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Date: June 17, 2025
To: Honorable Mayor and Members of the City Council
From: Ian Dailey, Finance Director
By: Jason Nishiyama, Deputy Finance Director | [email protected] Subject: Finance – Approve Premium Renewal with Public Risk Innovation, Solutions, and Management (PRISM) for Excess Liability and Excess Workers’ Compensation Coverage and Authorize Finance Director to Execute the Coverage Binders.
Expenditure: Not-to-Exceed $5,703,328 (Non-General Fund).
RECOMMENDATION
Recommendation of the Finance Director that City Council:
1. Approve the annual premium renewal of excess liability coverage from Public Risk Innovation, Solutions, and Management (PRISM) in the amount of $4,662,000, plus a 10% contingency in the amount of $466,200, for a total not-to-exceed $5,128,200 for a one-year period beginning July 1, 2025 and ending July 1, 2026; and
2. Approve the annual premium renewal of excess workers’ compensation coverage from PRISM in the amount of $522,844, plus a 10% contingency in the amount of $52,284, for a total not-to-exceed $575,128 for a one-year period beginning July 1, 2025 and ending July 1, 2026; and
3. Authorize Finance Director or designee to execute the coverage binder.
FUNDING
Funding is available in the Self-Insurance Fund’s fiscal year 2025-26 operating budget.
DISCUSSION
The City faces many liability exposures related to owning buildings and roadways, running community programs and conducting public safety operations. The City can retain and pay some of its liability exposures, however some claims are potentially too big and too uncertain to fully self-insure. Therefore, the City transfers this risk by purchasing excess coverage. Excess coverage is important because it provides financial protection by effectively increasing the City's ability to pay single and multiple large loss claims.
In Fiscal Year 2021-22, City Council approved the City to join Public Risk Innovation, Solutions, and Management (PRISM) risk sharing pool to purchase excess liability (GL2, OEL) and excess workers’ compensation (EWC) coverage.
1 City Council
June 17, 2025
5 1
4 Both the excess liability and excess workers compensation coverage are renewed on an annual basis and premium estimates are made available in June before the coverage expiration date of July 1. The renewal premium is quoted as an estimate because final premium dues are presented to the City after the policy expires on July 1. Staff presents an estimated premium to ensure Council approval is obtained prior to policy expiration. If the actual renewal premium is lower than the estimated amount, the difference translates to budget savings.
Staff received confirmation that PRISM would accept the City as a continuing member of the risk sharing pool and without reduction to existing coverage provisions. The table below shows a summary of coverage provided by PRISM.
Coverage Type / Program
Name
Excess Liability
(GL2, OEL)
Excess Workers’ Compensation
(EWC)
Response Renewal Accepted Renewal Accepted
Coverage Law Enforcement Liability, Bodily
Injury, Personal Injury, Property
Damage, Public Officials Errors and
Omissions, Employment Practices
Liability, Automobile Liability.
Bodily injury or occupational disease
sustained by employees pursuant to
Workers’ Compensation laws of California.
Program Benefits Risk Control Program
Safety Webinars and Training
Resources
Legal Advice and Counsel
Best Practices Library
Risk Control Program
Safety Webinars and Training Resources
Legal Advice and Counsel
Best Practices Library
Coverage Limit $ 30,000,000 per claim Statutory limit - City is reimbursed up to amount legally responsible to pay for a
worker’s compensation claim.
Self-Insured Retention
(Amount the City pays
before coverage starts)
$ 5,000,000 per claim $ 2,000,000 per claim
Estimated Annual
Premium (includes 10%
contingency)
$ 5,128,200 * $ 575,128 *
* Additional assessments and fees are possible if the program incurs higher than anticipated losses during the coverage period.
