Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
FEBRUARY 20, 2025
Subject
SUBJECT: RISK MANAGEMENT INSURANCE BROKERAGE SERVICES
Action
ACTION: APPROVE CONTRACT AWARD
Heading
RECOMMENDATION
Title
AUTHORIZE the Chief Executive Officer to award a firm fixed price Contract No. PS126876000 to Marsh USA LLC for insurance brokerage services in the amount of $1,503,513 for the five-year base term, and $601,405 for each of the two, two-year options, for a total amount of $2,706,323, effective March 1, 2025, subject to the resolution of any properly submitted protest(s), if any.
Issue
ISSUE
Metro’s current insurance brokerage services contract will expire on May 31, 2025, and the new contract, if approved by the Board, will start on March 1, 2025. This ensures a smooth transition, avoids disruption, and allows the new broker time to onboard.
Background
BACKGROUND
An insurance broker of record is required for Metro to purchase insurance from commercial markets. Insurance is necessary because it covers risks such as potentially catastrophic property and liability damages that are better managed through commercial insurance. Additionally, many Metro contracts and other agreements require commercial insurance coverage.
Discussion
DISCUSSION
Metro uses a licensed broker to purchase insurance for its non-construction exposures. The broker markets the excess liability insurance program, currently with $300 million in limits and an $8 million self-insured retention for rail exposures, and up to $12.5 million self-insured retention for bus and other related exposures. In addition, the broker will market the program of all risk property and flood coverage. The current property program has $650 million in limits with a $1 million deductible. Further, Metro established a program of cyber liability insurance with limits of $50 million with a $10 million retention. Metro has considered and may direct the broker to market additional coverage including pollution legal liability, owner's protective, fraud and fidelity, and public official's directors and officers. Total insurance premiums for Metro are approximately $37.6 million per year.
Insurance premiums have increased exponentially over the past few years, leading to an assessment of pricing and the identification of ways to mitigate future increases. In an assessment conducted in January 2024, it was recommended that a new competitive solicitation, request for proposals (RFP), for broker services be issued to spur broker competition and ensure Metro is receiving the most competitive premium pricing.
In addition to handling required marketing and placement of coverage, the broker reviews Metro contracts to determine appropriate insurance requirements, reviews insurance coverage placed by contractors, and gives expert advice on insurance matters including construction insurance coverage. The broker also provides insurance guidance on Measure M and R construction projects including, Westside Subway Extensions, LAX/Metro Transit Center, East San Fernando Valley Transit Corridor, Gold Line Foothill Extensions, and others.
Attachment A summarizes the procurement activities for Request for Proposals (RFP) No. PS126876000, which was solicited as an open solicitation and included a Disadvantaged Business Enterprise (DBE) goal of 10% as shown in attachment B. The solicitation was posted on Metro’s Vendor Portal from September 13, 2024, through October 16, 2024, and was advertised in four publications - LA Daily News, LA Sentinel, LA Opinion, and Asian Week. Approximately 24 firms either picked up or downloaded the solicitation for review. A virtual pre-proposal conference was made available to the public and was held on September 23, 2024, and was attended by 25 participants. A copy of the plan holders list was posted on Metro’s Vendor Portal to facilitate outreach and networking opportunities amongst interested vendors.
Four vendors were selected as responsive to the requirements of the solicitation. Of the four, Marsh USA LLC (Marsh) was selected as the most qualified and competitive broker to provide services for the agency. Marsh, in support of the DBE commitment, selected National Insurance Consultants, Inc. dba Transportation Management Services, an African American Owned Small Business, to support scope of services to be provided and made a commitment of 10%.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Approval of this recommendation will positively impact the safety of Metro's patrons and employees. Marsh USA LLC will provide a wide array of services to improve Metro’s risk profile. In addition to providing contract review, insurance guidance, and marketing Metro’s insurance portfolio, consulting and risk management services to mitigate exposure will also be provided. Risk Management will partner with Marsh USA LLC, and insurance carriers to identify and mitigate loss trends.
Financial_Impact
FINANCIAL IMPACT
The FY25 Budget includes $300,702.50 for this service in Project 100004, PRMA- Workers Compensation (W/C), under Cost Center 0531, Non-Departmental Operations Risk Management.
Since this is a multi-year contract, the cost center manager and the Chief Transit Safety Officer will be accountable for budgeting the cost in future years. Insurance premiums are approved through separate Board action as each program is renewed in the marketplace.
Impact to Budget
The source of funding for this action will come from federal, state and local funding sources that are eligible for bus and rail operations.
Equity_Platform
EQUITY PLATFORM
The services provided by the selected insurance broker ensure the expertise required to provide insurance protections to cover all Metro-owned property, stations, tunnels, bridges, rolling stock fleet, right of ways, facilities, and buildings that provide transportation service and benefits to low-income residents, black, indigenous, and people of color, people with disabilities, people with limited English proficiency, minorities, women, disadvantaged or disabled veterans, LGBTQ community, and other marginalized groups. Furthermore, services provided by the selected broker ensure that the expertise required to support ongoing and upcoming development projects remains readily available to ensure the interests of Metro and the public at large remain protected in the event of catastrophic losses.
Vehicle_Miles_Traveled _Outcome
VEHICLE MILES TRAVELED OUTCOME
VMT and VMT per capita in Los Angeles County are lower than national averages, the lowest in the SCAG region, and on the lower end of VMT per capita statewide, with these declining VMT trends due in part to Metro’s significant investment in rail and bus transit.* Metro’s Board-adopted VMT reduction targets align with California’s statewide climate goals, including achieving carbon neutrality by 2045. To ensure continued progress, all Board items are assessed for their potential impact on VMT.
While this item does not directly encourage taking transit, sharing a ride, or using active transportation, it is a vital part of Metro operations, as it provides liability coverage for some of Metro’s largest programs. Because the Metro Board has adopted an agency-wide VMT Reduction Target, and this item supports the overall function of the agency, this item is consistent with the goals of reducing VMT.
*Based on population estimates from the United States Census and VMT estimates from Caltrans’ Highway Performance Monitoring System (HPMS) data between 2001-2019.
Implementation_of_Strategic_Plan_Goals
IMPLEMENTATION OF STRATEGIC PLAN GOALS
The recommendation supports strategic plan goal # 5, “Provide responsive, accountable and trustworthy governance within the LA Metro organization.” The responsible administration of Metro’s insurance programs requires the use of proficient insurance brokers. Furthermore, the broker must possess the expertise and access to represent Metro to insurance underwriters both domestically and internationally.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may elect not to approve the new contract. However, this action is not recommended because the fee proposed by Marsh USA LLC represents the most competitive fee for services provided by the marketplace. Further, the addition of the nine-year term allows us to build upon the relationship and lock in the pricing advantage of today's highly competitive insurance brokerage environment.
Next_Steps
NEXT STEPS
Upon Board approval, staff will execute Contract No. PS126876000 with Marsh USA LLC to provide brokerage services, effective March 1, 2025.
Attachments
ATTACHMENTS
Attachment A - Procurement Summary
Attachment B - DEOD Summary
Prepared_by
Prepared by: William Douglas, Senior Manager, Risk Financing, (213) 922-2105
Claudia Castillo del Muro, Executive Officer, Risk Management, (213) 922-4518
Carolina Coppolo, Deputy Chief Vendor/Contract Management Officer (Interim), (213) 922-4471
Reviewed_By
Reviewed by: Kenneth Hernandez, Chief Transit Safety Officer (Interim), (213) 922-2990
