Information Paper Business Administration Committee Annual Operational Insurance Policy Renewals

Transcription

1 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y Information Paper Business Administration Committee Annual Operational Insurance Policy Renewals November

2 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y Purpose Tradition to present to Committee the results of the insurance renewals Provide information on the annual, October 1 renewal of the insurance policies 2

3 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y Renewal Highlights Insurance premiums decreased 14.4 percent or $855,164 over the previous year. Property program premiums decreased by 21.3 percent or $784,216. Casualty program premiums decreased by 3.1 percent or $70,948. 3

4 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y Renewal Highlights Property Insurance: Increased coverage limit from $1 Billion to $1.5 Billion Added coverage for fungus and mold Non-Certified Terrorism now included at full limit of $1.5 Billion (previous was $5 Million) 4

5 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y Renewal Highlights Workers Compensation Insurance: Lowered Deductible from $750,000 to $500,000 Network Security & Privacy Insurance: Added enhanced coverage with a Data Breach Fund up to $5 Million when using the insurer s preferred vendors. 5

6 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y Summary Results Property Program Casualty Program 10/1/ /1/15 16 Percent Change $3,676,966 $2,892, % $2,261,074 $2,190, % Grand Total $5,938,040 $5,082, % 6

7 M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y 7

8 INFORMATION PAPER FOR THE BUSINESS ADMINISTRATION COMMITTEE ANNUAL OPERATIONAL INSURANCE POLICY RENEWALS NOVEMBER 2015 PURPOSE This paper provides information on the Metropolitan Washington Airports Authority s (Airports Authority) property and operational casualty insurance program insurance policy renewals effective October 1, DISCUSSION The annual renewal of the Airports Authority s property/casualty operational insurance program was executed on October 1, A comprehensive package of exposure information was submitted by the Risk Management Department, through the Airports Authority s property broker, Aon Risk Services, Inc., and casualty broker, Wells Fargo Insurance Services, Inc., to selected insurance carriers prior to the expiration of the current program. Attachment 1 summarizes the property program and Attachment 2 summarizes the operational casualty program. A brief summary of the renewal results for the insurance coverages follows. Property The property insurance placement was marketed this year to take advantage of the very soft and capitalized property insurance market. Receiving competitive quotes which provided a lower property rate and premium savings along with enhanced coverages, the property program was placed with AIG. The property program is providing $500,000,000 more in the maximum coverage limit for a $1.5 billion limit and a $100,000 combined deductible. There is coverage for fungus, mold, and spore up to $1 million per occurrence which was previously excluded. All acts of terrorism are covered at the maximum coverage limit whereas non-certified acts of terrorism were previously limited to $5 million per year. The soft property insurance market and competition provided the Airports Authority with a significant increase in coverage with a significant decrease in premium. Despite the increased cost of construction factors and a 3 percent increase in Total Insured Value from new construction coming online, the overall property premium was reduced by 22 percent.

9 Nuclear, Biological, Chemical Radiological (NBCR) Coverage A customarily excluded peril in the property marketplace is any occurrence involving a Nuclear, Biological, Chemical or Radiological (NBCR) event. In 2013, the Airports Authority first purchased this stand-alone primary coverage for terrorism occurrence stemming from a NBCR event. The 2014 renewal had a 21.5 percent decrease in premium. This year the coverage was renewed at the same coverage limits and deductibles with a 2 percent decrease in premium. Airport Owners and Operators Liability The aviation insurance market remains soft. Airport Liability coverage will again be provided by ACE USA and Lloyd s of London which offered the same coverage limits and deductibles with an 8.7 percent decrease in premium and the terrorism portion with a 15.3 percent decrease in premium. Workers Compensation The workers compensation coverage was a large focus of the renewal this year. An extensive marketing effort was performed by Wells Fargo and extremely competitive quotes with decreased deductibles were received. Costs are also driven by annual increases in medical inflation and the increased cost of wage replacement. By placing this coverage with Liberty Mutual for a slight increase in premium of 2.2 percent, the Airports Authority was able to decrease the deductible from $750,000 to $500,000. Law Enforcement Liability The law enforcement coverage is a difficult risk to underwrite with very little competition. Five markets were approached and all but the incumbent declined to offer a quote due to either pricing concerns or lack of willingness to take on the exposure. Indian Harbor (XL), purchased through the Virginia Association of Counties (VACO), is now in its seventh year of providing law enforcement liability coverage to the Airports Authority. The policy renewed at the same coverage limits and deductible with an increase in premium of 0.3 percent. Public Officials Liability / Employment Practices Liability The combined Public Officials and Employment Practices Liability policy renewed with AIG at the same coverage limits and deductible with a decrease in premium of 5.3 percent.

10 Public Officials Side A Management Liability The Side A Management Liability was first purchased in 2013 and augments traditional Public Officials Liability coverage by adding first dollar (no deductible) defense cost coverage where indemnification may be disputed. The policy renewed with XL at the same coverage limits and deductible with no change in premium. Fiduciary Liability The Fiduciary Liability policy renewed with Chubb at the same coverage limits and deductible with no change in premium. Crime The Crime policy renewed with AIG at the same coverage limits and deductible with an increase in premium of 3.5 percent. Network Security & Privacy The Network Security & Privacy Liability policy provides coverage in the event of a data breach or a release of personally identifiable information and was first purchased in Despite the frequency of high profile breaches in the media, the network security and privacy marketplace remains stable with modest premium increases and with the product coverage evolving, the underwriters continue to offer programs based on individual risk and exposures. By renewing coverage with ACE USA for an increase in premium of 8.5 percent, the Airports Authority was able to increase the Data Breach Fund coverage limit from $1,000,000 to $5,000,000 when using the insurer s preferred vendors. Business Travel Accident The Business Travel Accident policy was renewed for a three-year pre-paid term with AIG for a decrease in premium of 53.0 percent. This policy renews in Special Coverage This special coverage policy renewed last year with Hiscox for an additional three-year term at the same coverage limits and deductibles with no change in premium. This policy renews in 2017.

