FROM: Robert Thompson, General Manager
Originator: Wally Ritchie, Director of Finance
SUBJECT:
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FY 2023-24 PROPERTY - LIABILITY INSURANCE RENEWALS
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GENERAL MANAGER'S RECOMMENDATION
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RECOMMENDATION:
Approve the Orange County Sanitation District FY 2023-24 Property-Liability Insurance Renewals included in the FY 2023-24 Budget Update for the not-to-exceed amounts specified below:
Property and Boiler & Machinery - Not to Exceed
$2,617,059
Excess General Liability Insurance - Not to Exceed
$1,247,262
Excess Workers' Compensation Insurance - Not to Exceed
$ 391,000
Earthquake Insurance - Not to Exceed
$ 173,054
TOTAL
$4,428,375
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BACKGROUND
Financial Management staff and the Orange County Sanitation District's (OC San) operational insurance broker, Alliant, began the renewal process in January and received final quotes in June. After negotiating with the insurance carriers, Alliant was able to secure competitive rates for OC San without compromising the quality of coverage provided. The insurance market has been in a state of flux due to reduced reinsurer capacity, COVID-19, weather extremes, sea level rise, wildfires, catastrophic losses, social inflation, and cybersecurity threats around the world and in the state of California. There is a lot of uncertainty in the market and insurers have taken losses for previous years and, as a result, insurance costs will increase to absorb the losses.
The extreme uncertainty in the market due to the above-mentioned factors will impact the insurance rates. As such, OC San will need to pay higher rates to obtain the same coverage limits. The current extreme degree of uncertainty in the insurance industry means severe rate increases, at least in the short term, until the numbers play out for the insurance industry over the next few years.
The proposed cost of insurance coverage for FY 2023-24 is $4,428,375, an increase of $1,183,571 (36%). A summary of the insurances...
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