Exhibit 1 - Agenda Information SheetCity of Denton
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AGENDA INFORMATION SHEET
DEPARTMENT: Procurement
ACM: Cassey Ogden
DATE: June 18, 2024
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 emergency purchase of property, boiler,
machinery, and business interruption insurance coverage for the Denton Energy Center through the City’s
broker of record, Lockton Companies, LLC; and providing an effective date (File 8544 – awarded to
Associated Electric & Gas Insurance Services Limited (AEGIS), for one (1) year, with the option for two
(2) additional one (1) year extensions, in the total three (3) year not-to-exceed amount of $2,707,349.29).
The Public Utilities Board recommends approval (6-0).
INFORMATION/BACKGROUND
The City of Denton purchases property, boiler, and machinery insurance coverage to protect assets totaling
approximately $250,000,000 in buildings, machinery, contents, and equipment. This insurance policy
covers the Denton Energy Center (DEC) buildings and facilities from the standard exposures such as fire,
windstorm, hail, tornado, etc. In addition, the policy provides insurance coverage for loss due to mechanical
or electric breakdown of covered equipment (boiler & machinery coverage), and coverage for loss of
income suffered as a result of not being able to use the property due to a covered cause of loss (business
interruption).
Power generation risks are seeing hard market conditions across the board as capital continues to leave the
segment due to poor loss experience. Insurer submission flow is at an all-time high due to changes in market
conditions. Differing terms and pricing across the program by each market is common and lender
compliance requirements remain challenging.
Given the complexities of this insurance product solicitation as described in greater detail below, and given
that Chapter 252.024 of the Texas Local Government Code provides that the City can utilize the services
of our broker of record, Lockton, to assist with competitively procuring this coverage, the City elected to
work with our broker of record to complete this solicitation.
Over the past several months, Lockton has been actively engaged in working with the carriers writing
commercial property insurance, boiler, machinery, and business interruption coverage for public entity
electric power generation facilities in the Texas market. This has involved ongoing communication between
the City, the plant manager at the DEC, and the underwriters at the various insurance companies.
City Hall
215 E. McKinney Street
Denton, Texas
www.cityofdenton.com
Lockton marketed the property placement to several markets, including Associated Electric & Gas
Insurance Services Limited (AEGIS) (incumbent), AIG, Munich Re, Starr, Swiss Re and Zurich.
Ultimately, only AEGIS was able to quote 100% of the risk, which is a favorable policy structure. AIG &
Munich Re offered terms on a quota-share basis, whereby they would split the risk with AEGIS, however,
it was determined that this option was not advantageous as the premium savings were nominal.
The current incumbents’ proposal included a premium increase of 11.7% due to the impacts of inflation on
the City’s total insurable value: the full value of the property, inventory, equipment, and business income
coverage necessary.
AEGIS is a leading mutual insurance company that provides liability and property coverage, as well as
related risk management services, to the energy industry. The company’s premium revenues are $1.8
billion, total assets are more than $7.9 billion, and has an A.M. Best rating of A (Excellent) with a stable
outlook.
It is the opinion of staff and Lockton that the AEGIS proposal represents the best overall value for the City.
PRIOR ACTION/REVIEW (COUNCIL, BOARDS, COMMISSIONS)
On June 10, 2024, the Public Utilities Board (PUB) recommended this item to the City Council for
consideration.
RECOMMENDATION
Award a contract with Associated Electric & Gas Insurance Services Limited (AEGIS), for the emergency
purchase of property, boiler, machinery, and business interruption insurance coverage for the Denton
Energy Center through the City’s broker of record, Texas Series of Lockton Companies, LLC, in a one (1)
year, with the option for two (2) additional one (1) year extensions, in the total three (3) year not-to-exceed
amount of $2,707,349.29.
PRINCIPAL PLACE OF BUSINESS
Lockton Companies, LLC
Kansas City, MO
ESTIMATED SCHEDULE OF PROJECT
This is an initial one (1) year contract with options to extend the contract for two (2) additional one (1) year
periods, with all terms and conditions remaining the same.
Policy
Period Total Due
24/25 $704,213.63
25/26 825,690.48 This estimated premium includes the 5%TIV +10% RateYOY increase
25/26 931,322.52 This estimated premium includes the 5%TIV +10% RateYOY increase
Contingency 246,122.66 10% Contingency
Total NTE $2,707,349.29
FISCAL INFORMATION
Funding for property insurance for the DEC is available in the Denton Energy Center 600105.6706.5500.
Requisition # 165087 has been entered into the Purchasing software system in the amount of $704,213.63.
Additional capacity has been built into the not-to-exceed amounts to allow for increases in property values and
anticipated premium increases and fees year over year. This amount will be reimbursed to the Denton Energy
Center by Denton Municipal Electric.
EXHIBITS
Exhibit 1: Agenda Information Sheet
Exhibit 2: Declaration of Emergency
Exhibit 3: Recommendation Letter
Exhibit 4: Comparison Summary
Exhibit 5: Ordinance
Respectfully submitted:
Lori Hewell, 940-349-7100
Purchasing Manager
For information concerning this acquisition, contact: Megan Gilbreath, 940-349-8357.
Legal point of contact: Marcella Lunn at 940-349-8333.