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Exhibit 1 - Agenda Information SheetCity of Denton _____________________________________________________________________________________ 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 215 E. McKinney Street Denton, Texas www.cityofdenton.com 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.