Staff verified the quality and financial position of the pool by reviewing PRISM’s Annual Comprehensive Financial Report (ACFR). Staff also confirmed PRISM remained accredited by the California Association of Joint Powers Authorities (CAJPA) indicating the risk pool operates using professional standards and industry best practices. 2 City Council
June 17, 2025
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4 Hard Market Trends
In recent years California’s insurance market has been extremely challenging. All public entities are experiencing increasing premiums, reduced coverage or denial of coverage. There are several factors driving these trends.
Liability Lawsuits - Extremely large, so called “nuclear” verdicts and the resulting increased settlement values have adversely impacted the economics of liability claims. In recent times lawsuits that previously resolved in the $5 million to $10 million range are costing public entities and their insurers $20 million to $30 million and higher. These large losses are being covered by insurance companies and in turn the costs are passed on as significantly higher premium for all public entities.
Workers’ Compensation - For workers’ compensation, higher premiums are being caused by increased severity of claims. Factors such as medical inflation, the aging workforce, workplace violence, life expectancy, mental health exposures, and presumption laws are all contributing to increased claim severity. The City maintains a proactive stance to prevent work injuries, the City has an active Industrial Injury Prevention Program (IIPP) comprised of safety liaisons across each City department to promote health and safety in the workplace. The Risk Management division coordinates with the Workers Compensation Division to monitor potential reportable claims to control costs and to prevent losses in the future.
RECOMMENDATION
Especially during hard market conditions, being part of an insurance pool like PRISM becomes more important to gain access to purchasing power. PRISM enables economies of scale in purchasing insurance and leverage in the reinsurance markets. Without being part of PRISM, the City would pay much higher premiums and potentially lower coverage options and less benefits.
Staff recommend City Council approve the annual premium renewal with PRISM to purchase excess liability and excess workers’ compensation coverage as it provides the required coverage and benefits at the best available rates.
ATTACHMENTS
1. PRISM Coverage Premium History
2. PRISM 2025-26 Premium Estimates
3 PRISM Excess Liability Premium History
Policy Year Program Coverage Deductible
Information
Premium
Amount ($)
2022-2023 PRISM General
Liability (GL2)
Program
$20 million per claim $5 million self-
insured retention
$2,513,998
2023-2024 PRISM General
Liability (GL2)
Program
$30 million per claim* $5 million self-
insured retention
$2,925,692
2024-2025 PRISM General
Liability (GL2)
Program
$30 million per claim $5 million self-
insured retention
$3,307,077
*Increased coverage limit in response to adverse liability environment.
PRISM Excess Workers’ Compensation Premium History
Policy Year Program Coverage Deductible
Information
Premium
Amount ($)
2022-2023 PRISM EWC Statutory* $2 million self-
insured retention
$339,276
2023-2024 PRISM EWC Statutory $2 mil self-insured
retention
$394,571
2024-2025 PRISM EWC Statutory $2 mil self-insured
retention
$361,886
* Statutory coverage means all benefits due to the injured employee ATTACHMENT 1
4 TORRC
0 This second round of estimates have been prepared to further aid you in budgeting for the 2025/26 fiscal year. Since the initial version provided in October, we have updated the budget estimates to reflect the estimated 2025/26 exposure information submitted via the renewal applications and losses evaluated as of 6/30/2024. At the direction of the Board of Directors, the estimates provided are intended to be conservative; however, final premiums may be in excess of these estimates. PRISM has contemplated surcharge debits into these estimates. Surcharge credits from the prior year are not included. Pool rates and reinsurance/excess premiums are still estimated and pending Board approval in March therefore, we recommend you budget towards the high end of the range. Final estimates will be provided the first week of June 2025.
If you are aware that you have had any substantial changes over the past 12 months, please contact Sarah Bishop and a better estimate will be developed for you. $124,398,731
$146,903,978
PRISM pool rates are updated in this round of budget estimates, but are pending PRISM's Board approval in March of 2025. We have updated the budget estimates to reflect the estimated 2025/26 exposure information submitted vi a the renewal applications and lo sses evaluated as of 6/30/2024.
