SR 02-28-2017 3A
Ci ty Council
Report
City Council Meeting : Feb ruary 28, 2017
Agenda Item: 3.A
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To: Mayor and City Council
From: Gigi Decavalles -Hughes, Director , Finance Department, Risk Management
Subject: Property Insurance Brokerage Services
Recommended Action
Staff recommends that the City Council:
1. Award RFP #92 to Alliant Insurance Services, Inc., a California -based company ,
for proper ty insurance brokerage services; and
2. Authorize the City Manager to negotiate and execute a professional services
agreement with Alliant Insurance Services, Inc., in an amount not to exceed
$425,000 for a five -ye ar period, with future year funding contingent on Council
budget approval.
Executive Summary
The City has an ongoing need for professional property insurance brokerage services to
underwrite, market, and secure its property insurance coverage. This type of insurance
protects the City’s buildings and vehicles, valued at over $890 million, from the perils of
fire, flood and/or earthquake. The City’s current property insurance broker agreement is
set to expire at the end of this fiscal year, and in preparat ion for this, staff solicited
proposals in accordance with procurement policies and received responses from three
brokerage firms. A panel of City staff subsequently evaluated each firm’s proposal and
determined that Alliant Insurance Services, Inc. provi ded the most responsive bid. The
panel recommends the City pursue a five -year contract with Alliant at a cost of
$425,000.
Background
Alliant Insurance Services, Inc. has served as the City’s property insurance broker for
the last twenty -five years. The City has maintained this long standing broker
relationship with Alliant because it offers access to the Alliant Property Insurance
Program (APIP) - formerly known as the Public Entity Property Insurance Program or
PEPIP. APIP was developed specifically t o meet the unique needs of public entities,
and as the largest property placement in the world, its market share and strength has
helped to ensure the City obtains the best property insurance coverage at the most
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competitive price. The City has participat ed in APIP since its inception and can only
continue to do so as a client of Alliant. The City’s current property insurance broker
agreement with Alliant is set to expire on June 30, 2017 (see June 26, 2012 staff
report). The City continues to survey the market place for broker services every five
years to determine what other property insurance options are available, and whether
these options can compete with APIP’s offerings.
Discussion
The City uses a professional property insurance brokerage firm to p rocure its property
insurance coverage. This is necessary for two reasons: 1) it ensures the City has
access to the broadest range of high quality insurance coverage at the most competitive
price, and 2) it provides the City with access to property insura nce markets only
available to professional brokers (e.g., earthquake coverage for City facilities, wave -
wash coverage for the Pier, etc.).
The broker is responsible for all aspects of procuring property insurance. This includes
such tasks as evaluating t he City’s property insurance program and recommending
alternatives to address changing coverage needs; developing and marketing the
program to insurers capable of meeting the City’s needs; and securing cost -effective
coverage on behalf of the City.
Consul tant Selection
The City issued a Request for Proposals (RFP) for property insurance brokerage
services on October 17, 2016. The RFP was posted on the City’s on -line bidding site,
and notices were advertised in the Santa Monica Daily Press in accordance wi th City
Charter and Municipal Code provisions. A total of 118 vendors were notified of the
RFP. Of those notified, 10 prospective vendors downloaded the RFP and three
brokerage firms submitted proposals (Alliant Insurance Services, Arthur J. Gallagher &
Company, and AON Risk Services West, Inc.).
A panel of staff from the Finance, Housing and Economic Development, and Public
Works Departments reviewed and evaluated the RFP submittals on the basis of
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experience, ability to fulfill the City’s unique proper ty insurance needs, references, and
cost. The panel then conducted on -site interviews of all three firms. Through this
process, the panel confirmed that Alliant’s APIP continues to deliver the broadest
property insurance coverage at the most competitive price. Further, through APIP, the
City is guaranteed access to difficult, but much needed, high risk property coverage
(e.g., wave wash coverage for the Pier). Finally, APIP provides a variety of valuable
public entity -oriented coverages that are not off ered in traditional property insurance
policies. For example, APIP provides municipal bond and tax revenue interruption
coverage, wave -wash coverage, trained animal coverage (e.g., police dogs, mounted
patrol horses, etc.), and ample policy limits ($1 bil lion in all -risk coverage). Relative to
broker fees, Alliant came in at mid -range; AON was higher, Gallagher was lower.
Based on the information presented above and SMMC 2.24.073 criteria, staff
recommends Alliant Insurance Services, Inc. as the best qu alified firm to serve as the
City’s property insurance broker.
Financial Impacts and Budget Actions
The contract to be awarded to Alliant Insurance Services, Inc. is for an amount not to
exceed $425,000. Funds for the first year of the contract (July 1, 2017 to June 30,
2018) will be requested in the FY 2017 -18 budget in the Finance Department. The
contract will be charged to account 58229 -522040. Future funding is conting ent on
Council budget approval.
