income. 2.5 The allocation methodology was reviewed for 2020/2021, as it is 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 has decreased by 3.2 per cent. This has resulted in savings to the Municipality of over $31,100. 2.6 The Board of Directors of the Durham Municipal Insurance Pool has placed coverage with the Frank Cowan Company for an integrated pooling arrangement. Municipality of Clarington Page 4 Report FND-027-20 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 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. 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. 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/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). Insurance Market in Ontario 3.5 The past year and a half has seen a hardening of the insurance market in Ontario. Municipality of Clarington Page 5 Report FND-027-20 3.6 Municipalities are seeing premium increases that can be in excess of 50 per cent, with many municipalities seeing at least 10 per cent increases. 3.7 The hardening markets and increased premiums have resulted in several cities looking at developing their own insurance pools modeled after the insurance pools in the Region of Waterloo and the Region of Durham. 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 Finance/Treasurer, 905-623-3379 ext. 2601 or tpinn@clarington.net Attachments: Not Applicable Interested Parties: There are no interested parties to be notified of Council's decision.