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DISCUSSION
City of San Bernardino
Request for Council Action
Date: July 2, 2025
To: Honorable Mayor and City Council Members
From: Bill Gallardo, Interim City Manager;
Andrea Russell, Director of Human Resources
Department: Human Resources
Subject: Approve the Annual Renewal of the City’s Risk Management Insurance Policies in the amount of
$3,337,089 for FY 2025/26 (All Wards)
Recommendation:
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Approve the annual renewal of the City’s excess general liability insurance, excess workers’ compensation insurance, crime insurance and cyber insurance; and
2. Authorize the City Manager or designee to execute all related documentation.
Executive Summary
The City purchases insurance policies through Public Risk Innovation, Solutions, and Management (PRISM), a member-directed risk sharing pool of public agencies committed to providing risk coverage programs and risk management services, which drive member stability, efficiency, and best practices. Staff is recommending renewing insurance coverage for the specific policies noted below. • Excess Workers’ Compensation Program
• General Liability 2 Program (GL2)
• Master Crime Program
• Cyber Liability Program
Background
On June 19, 2019, the Mayor and City Council adopted a resolution authorizing the City Manager to purchase stand-alone commercial coverage for excess liability insurance through the City’s then liability broker Aon; and increased the City‘s self- 2 7
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insured retention (SIR) from $1 million to $5 million in order to obtain a manageable premium amount. Before the start of FY 20/21 began, Allied, the City’s then excess liability insurance carrier, made the determination not to renew coverage with the City.
Instead, what Allied offered was a 30-day extension of the existing policy to allow the City an opportunity to secure other coverage. The City’s three additional excess carriers followed Allied’s lead and also agreed to provide the City a 30-day extension of the existing policies through July 31, 2020. At the time, The City purchased insurance policies through Aon who served as the City’s broker of record for six years.
Aon was responsible for marketing and negotiating quotes with numerous insurance carriers in an effort to secure the best coverage at the best price.
Aon solicited quotes from 28 carriers to obtain excess liability insurance coverage for the City. The insurance market faced obstacles most importantly capacity restrictions, meaning there were fewer firms writing policies for public agencies. Those firms that were writing policies, did so for less coverage. Perceived jury verdicts and the uncertainty of COVID-19 significantly influenced the insurance market at the time.
All the excess general liability insurance carriers Aon approached declined to provide a quote to the City. Reasons noted included the City’s history of losses, financial stability, and the climate of California tort claims perceived jury verdicts. In addition to market conditions, loss data was also an influential factor in the City’s ability to secure coverage in FY 20/21. The City‘s loss run report was challenged, as settlements that were part of the bankruptcy (BK) plan of adjustment reflected a lower dollar value than what they would have settled outside of the bankruptcy proceedings. This made it difficult for insurance carriers to accurately measure risk exposure, and position themselves to extend an offer of coverage and establish insurance premiums. As a result, Aon was unable to secure a viable option for the City. To augment Aon’s efforts with quote solicitation and to explore coverage options for the City, staff approached other markets and carriers to secure coverage.
Finally, the City partnered with Alliant Insurance Services, Inc. (Alliant) to obtain coverage through their pooled insurance carrier PRISM, formerly CSAC-EIA. Alliant is one of the nation’s leading distributors of diversified insurance products and services.
Operating through a national network of offices, Alliant offers a comprehensive portfolio of services. The knowledge Alliant has gained in its more than eight decades of working with many of the top insurance companies in the world allows them to provide its clients guidance and high-quality performance.
PRISM expressed concern over the reliability of our loss data for the time period of 2012-2017, indicating that larger claims would have settled for a much higher amount, if not for the bankruptcy proceedings and the plan of adjustment. In short, PRISM requested an audit of 27 claims to analyze the loss data to determine the risk exposure they would assume by extending excess general liability coverage to the City. This would allow them to quote a premium based on the audited data. Below is a summary of the audit findings. After reviewing the audited files, PRISM was able to offer a premium quote.
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Discussion
Insurance Market Update
The general liability market for 2025 will continue to be extremely challenging. There is reduced carrier capacity, heightened underwriter scrutiny, a push for aggregated limits and higher attachment points, and increased rates. There are many factors contributing to these hard market conditions, but it essentially comes to the increase in the number and size of extremely large losses over the last decade.
Starting around 2013-2014, large liability claims activity increased significantly.
Extremely large “nuclear” verdicts and the resulting increased settlement values have had devastating impacts on the economics of liability claims. Claims that were previously resolved in the $5M-$10M range rose to $20M-$30M and higher for public entities and their insurers. The rising claims costs caused carriers to increase their reserves for prior year claims to keep up with the adverse development.
Collectively, the members of PRISM’s General Liability Programs have experienced their fair share of large losses, contributing to the challenging conditions described above. In fact, over the last 10 years, PRISM members have experienced an average of 126 claims per year that exceeded their current Self-Insured Retention (SIR). These claims collectively exceeded the collective SIRs by more than $188M, per year.
PRISM and Alliant have developed long-term relationships with excess insurance and reinsurance underwriters. They work throughout the year to not only maintain their participation in the Program in a very difficult claims environment, but also to analyze structural changes and other strategies to make the overall cost as efficient as possible.
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While PRISM’s premiums will increase for 2025/26, the premiums are still less costly than an entity would likely be faced with outside of PRISM. A testament to the continued competitiveness of the Program. In addition to premium savings, members enjoy broader coverage and avoid coverage restrictions and limitations that are often quoted outside of PRISM.
Excess Workers’ Compensation Program
The City purchases excess workers' compensation insurance to cover employees if they are injured on the job. Coverage includes reimbursement for payments above the City’s self-insured retention (SIR). This includes compensation for temporary disability benefits at statutory rates, medical benefits, and some allocated expenses.