Prepared By: Michael Spenelli, Risk Management A nalyst
Approved
Forwarded to Council
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Attachments:
A. June 26, 2012 Staff Report
B. Oaks Initiative - AIS
City Counc il Report
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City Council Meeting: June 2 6 , 2012
Agenda Item: 3 -C
To: Mayor and City Council
From: Gigi Decavalles -Hughes , Director of Finance
Subject: Professional Services Agreement for Property Insurance Brokerage
Services
Recommended Action
Staff recommends that the City Council auth orize the City Manager to negotiate and
execute a professional services agreement with Alliant Insurance Services, Inc., a
California based company, in the amount of $360,000 over a five year period for
property insurance brokerag e services.
Executive Summa r y
The City has an ongoing need for professional property insurance brokerage services to
underwrite, market, and secure its property insurance coverage. This type of insurance
protect s the City’s buildings and vehicles , value d at over $800 million , from the p erils of
fire, flood and /or earthquake. T he City’s current property insurance broker agreement is
set to expire at the end of th is fiscal year, and in preparation for this, staff solicited and
received p roposals from thre e broker age firms . A panel of City staff subsequently
evaluated each firm’s proposal and determined th at Alliant Insurance Services, Inc.
provided the most responsive bid . T he panel recommends t he City pursue a five year
contract with this firm at a cost of $360,000.
Background
Alliant Insurance Services, Inc. has served as the City’s property insurance broker for
the last twenty years . The City has maintained this long standing broker relationship
with Alliant because it offers access to the Public Ent ity Property Insurance Program
(PEPIP). PEPIP was developed specifically to meet the unique needs of public entities
and possesses a variety of advantages that cannot collectively be matched by
traditional property insurance product s on the market . The C ity has participated in
PEPIP since its inception in the mid -1990s and can only continue to do so as a client of
Alliant (i.e., PEPIP is an Alliant program only offered to Alliant clients).
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T he City’s current property insurance broker agreement with Allian t is set to expire in
July 2012 (see April 10, 2007 staff report). In preparation, staff surveyed the
marketplace again to determine if any competitors to PE PIP ha ve emerged since the
last Request for Proposal (RFP) was circulated i n 2007. Th is process did not yield any
viable prospects . Staff is once again recommending the City continue to contract with
Alliant for property insurance brokerage serv ices.
Di scussion
The City uses a professional property insurance brokerage firm to procure its property
insurance coverage. This is advantageous for two reasons: 1) it ensures the City has
access to the broadest range of high quality insurance coverage at the mos t competitive
price, and 2) it provides the City with access to property insurance markets only
available to professional brokers (e.g., earthquake coverage for City facilities, wave -
wash coverage for the Pier, etc.).
The broker is responsible for all as pects of procuring property insurance. This includes
ev erything from evaluating the City’s property insurance program and recommending
alternatives to address changing coverage needs , to developing and market ing the
program to insurers capable of meeting the City’s need s and securing coverage on
behalf of the City.
Consultant Selection
A Request for P roposal (RFP) for property insurance brokerage services was posted on
the City’s online bidding website in December 2011. Three brokerage firms submitted
responses to the RFP . A City panel composed of Finance Department and Housing
and Economic Develop ment Department staff evaluated the proposals on t he basis of
experience, qualifications , references and cost. After reviewing the proposals and
holding tel ephone interviews, the panel determined t hat Alliant Insurance Services, Inc.
submitted the most responsive bid and w as best suited to meet the City’s ongoing
property insurance needs.
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The panel acknowledged that Alliant’s proposal was the most costly . H owever, the
panel felt that Alliant’s qualifications and proven experience with delivering cost -
effective property insurance programs justified the firm’s fees . A lliant is considered a
leader in the public entity insurance industry and is responsible for designing the P ublic
Entity Property Insurance Program (PEPIP). Most cities and counties in California
participate in PEPIP; the program annually insures over $300 billion worth of public
entity property across the country .
The advantages of PEPIP are m any . For example:
• PEPIP’s market share and strength can almost always ensure the City will obtain
the best coverage at the most competitive price. Further, size and strength allow
PEPIP to better weather market swings and continue to secure difficult, bu t much
needed, high risk property coverage (e.g., wave -wash coverage for the Pier).
• PEPIP provides ample policy limits ($1 billion) and low deductibles ($25,000 per
occurrence) to cover property losses sustained by the City . Further, it p rovides
up to $50 million in policy limits to cover earthquake losses and will replace the
Pier should it be destroyed b y storm damage .
