City Council
Report
City Council Meeting: February 28, 2017
Agenda Item: 3.A
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To: Mayor and City Council
From: Gigi Decavalles-Hughes, Director, Finance Department, Risk Management Subject: Property Insurance Brokerage Services
Recommended Action
Staff recommends that the City Council:
1. Award RFP #92 to Alliant Insurance Services, Inc., a California-based company, for property insurance brokerage services; and
2. Authorize the City Manager to negotiate and execute a professional services agreement with Alliant Insurance Services, Inc., in an amount not to exceed $425,000 for a five-year period, with future year funding contingent on Council budget approval.
Executive Summary
The City has an ongoing need for professional property insurance brokerage services to underwrite, market, and secure its property insurance coverage. This type of insurance protects the City’s buildings and vehicles, valued at over $890 million, from the perils of fire, flood and/or earthquake. The City’s current property insurance broker agreement is set to expire at the end of this fiscal year, and in preparation for this, staff solicited proposals in accordance with procurement policies and received responses from three brokerage firms. A panel of City staff subsequently evaluated each firm’s proposal and determined that Alliant Insurance Services, Inc. provided the most responsive bid. The panel recommends the City pursue a five-year contract with Alliant at a cost of $425,000.
Background
Alliant Insurance Services, Inc. has served as the City’s property insurance broker for 2 of 4
the last twenty-five years. The City has maintained this long standing broker relationship with Alliant because it offers access to the Alliant Property Insurance Program (APIP) - formerly known as the Public Entity Property Insurance Program or PEPIP. APIP was developed specifically to meet the unique needs of public entities, and as the largest property placement in the world, its market share and strength has helped to ensure the City obtains the best property insurance coverage at the most competitive price. The City has participated in APIP since its inception and can only continue to do so as a client of Alliant. The City’s current property insurance broker agreement with Alliant is set to expire on June 30, 2017 (see June 26, 2012 staff report). The City continues to survey the marketplace for broker services every five years to determine what other property insurance options are available, and whether these options can compete with APIP’s offerings.
Discussion
The City uses a professional property insurance brokerage firm to procure its property insurance coverage. This is necessary for two reasons: 1) it ensures the City has access to the broadest range of high quality insurance coverage at the most competitive price, and 2) it provides the City with access to property insurance markets only available to professional brokers (e.g., earthquake coverage for City facilities, wavewash coverage for the Pier, etc.).
The broker is responsible for all aspects of procuring property insurance. This includes such tasks as evaluating the City’s property insurance program and recommending alternatives to address changing coverage needs; developing and marketing the program to insurers capable of meeting the City’s needs; and securing cost-effective coverage on behalf of the City.
Consultant Selection
The City issued a Request for Proposals (RFP) for property insurance brokerage services on October 17, 2016. The RFP was posted on the City’s on-line bidding site, and notices were advertised in the Santa Monica Daily Press in accordance with City Charter and Municipal Code provisions. A total of 118 vendors were notified of the 3 of 4
RFP. Of those notified, 10 prospective vendors downloaded the RFP and three brokerage firms submitted proposals (Alliant Insurance Services, Arthur J. Gallagher & Company, and AON Risk Services West, Inc.).
A panel of staff from the Finance, Housing and Economic Development, and Public Works Departments reviewed and evaluated the RFP submittals on the basis of experience, ability to fulfill the City’s unique property insurance needs, references, and cost. The panel then conducted on-site interviews of all three firms. Through this process, the panel confirmed that Alliant’s APIP continues to deliver the broadest property insurance coverage at the most competitive price. Further, through APIP, the City is guaranteed access to difficult, but much needed, high risk property coverage (e.g., wave wash coverage for the Pier). Finally, APIP provides a variety of valuable public entity-oriented coverages that are not offered in traditional property insurance policies. For example, APIP provides municipal bond and tax revenue interruption coverage, wave-wash coverage, trained animal coverage (e.g., police dogs, mounted patrol horses, etc.), and ample policy limits ($1 billion in all-risk coverage). Relative to broker fees, Alliant came in at mid-range; AON was higher, Gallagher was lower.
Based on the information presented above and SMMC 2.24.073 criteria, staff recommends Alliant Insurance Services, Inc. as the best qualified firm to serve as the City’s property insurance broker.
Financial Impacts and Budget Actions
The contract to be awarded to Alliant Insurance Services, Inc. is for an amount not to exceed $425,000. Funds for the first year of the contract (July 1, 2017 to June 30, 2018) will be requested in the FY 2017-18 budget in the Finance Department. The contract will be charged to account 58229-522040. Future funding is contingent on Council budget approval.
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Prepared By: Michael Spenelli, Risk Management Analyst
Approved Forwarded to Council
Attachments:
A. June 26, 2012 Staff Report
B. Oaks Initiative - AIS