Exhibit 1 - Agenda Information SheetCity of Denton
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AGENDA INFORMATION SHEET
DEPARTMENT: Procurement & Compliance
ACM: David Gaines
DATE: December 17, 2020
SUBJECT
Consider adoption of an ordinance of the City of Denton, a Texas home-rule municipal corporation,
providing for, authorizing, and approving the purchase of property insurance coverage for the City of
Denton, through the City’s sole broker of record, Lockton Companies, LLC; and providing an effective date
(File 7562 – awarded to Affiliated FM Insurance Company for a three (3) year not-to-exceed amount of
$1,882,580.00).
INFORMATION/BACKGROUND
Given the complexities of this insurance product solicitation as described above and given that Chapter
252.024 of the Texas Local Government Code provides that insurance products are exempt from the
requirements of competitive bidding, the City utilized the services of our broker of record, Lockton, to assist
with procuring this coverage without going through the Request for Proposal (RFP) process.
Lockton was appointed the broker of record for the City of Denton on August 6, 2020 and information
about the City’s current program started coming into Lockton for review shortly afterward. While Lockton
has access to markets all over the world, there are specific Public Entity insurance markets that Lockton
does not have access to. In order to access these markets, Lockton works with an intermediary named
CRC. CRC has a specific Public Entity division and has worked for the City of Denton for the past two
years, alongside Denton’s prior retail broker(s).
State of the Market:
The property market in Texas is already a difficult market. Due to adverse weather, the continued annual
losses in Texas due to wind and hailstorms, insurance carriers have left this market completely or severely
decreased their capacity to insure property in Texas.
Public entities are difficult for insurance carriers to insure due to large property limits placed in small
geographical areas. Additionally, due to nationwide civil unrest, property claims are estimated to cost over
$2 billion in 2020; this has limited the number of property carriers willing to write public entity property
insurance. As carriers have left the public sector market due to losses, the remaining carriers have had to
make some changes to their limits and deductible structures to maintain feasibility in the market.
The firming pricing landscape of 2019 gave way to a new reality in 2020, as insurance markets reduced
capacity, tightened terms, and delivered some of the steepest premium increases on record. Already
struggling with unsustainable loss activity, the market was also forced to confront challenges associated
City Hall
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Denton, Texas
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with COVID-19, a rolling shutdown of the global economy, historically low interest rates, natural
catastrophes, and civil strife.
Renewals in the second quarter of 2020 saw some of the largest pricing increases since 2003, led by
umbrella/excess liability, directors and officers liability, property, and commercial auto. This trend is likely
to continue through 2022, although the rate of increase should begin to moderate by late 2021. Any
prediction, however, is clouded by ongoing uncertainty.
Various market indexes, including Lockton’s Property Benchmarking, indicate average property renewal
rate increases in excess of 20%.
Given the very short timeframe as outlined above, AFM, the incumbent carrier, quickly provided a renewal
quote based on the over 10 year relationship with the City. Due to the favorable renewal, that coverage was
immediately bound with them.
PRIOR ACTION/REVIEW (Council, Boards, Commissions)
On October 1, 2019, City Council awarded a contract to AFM Global for commercial property coverage.
RECOMMENDATION
Award a contract with Lockton Companies, LLC., for property insurance coverage for the City of Denton,
in the amount of $493,791.00 for the first year, approximately $617,239 in the second year, approximately
$771,550 in the third year with total three (3) year not-to-exceed amount of $1,882,580.
PRINCIPAL PLACE OF BUSINESS
Lockton Companies, LLC
Kansas City, MO
ESTIMATED SCHEDULE OF PROJECT
This is a three (3) year contract.
FISCAL INFORMATION
Funding for commercial property insurance is budgeted in the Risk Retention Fund.
EXHIBITS
Exhibit 1: Agenda Information Sheet
Exhibit 2: Property Insurance Quote
Exhibit 3: Broker Recommendation Letter
Exhibit 4: LLC Members
Exhibit 5: Ordinance
Respectfully submitted:
Lori Hewell, 940-349-7100
Purchasing Manager
For information concerning this acquisition, contact: Deby Skawinski, 940-349-7810.
Legal point of contact: Marcella Lunn at 940-349-8333.