Metro - File #: 2018-0239

• File #: 2018-0239
• Type: Program
• Status: Agenda Ready
• File created: 4/25/2018
• In control: Finance, Budget and Audit Committee
• On agenda: 6/20/2018
• Title: AUTHORIZE the Chief Executive Officer to negotiate and purchase excess liability insurance policies with up to $300 million in limits and an $8 million self-insured retention at a cost not to exceed $4.5 million for the 12-month period effective August 1, 2018 to August 1, 2019.
• Sponsors: Finance, Budget and Audit Committee
• Indexes: Budgeting, Commuter Rail (Project), Expo Line Operating Project (Project), Gold Line Operations (Project), Insurance, Light rail transit, Los Angeles Union Station, Metro Exposition Line, Metro Gold Line, Metro Green Line, Metro Orange Line, Metro Rail A Line, Metro Rail B Line, Metro Rail C Line, Metro Rail E Line, Metro Rail L Line, Metro Red Line, Operations Transportation (Project), Program, Project management, Purchasing, Rail Operations - Blue Line (Project), Rail Operations - Green Line (Project), Rail Operations - Red Line (Project), Railroad commuter service, Station operations, Union Station Property Management (Project)
• Related files: 2018-0442

Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JUNE 20, 2018

Subject
SUBJECT: EXCESS LIABILITY INSURANCE PROGRAM

Action
ACTION: PURCHASE EXCESS LIABILITY INSURANCE

Heading
RECOMMENDATION

Title
AUTHORIZE the Chief Executive Officer to negotiate and purchase excess liability insurance policies with up to $300 million in limits and an $8 million self-insured retention at a cost not to exceed $4.5 million for the 12-month period effective August 1, 2018 to August 1, 2019.

Issue
ISSUE

The excess liability insurance policies expire August 1, 2018. Insurance underwriters will not commit to final pricing until roughly six weeks before our current program expires on August 1. Consequently, we are requesting a not-to-exceed amount for this renewal pending final pricing and carrier selection. Metro is required by some shared use agreements with the freight railroads to carry excess liability insurance. Without this insurance, Metro would be subject to unlimited liability for bodily injury and property damage claims resulting from, primarily, bus and rail operations.

Discussion
DISCUSSION

Our insurance broker, USI Insurance Services ("USI"), is responsible for marketing the excess liability insurance program to qualified insurance carriers. Quotes are in the process of being received by our broker from carriers with A.M. Best ratings indicative of acceptable financial soundness and ability to pay claims.

To put the insurance marketplace in perspective, US property/casualty insurers saw underwriting losses more than double to $5.1 billion for the first half of 2017 compared with the year before. Losses led by higher catastrophe and auto claims drove net income down by 29% in the first half; even before third quarter hurricane losses were included.

Casualty premiums remain relatively flat, except as to auto liability where losses have increased in number and severity. Liability insurance coverage for our bus system has been negatively affected be...