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Home My WebLink AboutMinutes - September 20, 2016 SSLODI CITY COUNCIL SHIRTSLEEVE SESSION CARNEGIE FORUM, 305 WEST PINE STREET TUESDAY, SEPTEMBER 20, 2016 A. Roll Call by City Clerk An Informal Informational Meeting ("Shirtsleeve" Session) of the Lodi City Council was held Tuesday, September 20, 2016, commencing at 7:00 a.m. Present: Council Member Johnson, Council Member Mounce, Council Member Nakanishi, Mayor Pro Tempore Kuehne, and Mayor Chandler Absent: None Also Present: City Manager Schwabauer, City Attorney Magdich, and City Clerk Ferraiolo B. Topic(s) B-1 Receive Overview Presentation Regarding the California Joint Powers Risk Management Authority by General Manager David Clovis (CA) City Attorney Magdich reported that Lodi was a founding member of the California Joint Powers Risk Management Authority (CJPRMA), which provides general liability insurance coverage for excess liability, property, boiler and machinery, and automobile. CJPRMA General Manager David Clovis presented a PowerPoint presentation regarding an overview of CJPRMA. Specific topics of discussion included background of CJPRMA, historical perspective, insurance pooling in the early years, creation of CJPRMA, CJPRMA members, first steps, CJPRMA today, Memorandum of Coverage, limits, total member payroll, liability rates, Lodi net cost, Lodi net benefits, property program, property program - total insured values, property program - rates, other programs, added services, and state of the industry. In response to Council Member Mounce, Mr. Clovis explained that CJPRMA is a blended insurance pool for excess liability and four of the members are other insurance pools: Northern California Cities Self Insurance Fund, Redwood Empire Municipal Insurance Fund, Small Cities Organized Risk Efforts, and Yolo County Public Agency Risk Management Insurance Authority. He stated there are 21 members but 97 different entities. In response to Council Member Nakanishi, Mr. Clovis stated that CJPRMA purchases its insurance from Munich Reinsurance Company, which is based in Munich, Germany, and is the largest reinsurer in the world. CJPRMA left the company two years ago and went with Starr Insurance due to lower costs; however, six months into the program, the company decided it would no longer insure public agencies in California and CJPRMA returned to Munich Reinsurance Company. Mr. Clovis stated that Munich provides great rates and is a superior company that works with CJPRMA on liability claims without pushing settlements. In response to Council Member Johnson, Mr. Clovis stated that CJPRMA works in partnership with the City of Lodi legal staff to ensure the best end result, stating there are times when it is appropriate to go to trial on a claim due to political concerns while other times it may be in the best interest to settle a claim. CJPRMA does not force members to settle and will give insights on claims, including financial perspectives on costs of settlement versus trial and mock trials to determine what a jury may do. In response to Council Member Nakanishi, City Manager Schwabauer stated that the retained coverage limit is similar to an insurance deductible for individuals: CJPRMA would pay the deductible on a claim up to $5 million, and anything over that amount is covered by the reinsurer company. In further response, Mr. Clovis stated that no member city has reached or 1 exceeded the $5 million limit, partially due to good risk management, good jury awards, or pure luck. CJPRMA will typically move aggressively to settle a case before it reaches that level. In response to Council Member Nakanishi, Mr. Clovis stated that the $2.7 million listed in the PowerPoint as the net benefit represents what it would have cost the City over time and is a savings over and above the amount the City has with CJPRMA. Mr. Schwabauer further explained that, if the City were completely self insured and paid the claims, it would have cost Lodi $2.7 million more than what it cost the City as a result of the CJPRMA program. Currently, CJRPRMA holds $1.5 million on the City's behalf in the pool and the remaining amount was either redistributed back to the City or paid by CJPRMA on claims. Ms. Magdich stated that Lodi receives more back in redistribution because it has been in the pool for so long. CJPRMA manages $93 million, some of which is invested with a return on the money. In response to Council Member Mounce, Mr. Clovis confirmed that Lodi does not currently participate in the Difference in Conditions