TRANSMITTAL LETTER FOR BOARD MEETING OF OCTOBER 19, 2023
COMMITTEE ON PROCUREMENT
Mr. Brian A. Perkovich, Executive Director
Title
Issue purchase order to Willis Towers Watson Midwest, Inc. to Furnish Property Insurance Coverage for the District in an amount not to exceed $3,014,218.00, Account 101-25000-612290, Requisition 1607475
Body
Dear Sir:
At the Board Meeting of December 1, 2022, in accordance with Contract 22-RFP-12, the Board of Commissioners awarded a purchase order to Willis Towers Watson Midwest, Inc. (Willis) to serve as the District's broker-of-record for property insurance and related services for a three-year period. In this capacity, Willis has responsibility for securing quotes from the insurance market for property insurance for the District.
On September 28, 2023, 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, 2023, 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 2023 property insurance program, four insurance carriers were approached. The incumbent provided two quotes and three carriers declined to quote primarily due to inability to provide competitive pricing.
The quotes provided by the incumbent for the District’s property insurance for 2023 were:
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 $3,014,218.00.This quote offers coverage that is the same as expiring; or
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 significantly reduced Flood Sublimits of $75,000,000.00 Aggregate and $50,000,000.00 for Lockport Powerhouse at a cost of $2,810,135.00.
The property insurance market in North America is experiencing significant price increases, even for insureds with no history of losses. This rise in prices is due to a confluence of factors, including increased frequency and severity of natural disasters, sustained inflation, continued supply chain disruptions, and most acutely, the state of the reinsurance market.
The quotes were 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 $3,014,218.00. The AIG quote of $3,014,218.00 is $449,218.00 (17.51%) more than the expiring program. This increase is due to an increase of approximately 6.09% in property values insured, primarily from property value indexing, and a rate increase of approximately 10.77%.
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: 20% MBE, 10% 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 $3,014,218.00.
Funds are available in Account 101-25000-612290.
Requested, Thaddeus J. Kosowski, Director of Human Resources, TJK: BLW
Recommended, Darlene A. LoCascio, Director of Procurement and Materials Management
Respectfully Submitted, Marcelino Garcia, 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 19, 2023
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