The City’s current excess workers’ compensation coverage cost is $652,569 and has a $1 million self-insured retention (SIR) with a limit remaining at statutory coverage.
Statutory coverage provides payment for claims up to the amount required by law, without limits. The FY 2025/26 premium is increasing by 28% ($910,293).
Excess General Liability Program
The City purchases excess general liability insurance to protect against catastrophic incidents such as: bodily injury, property damage, personal injury, public officials’ errors and omissions liability, automobile liability and employment practices liability.
The City’s current excess general liability insurance coverage cost is $2,049,093 and has a $5 million self-insured retention (“SIR”) with a limit of $25 million. The FY 2025/26 premium is increasing by approximately 14% ($2,392,094) while Program premium projections assume increases of up to 30%.
Master Crime Program
The City purchases master crime insurance to protect against illegal acts committed by employees while on the job including theft, forgery, inside premises (theft of money and securities/robbery), computer fraud, money orders and counterfeit paper currency, and outside premises.
The City’s current master crime coverage cost is $13,709 and has a $2,500 self- insured retention (“SIR”) with a limit of $15 million. The FY 2025/26 premium is decreasing by 4% ($13,190) while Program premium projections assume increases of up to 35%.
Cyber Liability Program
The City purchases cyber liability insurance for reimbursement coverage in response to information security and privacy liability, website media content liability, cyber extortion and first party data protection.
The City’s current policy cost is $20,995 and has a $100,000 SIR with a limit of $12 million. The FY 2025/26 premium is increasing by 3% ($21,512) while Program premium projections assume increases of up to 85%.
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The following chart summarizes the City’s current actual cost for insurance coverage, assuming no changes to coverage, deductibles and or retention.
Insurance Type FY 2024/25
Premium
FY 2025/26
Premium
Percentage
Change
Excess Workers’
Compensation
$652,569 $910,293 28%
Excess General
Liability
$2,049,093 $2,392,094 14%
Master Crime $13,709 $13,190 - 4%
Cyber Liability $20,995 $21,512 3%
2021-2025 Strategic Targets and Goals
Approving the renewal of the City’s various insurance policies aligns with Strategic Target No. 1: Improved Operational and Financial Capacity, specifically, Goal e:
minimize risk and litigation exposure by maintaining sufficient coverage to provide protection to the City.
Fiscal Impact
The financial impact to the City would not exceed $3,337,089. There is sufficient funding included in the FY 2025/26 Operating Budget.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Approve the annual renewal of the City’s excess general liability insurance, excess workers’ compensation insurance, crime insurance and cyber insurance; and
2. Authorize the City Manager or designee to execute all related documentation.
Attachments
Attachment 1 - Insurance Renewal PowerPoint
Ward:
All Wards
Synopsis of Previous Council Actions:
June 5, 2024 The Mayor and City Council approved the annual renewal of the City’s Property insurance, excess general liability insurance, excess workers’ compensation insurance, crime insurance and cyber insurance.
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June 7, 2023 The Mayor and City Council approved the annual renewal of the City’s Property insurance, excess general liability insurance, excess workers’ compensation insurance, crime insurance and cyber insurance.
June 15, 2022 The Mayor and City Council approved the annual renewal of the City’s excess workers’ compensation, excess general liability insurance, crime insurance and cyber insurance policies.
June 2, 2021 The Mayor and City Council Adopted Resolution 2021-125 approving the annual renewal of the City’s excess general liability insurance, excess workers’ compensation insurance, crime insurance and cyber insurance.
July 17, 2020 Mayor and City Council:
1. Adopted Resolution No. 2020-176, approving the annual renewal of the City’s various insurance policies negotiated through Alliant for the term beginning August 1, 2020 and ending July 31, 2021 for: (1) a pro-rated premium not to exceed $820,190 for property insurance for the term beginning August 1, 2020 and ending March 31, 2021; (2) for a premium not to exceed $6,350 for cyber liability insurance for the term beginning August 1, 2020 and ending July 1, 2021; and (3) for a premium not to exceed $3,500,000 for excess liability insurance; AND authorized an amendment to the FY 2020-21 Adopted Budget in the amount of $2,113,229 to be appropriated into the Liability Insurance Fund, Account Number 629-110-0056-5161, from the General Fund Reserves and authorize staff to continue exploring options for containing excess general liability insurance costs and to bring back an update in August of the outcome and option selected.
2. Adopted Resolution No. 2020-178, to: Remain a member of CSAC Excess Insurance Authority; Becoming a Member of Public Risk Innovation, Solutions, and Management; and authorized the City Manager to act on the City’s behalf in relation to these entities.
June 17, 2020 Mayor and City Council adopted Resolution No. 2020-131, authorizing the City Manager to purchase both a 30-day extension to the current excess liability policies for the extended term of coverage from July 1, 2020 and excess workers’ compensation insurance through Public Risk Innovation, Solutions, and Management (PRISM) formerly California State Associate of Counties Excess Insurance Authority (CSAC-EIA).
June 19, 2019 Mayor and City Council adopted Resolution 2019-68 authorizing the City Manager enter into California State Association of Counties Excess Insurance Authority (CSAC-EIA) insurance pool for excess workers’ compensation insurances and to purchase stand-alone commercial coverage for excess liability insurance with Aon.
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July 17, 2019 Mayor and City Council adopted Resolution 2019-176 authorizing the City Manager to purchase the City’s property, auto, terrorism, difference in conditions, and cyber security insurance policy term July 31, 2019 to July 31, 2020 for Fiscal Year (FY) 2019-2020.