• PEPIP provides more comprehensive coverage than traditional property
insurance policies in a variety of valuable areas (e.g., busine ss interruption
insurance is provided for a longer timeframe, builders’ risk insurance is provided
at no cost for projects valued at $25 million or less, errors and omissions
insurance is provided to cover losses when buildings are inadvertently left off t he
property schedule, etc.).
• PEPIP provides insurance premium discounts to entities with excellent loss
records (of which the City is one).
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In short, the panel concluded that Alliant is best positioned to c ontinue to offer the
broadest property insura nce coverage at the best price. Further, the two competing
firms failed to demonstrate to the panel’s satisfaction that they could procure property
insurance comparable in coverage and cost to the City’s current program. Th is
suggests that any short term savings yielded by contracting with one of the two less
costly brokers would be offset many times over by higher property insurance costs or
the loss of important property coverage . Given these factors, the panel recommends
the City continue to contract with Alliant for property insurance brokerage services.
Financial Impact s & Budget Action s
The agreement to be awarded to Alliant Insurance Services, Inc. is $360,000 over five
years. Funds in the amount of $68,000 are included in the FY201 2 -13 budget i n
account 56232.555060 , which is pending Council approval . Budget authority for
subsequent years will be requested in each budget cycle for Council approval ($70,000
for FY2013 -14; $72,000 for FY2014 -15; $74,000 for FY2015 -16 ; and $76,000 for
FY2016 -17). Future funding is contingent on Council approval.
Prepared by: Deb Hossli, Risk Manager
Approved: Forwarded to Council:
Gigi Decavalles -Hughes
Director of Finance
Rod Gould
City Manager
Oaks Initiative Notice
CITY OF SANTA MONICA
NOTICE TO APPLICANTS, BIDDERS, PROPOSERS
AND OTHERS SEEKING DISCRETIONARY PERMITS, CONTRACTS, OR OTHER
BENEFITS FROM THE CITY OF SANTA MONICA
Santa Monica’s voters adopted a City Charter amendment commonly known as
the Oaks Initiative. It prohibits a public official from receiving specif ied personal benefits
from a person or entity a fter the official votes, or otherwis e takes official action, to award
a “public benefit” to that perso n or entity. Examples of a “public benefit” include public
contracts to provide goods or services worth more than $25,000 or a land use approval
worth more than $25,000.
The Oaks Initiative requires the City to provide this note and information about
the Initiative’s requirements. An information sheet on the Oaks Initiative is attached.
You may obtain a full copy of the Initiative’s text from the City Clerk.
In order to facilitate compliance with the requirements of the Oaks Initiative, the
City compiles and maintains ce rtain information. That info rmation includes the name of
any person who is seeking a “public benefit.” If the “public benef it” is sought by an
entity, rather than an individua l person, the information includes the name of every: (a)
trustee, (b) director, (c) partner, (d) officers, or (e) ten percent interest in the entity.
Therefore, if you are seeki ng a “public benefit” covered by the Oaks Initiative, you must
supply that information on the attached form (Attachment A).
(Attachment A)
City of Santa Monica
Oaks Initiative Disclosure Form
All persons or entities receiving public benefits defined below from the City of Santa Monica
shall provide the names of trus tees, directors, partners and o fficers and names of those with
more than a 10% equity, participation or revenue inte rest. This information is required by City
Charter Article XXII—Taxpayer Protection.
Name of Entity: ____________________________________________
NAME(S) OF PERSONS OR ENTITIES RECEIVING PUBLIC BENEFIT:
NAME(S) OF TRUSTEES, DIRECTOR S, PARTNERS, AND OFFICERS:
NAME(S) OF THOSE WITH MORE THAN A 10% EQUI TY, PARTICIPATION OR
REVENUE INTEREST:
Public benefits include:
1. Personal services contracts in exce ss of $25,000 over any 12-month period;
2. Sale of material, equipment or supplies to the City in excess of $25,000 over a 12-month period;
3. Purchase, sale or lease of real property to or fro m the City in excess of $25,000 over a 12-month period;
4. Non-competitive franchise awards with gross revenue of $50,000 or more in any 12-month period;
5. Land use variance, special use permit, or other exception to an established land use plan, where the decision has a value
in excess of $25,000;
6. Tax “abatement, exception, or be nefit” of a value in excess of $5,000 in any 12-month period; or
7. Payment of “cash or specie” of a net value to the recipient of $10,000 in any 12-month period.
Prepared by: __________________________ Signature: ________________________
Date: __________________________ Title: ________________________
FOR CITY USE ONLY:
Bid/PO/Contract # ___________________________ Permit # _____________________________________
(1/06)
Reference:
Agreement No. 10433 (CCS)