Reinsurance/Excess Premiums are estimated with a ssumptions applied at this time. Administrative costs and fees are also estimat ed. Members who reported payroll exposure increases greater than 5% over last year, may see premium increases that are higher than the range provided in October. If your agency has directed us to apply the 2023/24 pay roll audit to your 2025/26 premium, it has been included in the total collection shown. If you hav e decided to handle the pay roll audit outside of the renewal premium, the estimated pr emium shown is the estimated to tal collection. As noted in the introduction, these estimates also do not contemplate any premium credits based on loss experience.
Premium
$462,000 $492,000
Excess Workers' Compensation Program
2023/24 Estimated Payroll:
2024/25 Estimated Payroll:
to
$394,57123/24 Premium:
25/26 Estimated Premium: 2025/26 Estimated Payroll: $167,184,361 Payroll Audit: $30,844
Estimated Collectible: $492,844 $522,844 to
23/24 Premium:
$361,88624/25 Premium:
Attachment 2
Public Risk Innovation, Solutions, and Management (PRISM)5 2025/26 Budget Estimates, February 2025
City of Torrance
TORRC
City of Torrance
Public Risk Innovation, Solutions, and Management (PRISM) 2025/26 Budget Estimates, February 2025
0 $144,209,579
$150,447,048
The liability market has continued to experience a hardening trend in response to rising claims costs.
Based on market conditions, and the B oard's direction to be conservative at this point in the process these estimates reflect rate increases within a range of 20% to 30% for the SIR to 10M layer, 25% to 40% increases within the 5M xs 10M layer, and 15% to 25% for the 10M xs 15M layer. These preliminary estimates have been formulated utiliz ing the 2024/25 final allocation and anticipated market rate fluctuations. Please note that individual member rate variations may deviate from these assumptions, depending on their loss history, shifts in exposure, or other re levant factors. We, therefore, recommend budgeting at the upper end of the range provided. The market based program allocation of premium will be evaluated and approved by the GL2 Committee in the Spring.
To learn more about PRISM's response to the har d insurance market and how to discuss premium increases with stakeholders at your entity, please see the narrati ves and talking points provided on PRISM's website at prismrisk.gov/coverages/managing-a-hard-market.
Premium
$3,890,000 $4,357,000
General Liability 2 Program
2023/24 Estimated Payroll:
2024/25 Estimated Payroll:
to
$2,754,82223/24 Premium:
25/26 Estimated Premium: 2025/26 Estimated Payroll: $167,184,372 23/24 Premium:
$3,111,75624/25 Premium:
Due to recent organizational changes at the program's lead insurer (AIG), at this time we are recommending budgeting for a 15%-35% rate increase in case there are any changes in underwriting appetite or capacity. Please not e that exposure changes and lo ss experience may impact the premium.
For those members that do not currently purchase the optional $250,000 excess of $250,000 Impersonation Fraud coverage, we recommend budgeting $7,500 to $10,000 in addition to the budget estimates if there is interest in applying for that coverage.
Premium
$21,000 $25,000
Master Crime Program
to
$19,50123/24 Premium:
25/26 Estimated Premium:
23/24 Premium:
$21,00224/25 Premium:
6 TORRC
City of Torrance
Public Risk Innovation, Solutions, and Management (PRISM) 2025/26 Budget Estimates, February 2025
0 This program currently provides excess limits up to $25M excess of $25M on an optional basis above the GL1 or GL2 programs. We currently reco mmend that the members budget for a 25-40% rate increase; however, the actual increase or decr ease may differ for each member due to exposure changes and/or losses. For those me mbers that do not participate in all layers and are interested in higher limits, please budget for the additional layer(s) accordingly.
Premium
$275,000 $305,000
Optional Excess Program
to
$170,87023/24 Premium:
25/26 Estimated Premium:
23/24 Premium:
$195,32124/25 Premium:
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