program, which is a new add-on service to cover catastrophic events. While the CJPRMA program is more affordable than those in the market place, it is still expensive; however, entities can select what they want to cover. Council Member Mounce requested that Council discuss and consider this program, to which Ms. Magdich stated that, once the program is in place, the costs are known, and updated appraisals are completed on City properties, the item will be brought back to Council for consideration. At the request of Ms. Magdich, Mr. Clovis explained property coverage and replacements costs, using the Carnegie Forum as an example if it were damaged. Based on an appraisal and the listed value, the building would be reconstructed as is and upgraded to today's codes and standards; however, the listed value must be based on what it would reasonably cost to rebuild the structure at today's cost. In response to Council Member Nakanishi, Mr. Clovis stated that none of the CJPRMA members has a negative balance in the pool and all entities share equally. In response to Council Member Johnson, Mr. Clovis stated that, unfortunately, CJPRMA's rate of return on investments recently has been poor at roughly 6 to 7 percent, but it invests conservatively to protect its portfolio. C. Comments by Public on Non -Agenda Items None. D. Adjournment No action was taken by the City Council. The meeting was adjourned at 7:59 a.m. ATTEST: Jennifer M. Ferraiolo City Clerk 2 TM CITY OF LODI COUNCIL COMMUNICATION AGENDA TITLE: MEETING DATE: PREPARED BY: AGENDA ITEM Receive Overview Presentation Regarding the California Joint Powers Risk Management Authority (CJPRMA) by General Manager, David Clovis September 20, 2016 — Shirtsleeve Meeting City Attorney RECOMMENDED ACTION: Receive overview presentation regarding the California Joint Powers Risk Management Authority (CJPRMA), by General Manager, David Clovis. BACKGROUND INFORMATION: The California Joint Powers Risk Management Authority is a member -directed excess liability risk retention pool that is dedicated to protecting its members from catastrophic losses and meeting the needs of its members by: 1) providing comprehensive, stable, and affordable excess liability coverage; 2) offering competitive and flexible coverage programs; 3) delivering quality risk management services; and 4) preserving financial strength and solvency. The CJPRMA programs provide coverage for excess liability, property, boiler and machinery, and auto physical damage. Under the Excess Liability Program, $40 million in coverage is provided. Members can select retained limits of either $500,000 or $1 million. Lodi selected the $500,000 self-insured retention level. CJPRMA is self-insured in the amount of $5,000,000, and purchases an additional $35 million in excess coverage. As of June 30, 2015, the CJPRMA liability program had an equity balance of $42.9 million. Under the Property Program, of which Lodi is a member, participants have $300 million of insurance coverage. Additional services are provided to the members through the Risk Management Program, which include a wide variety of training programs, audits of facilities and programs, and extensive consultation services. The CJPRMA Risk Management Program is designed to supplement and enhance existing member programs in order to increase their level of effectiveness. Attached are the insurance premiums paid by the City for the coverage years 2012 through 2017, for the general liability, property, boiler and machinery, and auto physical damage programs. J . MAG D "NICE ICH City Attorney FISCAL IMPACT: Not applicable. FUNDING AVAILABLE: Not applicable. ity Manager Type of Coverage Coverage Year 2012 Coverage Year 2013 Coverage Year 2014 Coverage Year 2015 Coverage Year 2016 Coverage Year 2017 General Liability Premium 165,540 116,466 155,535 164,873 161,974 198,205 Redistribution (135,325) (116,466) (91,091) (72,664) (42,736) (51,460) Net Paid 30,215 - 64,444 92,209 119,238 146,745 Property Premium 93,198 100,247 102,806 103,032 75,105 105,022 Boiler & Machinery Premium 11,966 12,871 12,838 12,955 13,116 - Paid 105,164 113,118 115,644 115,987 88,221 105,022 Auto Physical Damage Premium 26,067 32,797 34,697 37,941 39,647 43,540 * Property & B/M combined in 2017 EST. 1986 CALIFORNIA JOINT POWERS RISK MANAGEMENT AUTHORITY 011) CJPRMA city of Lodi City Council Session By: David Clovis General Manager September 20, 2016 CALIFORNIA JOINT POWERS RISK MANAGEMENT AUTHORITY CJPRMA • History of Insurance Pooling • Making of CJPRMA • Facts & Figures • Programs • Service • State