In a memorandum to Committee, Risk Management/Safety Director William Stafford, Deputy General Manager/Administration and Development Teri Mantony, Auditor-Controller Joseph Wire and General Manager Celia Kupersmith reported on the annual renewal of the District’s Marine Insurance Program, which renews on February 28, 2006.

The report stated that the Marine Insurance Program is comprised of Hull and Machinery/Protection and Indemnity Insurance, Vessel Pollution Insurance and Marine Liability Insurance (including Terminal Operator’s Legal Liability and Excess Protection and Indemnity Insurance). The report stated that the Marine Insurance Program provides coverage in amounts equal to the approximate replacement costs of the ferry vessels, with primary Protection & Indemnity limits of $1,000,000. The current limits of liability for the Excess Protection and Indemnity Insurance and Marine Liability Insurance is $75 million. For this year’s renewal, given the scope of potential loss from Ferry operations compared with potential losses from Bridge and Bus operations, staff recommends that the District pursue an additional excess layer of $25 million for the Marine Insurance Program, bringing the excess liability limit to $100 million.

The report described the current market conditions in the Marine Insurance class of insurance, noting that the market is leveling off after several years of increases. The report also stated that the District has worked aggressively over the last several years to reduce its loss experience in the Ferry Division and has succeeded in claims reduction. The Ferry Division has undertaken the following measures to achieve these goals by: 1) establishing an active Safety Committee who meets once a month to discuss and evaluate safety incidents to raise awareness of safety-related matters; and, 2) taking a proactive role as relates to all incidents, whether or not they result in injuries.

The report also included a letter from the District’s Insurance Advisor, Marsh Risk & Insurance Services (Marsh), dated February 3, 2006, which included the following exhibits:

• Exhibit 1 – Schedule of Insured Vessels and Values for 2006
• Exhibit II – 2006 Renewal Options Comparison (as of January 26, 2006)
• Exhibit III – Fifth Layer Excess Program Options
• Exhibit IV – Five-Year Loss History
• Exhibit V – 2005 Marketing Results

Marsh has advised that it would be in the District’s best interest to renew the policies in the Marine Insurance Program with the incumbent carriers, maintaining the same terms, conditions and deductibles as in the expiring policies. The report noted that the recommended renewal options include terrorism exclusions, and that the District must purchase separate terrorism insurance endorsements offered in accordance with the Terrorism Risk Insurance Act (TRIA).

Staff is recommending that the District renew the Hull and Machinery/Protection and Indemnity Insurance with St. Paul Travelers, renew the Excess Marine Liability Program with AIG and various underwriters, including an increase in limits from $75 million to $100 million, renew the Vessel Pollution Liability policy with Water Quality Insurance Syndicate and approve TRIA endorsements for the above policies, for a total premium of $500,324 for the Marine Insurance Program. A copy of the report is available in Office the District Secretary and on the District’s web site.

At the meeting, Mr. Wire summarized the staff report, noting the overall renewal for the Marine Insurance Program will be $500,324, an 8% increase from last year’s premium.

Staff recommended and the Committee concurred by motion made and seconded by Directors MURRAY/COCHRAN to forward the following recommendation to the Board of Directors for its consideration:

The seventy-six day Agreement extension is recommended for the following reasons:

• To allow the District to adequately prepare a new Request for Proposal (RFP);
• To identify and contact a vendor pool whose capabilities are aligned with the Districts needs and future workers’ compensation goals;
• To research current best practices that would be integrated into the new RFP;
• To allow time for vendors to adequately respond, and if the District selects a new vendor, allow time to begin claims migration to a new vendor; and,
• To align the new Agreement, effective July 1, 2006, in the budgeting process with the District’s fiscal year.

The report also stated that CMI has agreed to a seventy-six day pro-rata extension of the current Agreement at a cost not to exceed $84,000. In conjunction with the extension of this Agreement, the District will advertise an RFP for the workers’ compensation program in early 2006 with award and implementation by the end of June 2006. This recommendation has no fiscal impact since the compensation remains the same and is included in the District’s FY 05/06 Operating Budget. A copy of the report is available in Office the District Secretary and on the District’s web site.

Staff recommended and the Committee concurred by motion made and seconded by Directors EDDIE/SHAHUM to forward the following recommendation to the Board of Directors for its consideration: