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Exhibit 1 - Agenda Information SheetCity of Denton _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Procurement & Compliance ACM: David Gaines DATE: October 26, 2021 SUBJECT Consider adoption of an ordinance of the City of Denton, a Texas home-rule municipal corporation, ratifying the expenditure of funds by the City Manager for the purchase of cyber network liability insurance coverage for the City of Denton through the City’s broker of record, Lockton Companies, LLC; and providing an effective date (File 7844 – awarded to Corvus Insurance Agency, LLC, in the not-to-exceed amount of $271,000.00). INFORMATION/BACKGROUND The City of Denton purchases cyber network liability coverage should the City become a victim of malware, data breach, ransomware, or other cyber-attack. Given the complexities of this insurance product solicitation 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. State of the Market Cyber network liability has become a significant threat to municipalities compromising approximately 22% of successful cyber-attacks. Ransomware and cyber breaches cost governments, businesses, and individuals over $1 trillion per year. The cyber insurance market has been hardening at a fast pace and is now firmly in “hard-market” territory as rates surge far ahead of initial expectations, capacity contracts, and resistance among carriers to take on new business prevails. This bearish stance is primarily due to the rise of ransomware attacks throughout all industries and the resulting losses from those attacks. Over the past few months, several highly publicized ransomware events (e.g., the U.S. government, Solarwinds, JBS, Kaseya) have significantly accelerated an already firming market. The concern has resulted in top cyber carriers pulling back on their offerings and taking dramatic action that is expected to spread throughout the rest of the cyber marketplace. Carriers, deeply concerned about the explosion in ransomware and the potential for systemic loss, are deploying more drastic measures during the underwriting process. These include increased underwriting diligence, reduced capacity, more restrictive terms, and conditions, increased pricing and retentions, sub-limits on ransomware coverage, and even applying coinsurance (many at 50%) to those losses. Due to the rise of severe ransomware claims, the marketplace has become “security first,” with carriers requiring evidence of minimum-security standards to obtain terms. Over the past year, the shift for rate increases has moved to a minimum of 30-60% on clean accounts, and those accounts with missing security controls are seeing even more significant increases, structural changes, City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com or non-renewals. Primary renewals are seeing 100% + increases on a frequent basis. Earlier predictions of a multi-year correction in cyber appear to be bearing out, with sources indicating that it may take 36 months for the market to stabilize. The incumbent, Brit/Lloyd’s of London, was non-renewed due to a change in appetite. As a result, a new carrier had to be located. Lockton solicited over 50 markets; five carriers considered the solicitation; however, Corvus Insurance Agency, LLC. (Corvus), was the only market that was able to provide a proposal due to the class of business. Corvus is backed by Accredited Specialty Insurance Company, which has an AM Best Rating of A- Excellent. The City qualifies for the Corvus Black services due to the size of the entity, which allows for increased benefits in additional reporting and recommendations, response handling, and security training. RECOMMENDATION Approve the purchase of cyber network liability insurance coverage for the City of Denton, in the estimated expenditure amount of $271,000. PRINCIPAL PLACE OF BUSINESS Lockton Companies, LLC Kansas City, MO ESTIMATED SCHEDULE OF PROJECT The 2020-21 cyber network liability coverage will expire on September 30, 2021. Due to the urgency to bind coverage to prevent a lapse, coverage for the 2021-22 coverage year was bound on September 28, 2021, and will go into effect on October 1, 2021. FISCAL INFORMATION These services will be funded from Risk Retention Fund. EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Corvus Cyber Insurance Proposal Exhibit 3: Cyber Renewal Summary Exhibit 4: Broker Recommendation Letter Exhibit 5: LLC Members Exhibit 6: 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.