8E
Date: June 9, 2026
To: Honorable Mayor and Members of the City Council
From: Ian Dailey, Finance Director
By: Jonathan Lackey, Risk Manager | [email protected] Subject: Finance – Approve Memorandum of Understanding with Public Risk Innovation Solutions and Management (PRISM), Approve Annual Premium Renewal of Insurance Coverage, and Authorize the Mayor as the City’s Signatory. Expenditure:
Not-to-Exceed $5,971,900 (Non-General Fund).
RECOMMENDATION
Recommendation of the Finance Director that City Council:
1. Approve the Memorandum of Understanding with Public Risk Innovation Solutions and Management (PRISM), in the amount of $4,906,000 plus a 10% contingency in the amount of $490,600, for a total not-to-exceed amount of $5,396,600, for the annual premium renewal of excess (GL2) and optional excess liability (OEL) coverage, for a one-year (1) period beginning July 1, 2026 and ending July 1, 2027; and
2. Approve the annual premium renewal of excess workers’ compensation coverage from PRISM in the amount of $523,000, plus a 10% contingency in the amount of $52,300, for a total not-to-exceed amount of $575,300 for a one-year (1) period beginning July 1, 2026, and ending July 1, 2027; and
3. Authorize the Mayor as the City’s signatory for the Memorandum of Understanding.
FUNDING
Funding is anticipated to be available in the Self-Insurance Fund’s fiscal year 2026-27 operating budget.
DISCUSSION
The City faces a broad range of liability exposures arising from the ownership and operation of public buildings, streets, sidewalks, infrastructure, community programs, special events, and public safety operations. While the City may retain and directly fund certain predictable or lower- severity claims through its self-insurance program, some claims are too large, complex, or uncertain to fully self-insure.
To protect the City from significant financial loss, the City transfers a portion of this risk by purchasing excess insurance coverage. Excess insurance provides financial protection above the City’s self-insured retention and effectively increases the City’s capacity to respond to individual large-loss claims, multiple claims arising from a single event, or a series of high-severity claims within a coverage period.
1 City Council
June 9, 2026
In Fiscal Year 2021-22, City Council approved the City participation in the Public Risk Innovation, Solutions, and Management (PRISM) risk sharing pool. Through PRISM, the City purchases excess liability coverage, including General Liability 2 (GL2) and Optional Excess Liability (OEL), Master Crime, and excess workers’ compensation coverage (EWC).
Both the excess liability and excess workers’ compensation programs are renewed annually.
PRISM typically provides estimated renewal premiums in June, prior to the July 1 coverage renewal date. Because final premium amounts may not be available until after the renewal date, staff seeks City Council authorization based on estimated premiums to ensure there is no lapse in coverage. If the final renewal premium is lower than the approved estimate, the difference will result in budget savings. The City also participates in the Master Crime program which provides coverage for internal fraud and illegal acts committed by City employees on the job.
Staff has received confirmation that PRISM will accept the City as a continuing member of the risk sharing pool and without reduction to existing coverage provisions. The summary of the proposed coverage is provided below.
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 Worker’s
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 the 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)
$ 5,396,600* $ 575,300*
*Additional assessments and fees are possible if the program incurs higher than anticipated losses during the coverage period.
Staff reviewed PRISM’s Annual Comprehensive Financial Report to assess the quality and financial position of the pool. Staff also confirmed that PRISM remains accredited by the California Association of Joint Powers Authorities. Accreditation by CAJPA indicates that the risk pool operates in accordance with recognized professional standards and industry best practices for public agency risk-sharing organizations.
2 City Council
June 9, 2026
PRISM’s accreditation, financial reporting, and long-standing public agency membership structure provide additional assurance that the City is participating in a professionally managed risk-sharing program designed specifically for the needs of California public entities.
Hard Market Trends
California’s public entity insurance market remains extremely challenging. Public agencies throughout the state continue to experience increased premiums, reduced coverage capacity, higher self-insured retentions, more restrictive policy terms, and, in some cases, limited availability of coverage. These conditions are commonly referred to as a “hard market.” Several factors continue to drive these market conditions, including increased claim severity, higher litigation costs, large jury verdicts, inflationary pressure, reduced insurer capacity, and the overall volatility of the reinsurance market. As a result, public entities are facing higher costs to obtain and maintain the same levels of financial protection.
Liability Lawsuits - The liability market continues to be affected by extremely large verdicts and settlements, often referred to as “nuclear verdicts.” These high-severity claims have significantly changed the economics of public entity liability coverage. Claims that may have been previously resolved in the $5 million to $10 million range are now increasingly reaching $20 million to $30 million or more.