11 Environmental Liability The Environmental Liability policy to cover site pollution was placed with ACE USA for a three-year term in 2013 with the entire premium paid in This policy will renew in Vehicle Liability and Physical Damage Injuries to third parties and damage to their property are covered under the Airport Liability Policy, and are subject to a deductible of $200,000 per occurrence. Vehicle physical damage continues to be primarily self-insured. The exception is physical damage for Fire Department vehicles and boats. A specialty program for fire apparatus through the American Alternative Insurance Corporation (AAIC) was established November 12, This policy provides affordable physical damage coverage for Airports Authority fire apparatus, subject to a $1,000 deductible per occurrence. The policy renewed with AAIC at the same coverage limits and deductible with a 9.6 percent decrease in premium. In 2013, all Airports Authority vehicles, regardless of the business enterprise were covered under the Airport Liability policy for no additional premium. In 2015, this is unchanged, allowing the Airports Authority to continue not having to purchase a separate Auto Liability policy for the Dulles Corridor Enterprise. Dulles Corridor Enterprise According to the requirements of the Master Transfer Agreement, a separate casualty insurance program with a limit of $50 million was purchased on November 1, 2008 for the Dulles Toll Road. The 2015 General Liability program was renewed at the same coverage limits and deductible with an increase in premium of 8.5 percent. In addition to the casualty premium, other Airports Authority operational insurance coverages, where applicable, have been extended to cover similar exposures for the Dulles Corridor Enterprise. Costs of these extensions have been apportioned to the Dulles Corridor Enterprise per approved methodologies.

12 CONCLUSION Property and Operational Casualty Insurance Program Renewal Summary Results: 10/1/14 10/1/15 10/1/15 10/1/16 Percent Change Property Program $3,676,966 $2,892, % Casualty Program $2,261,074 $2,190, % Insurance Program Total $5,938,040 $5,082, % Retentions for various lines of coverage remain within the Airports Authority s operational and financial capacity. The insurance marketplace for major coverages for large, high profile airports continues to be limited, though some new entrants have become active. Prepared by: Office of Human Resources and Administrative Services Department of Risk Management November 2015

13 Attachment 1 Metropolitan Washington Airports Authority Property Insurance Program Renewal October Line of Business Carrier 2015 Limits 2015 Retentions % Change () Property (includes Builders Risk) AIG $1,500,000,000 $100,000 $3,754,549 $2,399, % Terrorism AIG $1,500,000,000 $100,000 $430,857 $370, % 20-year Membership Credit (15%) -$633,440 $3,551,966 $2,770, % Nuclear, Biological, Chemical & Radiological Coverage (includes Builders Risk) Catlin $10,000,000 $500,000 $125,000 $122, % Total s $3,676,966 $2,892, % -$784,216 Notes: Total Insured Value increased 3.2% over 2014 value.

14 Attachment 2 Metropolitan Washington Airports Authority Operational Casualty Insurance Program Renewal October Line of Business Carrier 2015 Limits 2015 Retentions % Change () Airport Owners and Operators Liability ACE/Lloyd's $1,000,000,000 $200,000 $621,888 $568, % War/TRIPRA ACE/Lloyd's $750,000,000 $200,000 $98,633 $83, % Workers' Compensation (includes International WC) Liberty Mutual VA Statutory $500,000 $657,003 $671, % Law Enforcement Liability XL/Indian Harbor $10,000,000 $1,000,000 $82,889 $83, % Public Officials (D&O / EPL) AIG $10,000,000 $1,000,000 $242,400 $229, % Public Officials (Side A) XL $10,000,000 $0 $115,500 $115, % Fiduciary Liability Chubb $5,000,000 $0 $20,095 $20, % Crime AIG $10,000,000 $75,000 $26,749 $27, % Network Security & Privacy ACE $10,000,000 $250,000 $82,912 $89, % Business Travel Accident 3-yr term 10/ pre-paid of $20,721 paid prior 3 years Special Crime 3-yr term 10/ Premiuim was $15,212 paid in 2014 Pollution 3-yr term 10/ was $160,545 paid in 2013 AIG $1,000,000 $0 $20,721 $9, % Hiscox $10,000,000 $0 $15,212 $0 ACE $10,000,000 $100,000 $0 $0 Physical Damage Fire Dept Vehicles & Equipment American Alternative Stated Value $1,000 $49,749 $44, % Toll Road & Rail Phase 1 Pollution 10-yr term 8/ was $730,271 paid in 2010 ACE $25,000,000 $100,000 $0 $0 Toll Road & Rail General Liability Liberty ACE Great American $51,000,000 $25,000 $227,323 $246, % Total s $2,261,074 $2,190, % -$70,948 Notes: s include VA Surplus Lines Tax and Assessment Fee, as applicable.