FROM: Stacey Barnier, Chief Human Resources Officer
SUBJECT: Renewal of property and casualty insurance coverages
RECOMMENDATION:
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Approve renewal of property and casualty insurance with Alliant Insurance Services and the Marsh & McLennan Insurance Agency LLC for fiscal year 2025-2026 in an amount not to exceed $497,437 with a contingency of $5,000 to account for any extreme dislocations in the insurance market that might change some of the quotes prior to binding coverage.
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BACKGROUND:
SBCERA conducted a Request for Qualifications followed by a Request for Proposals in Spring 2020 with the help of G2 Risk Consulting to test the market and put in place appropriate coverage in various areas of our property and casualty risk management program. Alliant Insurance Services was awarded the contract for our Fiduciary Liability and Employment Practices insurance coverage whereas Marsh & McLennan Insurance Agency LLC was awarded the contract for the remainder of our casualty insurance coverages including cyber, property, general liability, excess/umbrella, crime, and Workers’ Compensation coverages.
As we have done in prior years, both carriers shopped SBCERA’s risk portfolio to various carriers based on the lines of coverage they currently handle for SBCERA. Different in this years’ property and casualty coverages is inclusion of some additional policies that were previously held by Hospitality Office in the event that Board approves its’ dissolution at the June 5, 2025 Board Meeting.
SBCERA is part of the Alliant Fiduciary Liability Insurance Program which is a pooled plan that bundles fiduciary liability, fiduciary dishonesty and employment practices liability insurances and leverages the buying power of multiple public pension plans. Our fiduciary liability insurance increased 4.5% as a result of the increase in SBCERA’s overall fund balance. As the fund continues to grow, we should expect to see our fiduciary liability insurance premiums increase. Our fiduciary dishonesty and employment practices liability insurance renewals stayed flat (0%).
As a result of the market conditions and massive property and casualty losses from the fires in Los Angeles County earlier this year insurers are leaving the California market in totality. As a result, we are seeing an increase of 6% in our property policy and 15% in our general liability and umbrella policies with our building, its contents (furniture, technological equipment, etc.) and business continuity increasing in value as a result of tenant improvements and modernization efforts. An additional challenge from carriers leaving the California market is that the discounted rate we had for bundling our cyber insurance with some of our other lines of coverage is no longer available, so we are seeing an 8.3% increase.
Our renewals for auto, crime, and business travel insurance were flat this year. Our Workers’ Compensation premium increase of 21% reflects the fact that our existing carrier is no longer providing this line of coverage in California along with an increase in SBCERA’s overall estimated payroll for the plan year including additional positions and a modest estimated cost of living adjustment for 2026. Workers’ compensation is budgeted as part of personnel and salary costs.
If the Board approves the dissolution of Hospitality Office, Inc., staff recommends the procurement of three additional lines of coverage, which are currently held by Hospitality Office to insure the building asset. Included in these lines are commercial building insurance which protects the structure itself as well as the standalone difference in conditions policy which protects the structure in the event of an earthquake, flood or sprinkler damage from an earthquake. Additionally, we are recommending the inclusion of a one-year directors and officers management liability policy which would cover any claims made against the officers of Hospitality Office. These three lines of coverage would be included in the Building Services budget.
Our brokers are still negotiating with various carriers to obtain the best possible rates for SBCERA. Exhibit A outlines the recommended coverages and associated price quotes which are subject to change as a result of market conditions at the time we actually bind insurance coverage. As a result, staff recommends approval of contingency funding in the amount of $5,000 to account for extreme dislocations in the insurance market that might change some of the quotes prior to binding coverage.
BUDGET IMPACT:
Costs for this item are included in the current year administrative budget.
STRATEGIC PLANNING GOAL/OBJECTIVE:
Operational Excellence & Efficiency
Prudent Fiscal Management
STAFF CONTACT:
Stacey Barnier
ATTACHMENTS:
Exhibit A: Proposed Property and Casualty Insurance Coverage Costs