These large losses are paid by insurers, reinsurers, and risk-sharing pools, and the resulting costs are reflected in higher premiums for all public entities. Public agencies with law enforcement operations, public works infrastructure, parks and recreation programs, employment practices exposure, and public-facing services are particularly impacted by these trends.
Workers’ Compensation - Workers’ compensation costs are also being affected by increased claim severity. Key drivers include medical inflation, an aging workforce, longer claim duration, workplace violence exposures, mental health claims, increased life expectancy, cumulative trauma claims, and statutory presumption laws.
The City continues to take a proactive approach to reducing workplace injuries and controlling claim costs. The City maintains an active Injury and Illness Prevention Program, supported by safety liaisons across departments who promote workplace health and safety.
The Risk Management Division also coordinates with the Workers’ Compensation Division to monitor claims, identify trends, support early intervention and implement loss-prevention strategies. These efforts help reduce the frequency and severity of claims; however, excess workers’ compensation coverage remains necessary to protect the City from catastrophic or unusually severe claims.
Benefits of PRISM Membership
Participation in PRISM provides the City with access to coverage and services that may be difficult or more costly to obtain independently in the commercial insurance market. As a large public entity risk-sharing pool, PRISM provides economies of scale, broader purchasing power, access to reinsurance markets, and specialized programs tailored to public agencies. 3 City Council
June 9, 2026
In addition to insurance coverage, PRISM provides risk control resources, training, legal guidance, claims support and best practices developed specifically for California public agencies.
These services assist the City in managing risk, reducing losses and improving overall safety and claims outcomes.
During hard market conditions, participation in a public agency risk pool is especially important.
Without PRISM membership, the City would likely face higher premiums, reduced coverage limits, less favorable terms and fewer risk management resources.
Staff recommends City Council approve the annual premium renewal with Public Risk Innovation, Solutions and execute the required memorandum of understanding documents to effectuate the coverage.
Approval of the renewal will ensure continued protection against significant liability and workers’ compensation losses, preserve the City’s existing coverage structure and allow the City to benefit from PRISM’s purchasing power, risk management resources and public agency-specific expertise. Staff has determined that PRISM continues to provide the required coverage and related benefits at the best available terms for the City under current market conditions.
ATTACHMENTS
1. PRISM Excess Liability Premium History
2. Master Crime Memorandum of Understanding
3. Optional Excess Liability Memorandum of Understanding 4 ATTACHMENT
1 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
2025
-
20 26
PRISM
General
Liability (GL2)
Program
$30
million
per
claim
$5 million self
-
insured
retention
$
3,7
69,111
202
6 -
20 2
7 PRISM
General
Liability (GL2)
Program
$30
million
per
claim
$5 million self
-
insured
retention
$
4,906,000
*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
2025
-
2026
PRISM
EWC
Statutory
$2
mil
self
-
insured
retention
$454,13
8 2026
-
2027
PRISM
EWC
Statutory
$2
mil
self
-
insured
retention
$
523,000
*
Statutory
coverage
means
all
benefits
due
to
the
injured
employee
5 Adopted: February 5, 2026
MEMORANDUM OF UNDERSTANDING
MASTER CRIME INSURANCE PROGRAM
This Memorandum of Understanding (hereinafter "Memorandum") is entered into by and between Public Risk lnnovation, Solutions, and Management (hereinafter referred to as 'PRlSM")and the participating entities (hereinafter "Members")who are signatories to this Memorandum,
1. CREATION AND PURPOSE OF THE PROGRAM. There is hereby created by this Memorandum the Master Crime lnsurance Program (hereafter "Program"). The purpose of the Program is to provide participating Members with group purchase and coverage for illegal acts committed by employees while on the job, as more fully described in the applicable coverage documents.
2. JOINT POWERS AGREEMENT. Each participating member of the Program shall have executed the Joint Powers Agreement Creating Public Risk lnnovation, Solutions, and Management (hereinafter referred to as "Agreement"). Except as othen¡yise provided herein, all terms used herein shall be as defined in Article 1 of the Agreement, and all other provisions of the Agreement not in conflict with this Memorandum shall be applicable.
3. GOVERNANCE AND PROGRAM OVERSIGHT
The Executive Committee of PRISM (hereafter "Committee") shall have full authority over all matters affecting the Program, including but not limited to:
a. Approval of new members;
b. Program structure and participation requirements;
c, Premium and rate setting;
d. Retention levels, limits, and reinsurance;
e. Unden¡uriting standards; and
f. Policies regarding withdrawal and cancellation
PROGRAM PARTICIPATION AND MEMBERSHIP
a. Participation in the Program is voluntary and subject to approval by PRISM in accordance with the Agreement and Program undenruriting guidelines. b, A Member approved for participation shall remain in the Program until withdrawal or cancellation in accordance with the Agreement and this Memorandum,
c. PRISM may establish eligibility criteria, including but not limited to training, and compliance with applicable laws and standards.