of the Industry �S 1986 TIME INC. Re rinted By PcrmLssiun Historical Perspective • Insurance Market Trend — Insurance market reversed itself every six to seven years. • In the 1980's — Insurance for public agencies unavailable. — Widespread formation of JPAs for risk sharing purposes occurred. Pooling in the early years • MOST were simply joint purchase arrangements, because Self Insured Retentions (SIRs) were as low as $100,000 each loss. • "Pooling", or the sharing of risk, became more prominent in the early 1980's when Liability pools started forming. • The number of JPAs in California tripled in 1986 due to the nationwide Liability insurance crisis. — $5 million stop sign claim in Walnut Creek (1985) Creation of CJPRMA • Insurance market in California • Lack of affordable insurance • Profit margin — We can do it better! — If we build it -they will join • 1986 Organization Created CJPRMA Members Alameda Chico Fairfield Fremont Livermore Lodi NCCSIF Petaluma Redding REMIF Richmond Roseville San Leandro San Rafael Santa Rosa SCORE Stockton Sunnyvale Vacaville Vallejo YCPARMIA First Steps • Creation of M.O.C. • Initial coverage $10 million limits • Premium contributions - $624,772 (6/86) - $2,666,750 (6/87) • Initial payroll $139,500,000 CJPRMA Today • 17 cities • 4 primary JPA's • 100 member agencies • 1.5 billion dollars of payroll • $92.5 million assets • Geographically centered in Northern California 011) CJPRMA Memorandum of Coverage • General Liability • Auto Liability • Public Officials • Employment Practices • Special Events Limits • Self Insured Retentions (SIR) - $500,000 - $1,000,000 • Coverage Limits - $5,000,000 Retained Limit — Re -insurance $35,0000,000 $2.00 - $1.50 - $0.50 - $0.00 Total Member Payroll $1.58 _7 S1.52 $1.5 Z7Z7ZZ$1'6D $1.46 $1.53 $1.4 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 Since 2011 the amount of member payroll has increased by $200 thousand (1.2%) to a total of approximately $1.6 billion. This is the basis upon which member contributions are calculated and allows for the effective sharing of risk. 1.00 - 0.75 0.50 0.25 0.00 - Liability Rates (per $100 of payroll) 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 0S500,000 SIR OS 1,000,000 SIR I Since 2011 liability rates have decreased by 0.044/$100 payroll (11.3%) for a $500,000 retained limit and by 0.067/$100 payroll (11`)/0) fora $1 million retained limit. These decreases reflect the organization's strong financial position and its responsiveness to the members' financial difficulties. Lodi Net Cost Contributions $ 5,842,695 Redistributions $ 2,866,466 Investment Income Returned $ 768,951 Net $ 2,207,278 (37.8%) Current Equity $ 1,573,029 (26.9%) Cost of Coverage $ 634,249 (10.9%) Average Cost Per Year $ 21,871 (29 Years) Lodi Net Benefit Redistributions/Invest Income Current Equity Claims Paid $ 3,635,417 $ 1,573,029 $ 3,403,431 Total Benefit $ 8,611,877 Member Contributions $ 5,842,695 Net Benefit $ 2,769,182 Property Program • All risks -Memorandum of Coverage • $400,000,000 Limits • $25,000 Deductible • $8.3 Billion of covered property • Cyber coverage included • Pollution to be incorporated in 2017 • DIC available as an add-on 011) CJPRMA $6.89 $7.15 in billions $8.00 $7.50 $7.00 $6.50 $6.00 $5.50 $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 Property Program - Total Insured Values 2009-2010 2010-2011 2011-2012 $6.66 $7.11 2012-2013 2013-2014 2014-2015 2015-2016 CJPRMA provides a commercially insured program for the property of its members. Since 2010 the total insured value of that property has increased approximately $600 thousand (0.86%). $0.050 $0.045 $0.040 - $0.035 - $0.030 - $0.025 - $0.020 $0.015 $0.010 $0.005 - $0.000 - Property Program - Rates (per $100 of valuation) 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 Other Programs • Auto Physical Damage • Pollution program • Cyber Program • Special Events Added Services • Risk Management support services • Risk Management Training — Contractual Risk Transfer — Associate in Risk Management — Board Member Orientation — Police liability • RMIS System • Property valuation services • Risk Management staff support 011) CJPRMA State of the industry • Law Enforcement Liability — Jefferson Mo. — Stockton Ca. — Oakland Ca. — Federal Cause of Action • Employment Practices Liability — Recession impacts — Attorney fee exposure State of the industry • Public Works — Impacts of recession — Sebastopol Ca. — Inverse Condemnation — Dangerous condition of public property • All other — Recreation — Public Officials Questions 114 EST. 1986