TRANSMITTAL LETTER FOR BOARD MEETING OF OCTOBER 20, 2022
COMMITTEE ON PROCUREMENT
Mr. Brian A. Perkovich, Executive Director
Title
Issue purchase order to Willis Towers Watson Midwest, Inc. for furnishing property insurance coverage for District properties in an amount not to exceed $2,565,000.00, Account 101-25000-612290, Requisition 1588790
Body
Dear Sir:
At the Board Meeting of December 21, 2017, in accordance with Contract 17-RFP-32, the Board of Commissioners awarded a purchase order to Willis of Illinois, Inc. whose name was changed to Willis Towers Watson Midwest, Inc. (Willis), as of January 1, 2020 to serve as the District's broker-of-record for property insurance and related services for a three-year period. As allowed by Contract, the District elected to extend the term for an additional two years to expire on December 31, 2022. In this capacity, Willis has responsibility for securing quotes from the insurance market for property insurance for the District. The District’s current property insurance policy will expire on December 6, 2022.
On September 28, 2022, the District received a quote and market responses which Willis had solicited pursuant to the detailed specifications for property insurance coverage, seeking a minimum of existing terms and conditions, and based on updated/indexed property values for property insurance, for a one-year period to be effective December 6, 2022, to provide insurance coverage for District property. District property includes buildings, structures, and equipment at water reclamation plants, pumping stations, the Lockport Powerhouse, and offices.
For the 2022 property insurance program, four insurance carriers were approached. The incumbent provided a quote and three carriers declined to quote primarily due to inability to provide competitive pricing.
The quote provided by the incumbent for the District’s property insurance for 2022 is:
AIG/American Home Assurance Company quoted a Limit of $750,000,000.00, with a Deductible of $15,000,000.00 and Sublimits of $100,000,000.00 for Earth Movement and $100,000,000.00 for Flood at a cost of $2,565,000.00.
This quote offers competitive pricing and coverage is the same as expiring.
The property insurance market continues to be affected by the increasing frequency and severity of claims arising from natural catastrophes such as hurricanes, windstorms, floods, and wildfires. As a result, insurance carriers continue to be selective about how they use and price their underwriting capacity.
Additionally, in 2021 the United States’ economy experienced one of the largest increases in construction costs on record. Overall inflation continues to affect the supply chain including transportation, raw materials, and manufacturing, which has a direct impact on the determination of replacement cost for District property.
The quote was evaluated by Willis, the Risk Manager, the Senior Risk Analyst and the Director of Human Resources. Based on the collective review, it is recommended that the District purchase property insurance coverage from AIG/American Home Assurance Company with a policy limit of $750,000,000.00 and a deductible of $15,000,000.00 at a cost of $2,565,000.00. The AIG quote of $2,565,000.00 is $315,000.00 (14.00%) more than the expiring program. This increase is due to an increase of approximately 9.66% in property values insured, due to property value indexing, and a rate increase of approximately 3.96%.
The Diversity Section has reviewed this contract and determined that Willis has met the requirements of Appendix A. The Minority-owned Business Enterprises (MBE), Women-owned Business Enterprises (WBE) and/or Small Business Enterprises (SBE) goals are: 10% MBE, 5% WBE and 10% SBE.
In view of the foregoing, it is recommended that the Director of Procurement and Materials Management be authorized to issue a purchase order to Willis Towers Watson Midwest, Inc. in an amount not to exceed $2,565,000.00.
Funds in the amount of $2,565,000.00 are available in Account 101-25000-612290.
Requested, Beverly K. Sanders, Director of Human Resources, BKS:BLW
Recommended, Darlene A. LoCascio, Director of Procurement and Materials Management
Respectfully Submitted, Barbara J. McGowan, Chairman Committee on Procurement
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for October 20, 2022
Attachment