5. ANNUAL PREMIUM
ln accordance with Afticle 14(b)(2) of the Agreement, participating Members shall be assessed an annual premium for the purpose of funding the Program, Annual rates/premiums will be established by the Committee in consultation with the carrier, actuaries and/or other consultants.
4 ATTACHMENT 2
6 I
Adopted: February 5, 2026
6. COST ALLOCATION
Each Member's share of the annual premium shall be determined pursuant to a Committee-approved cost allocation methodology, which may consider factors such as exposure, size, loss experience, and other risk characteristics. The cost allocation methodology may be amended from time to time by action of the Committee,
7. COVERAGE DOCUMENTS
PRISM shall issue applicable coverage documents evidencing a Member's participation in the Program and setting forth the specific terms, conditions, limits, retentions, exclusions, and endorsements applicable to the coverage,
CLAIMS AND INCIDENT REPORTING
a. Members shall comply with all incident reporting, claims reporting, and cooperation requirements established by PRISM and/or the carrier, and as set forth in the coverage documents.
b. Members shall promptly notify PRISM of any known or suspected incident that may give rise to a claim under the Program.
c. Failure to comply with these reporting requirements could adversely impact coverage.
9. CLAIMS ADMINISTRAT¡ON
Claims administration services shall be provided by the insurance carrier(s) and/or their assignee,
10. W¡THDRAWAL AND CANCELLATION
Withdrawal or cancellation from the Program shall be governed by Articles 20 and 21 of the Agreement, subject to policy provisions and any additional Program-specific requirements adopted by the Committee.
11, LATE PAYMENTS
Notwithstanding any other provision to the contrary regarding late payment of invoices or cancellation from a Program, at the discretion of the Executive Committee, any Member that fails to pay an invoice when due may be given a ten (10) day written notice of cancellation.
12. DISPUTE RESOLUTION
Any question or dispute with respect to the rights and obligations of the parlies to this Memorandum regarding coverage shall be determined in accordance with the Agreement Article 31, Dispute Resolution,
13. AMENDMENT
This Memorandum may be amended by a majority vote of the Executive Committee and signature on the Memorandum by the Member's designated representative who shall have authority to execute this Memorandum. Should a Member of the Program fail to execute any amendment to this Memorandum within the time provided by the Executive Committee, the Member will be deemed to have withdrawn at the following renewal. 7 Adopted: February 5, 2026
14. COMPLETE AGREEMENT
Except as othenruise provided herein, this Memorandum constitutes the full and complete agreement of the Members.
15. SEVERABILITY
lf any provision of this Memorandum is judicially determined to be void or unenforceable, such determination shall not affect the validity of the remaining provisions.
16. EFFECTIVE DATE
This Memorandum shall become effective on the effective date of coverage for the Member and upon approval by the Executive Committee of any amendment, whichever is later.
17. EXECUTION IN COUNTERPARTS
This Memorandum may be executed in several counterparts, each of which shall be an original, all of which shall constitute but one and the same instrument. lN WITNESS WHEREOF, the undersigned have executed this Memorandum as of the dates set forth below.
PRISM:
Dated: 7/r/2026
Signatu
Printed & Title Gina Dean. CEO
Public Risk lnnovation, Solutions, and Management
CITY OF TORRANCE
a municipal corporation
George K. Chen, Mayor
ATTEST:
Rebecca Poirier, MMC
City Clerk
APPROVED AS TO FORM
PATRICK Q. SULLIVAN
City Attorney
By:
Tatia Y. Strader
Assistant City Attorney
8 Adopted: February 5, 2026
MEMORANDUM OF UNDERSTANDING
OPTIONAL EXCESS LIABILITY INSURANCE PROGRAM
This Memorandum of Understanding (hereinafter "Memorandum") is entered into by and between Public Risk lnnovation, Solutions, and Management (hereinafter referred to as "PRlSM")and the participating entities (hereinafter "Members")who are signatories to this Memorandum.
1. CREATION AND PURPOSE OF THE PROGRAM. There is hereby created by this Memorandum the Optional Excess Liability lnsurance Program (hereafter "Program").
The purpose of the Program is to provide participating Members with group purchase and liability coverage excess of the underlying twenty-five million in limits from either the General Liability 1 or General Liability 2 Programs, as more fully described in the applicable coverage documents.
