City Council Agenda Report
Meeting Date: June 16, 2026
From: Alice Hui, Director of Finance/City Treasurer
Department: Finance
Submitted by: Javier Valdez, Risk Manager
Subject
Property and Casualty Insurance Placements for Fiscal Year 2026-27 Recommendation
Approve and authorize the City Administrator to execute all related documents to procure the City’s annual insurance coverage for Fiscal Year 2026-27, effective July 1, 2026, through June 30, 2027, for a total amount not-to-exceed $5,587,684.
Background
The City retained AON Insurance Services (AON) to assess and recommend appropriate insurance coverages and carriers for the upcoming fiscal year. Working closely with City staff, AON conducted a comprehensive review to identify suitable coverage types, coverage limits, self-insured retentions (deductibles), and competitive premium rates as part of the annual renewal process. This included soliciting and evaluating quotes from both existing and prospective insurance carriers, with up to 20 carriers being interviewed for certain coverage types. As part of this process, AON shared relevant financial and claims data with insurers to obtain competitive pricing and favorable terms. The final placement and coverage negotiation will be completed on or before June 29, 2026, ensuring the policies for Fiscal Year (FY) 2026-27 are bound in time for the July 1, 2026, effective date.
A detailed summary of the proposed coverage types and estimated premiums is provided in the attached FY 2026-27 Insurance Estimated Premiums Schedule.
Several factors have contributed to premium increases over the previous fiscal year, including the devastating wildfires in Los Angeles, inflation, accidents/significant losses, and a labor shortage. More details are as follows:
• Stand-alone Law Enforcement Liability Coverage - Higher premiums driven by significant settlements and high-dollar verdicts in California.
• Accidents – An increase in accident claims, particularly those resulting in fatalities or nuclear verdicts, leads to significant payouts for insurance companies. In California, auto accidents have surpassed law enforcement claims as the most costly settlements. • Excess liability coverage - The most significant factors driving excess liability coverage costs, particularly in California, are automobile and law enforcement liability verdicts, medical inflation, and capacity constraints. The amount of funds carriers can offer to insurance has dramatically decreased.
• Reinsurance Costs – The rising cost of reinsurance, used by insurers as backup coverage, has been fueled by a surge in billion-dollar property damage events and large liability verdicts, with costs rising by more than 60% since the pandemic.
Pursuant to Vernon Municipal Code (VMC) Section 3.32.110 (A)(8), insurance contracts are exempt from the competitive bidding requirements; however, insurance brokers and agents must be assigned through a competitive selection process. On March 5, 2024, Council approved an agreement with Aon to be retained as the City’s insurance broker based on the results of a Request for Proposals for Professional/Casualty Insurance Broker of Record process carried out in November 2023. The current agreement is set to expire on June 30, 2029.
Fiscal Impact
The fiscal impact is not-to-exceed $5,587,684. Sufficient funds are available in the General Fund, Finance, Insurance – Property/Crime Account No. 011-010-130-520035, in the amount of $1,987,684; Electric Fund, Administration, Insurance – Property/Crime Account No. 055-050- 580-520035, in the amount of $900,000; and Electric Fund, Malburg Generation Station, Insurance – Property/Crime Account No. 055-050-586-520035, in the amount of $2,700,000, totaling $5,587,684, for F Y 2026-27.
Attachments
1. FY 2026-27 Insurance Estimated Premium Schedule