2. JOINT POWERS AGREEMENT. Each participating member of the Program shall have executed the Joint Powers Agreement Creating Public Risk lnnovation, Solutions, and Management (hereinafter referred to as "Agreement"), Except as otherwise provided herein, all terms used herein shall be as defined in Article 1 of the Agreement, and all other provisions of the Agreement not in conflict with this Memorandum shall be applicable.
3. GOVERNANCE AND PROGRAM OVERS¡GHT
The Executive Committee of PRISM (hereafter "Committee") shall have full authority over all matters affecting the Program, including but not limited to:
a. Approval of new members;
b. Program structure and participation requirements;
c. Premium and rate setting;
d. Retention levels, limits, and reinsurance;
e. Underwriting standards; and
f. Policies regarding withdrawal and cancellation
4. PROGRAM PARTICIPATION AND MEMBERSHIP
a. Participation in the Program is voluntary and subject to approval by PRISM in accordance with the Agreement and Program unden¡rriting guidelines. b, A Member approved for participation shall remain in the Program until withdrawal or cancellation in accordance with the Agreement and this Memorandum.
c. PRISM may establish eligibility criteria, including but not limited to training, and compliance with applicable laws and standards,
5. ANNUAL PREMIUM
ln accordance with Article 14(b)(2) of the Agreement, participating Members shall be assessed an annual premium for the purpose of funding the Program. Annual rates/premiums will be established by the Committee in consultation with the carrier, actuaries and/or other consultants.
ATTACHMENT 3
9 Adopted: February 5, 2026
6. COST ALLOCATION
Each Member's share of the annual premium shall be determined pursuant to a Committee-approved cost allocation methodology, which may consider factors such as exposure, size, loss experience, and other risk characteristics. The cost allocation methodology may be amended from time to time by action of the Committee.
7. COVERAGE DOCUMENTS
PRISM shall issue applicable coverage documents evidencing a Member's participation in the Program and setting forth the specific terms, conditions, limits, retentions, exclusions, and endorsements applicable to the coverage,
8. CLAIMS AND INCIDENT REPORTING
a. Members shall comply with all incident reporting, claims reporting, and cooperation requirements established by PRISM and/or the carrier, and as set forth in the coverage documents.
b. Members shall promptly notify PRISM of any known or suspected incident that may give rise to a claim under the Program,
c. Failure to comply with these reporting requirements could adversely impact coverage.
9. CLAIMS ADMINISTRATION
Claims administration services shall be provided by the insurance carrier(s) and/or their assignee,
10. WITHDRAWAL AND CANCELLATION
Withdrawal or cancellation from the Program shall be governed by Articles 20 and 21 of the Agreement, subject to policy provisions and any additional Program-specific requirements adopted by the Committee.
11. LATE PAYMENTS
Notwithstanding any other provision to the contrary regarding late payment of invoices or cancellation from a Program, at the discretion of the Executive Committee, any Member that fails to pay an invoice when due may be given a ten (10) day written notice of cancellation.
12, DISPUTE RESOLUTION
Any question or dispute with respect to the rights and obligations of the pafties to this Memorandum regarding coverage shall be determined in accordance with the Agreement Article 31, Dispute Resolution,
I 3. AMENDMENT
This Memorandum may be amended by a majority vote of the Executive Committee and signature on the Memorandum by the Member's designated representative who shall have authority to execute this Memorandum. Should a Member of the Program fail to execute any amendment to this Memorandum within the time provided by the Executive Committee, the Member will be deemed to have withdrawn at the following renewal. 10 Adopted: February 5, 2026
14. COMPLETE AGREEMENT
Except as otheruise provided herein, this Memorandum constitutes the full and complete agreement of the Members.
15. SEVERABILITY
lf any provision of this Memorandum is judicially determined to be void or unenforceable, such determination shall not affect the validity of the remaining provisions.
16. EFFECTIVE DATE
This Memorandum shall become effective on the effective date of coverage for the Member and upon approval by the Executive Committee of any amendment, whichever is later,
17. EXECUTION IN COUNTERPARTS
This Memorandum may be executed in several counterparts, each of which shall be an original, all of which shall constitute but one and the same instrument. lN WITNESS WHEREOF, the undersigned have executed this Memorandum as of the dates set forth below.
PRISM:
Dated: 7/I/2026
Signatu
Printed & Title: Gina Dean, CEO
Public Risk lnnovation, Solutions, and Management
CITY OF TORRANCE
a municipal corporation
George K. Chen, Mayor
ATTEST:
Rebecca Poirier, MMC
City Clerk
APPROVED AS TO FORM:
PATRICK Q. SULLIVAN
City Attorney
Tatia Y. Strader
Assistant City Attorney
By
11