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HomeMy WebLinkAboutExhibit 1 - Agenda Information SheetCity of Denton _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Procurement ACM: Christine Taylor DATE: September 22, 2026 SUBJECT Consider adoption of an ordinance of the City of Denton, a Texas home-rule corporation, providing for, authorizing, and approving the purchase of property and boiler and machinery insurance coverage for the City of Denton, through the City’s sole broker of record Lockton Companies, LLC; providing for the expenditure of funds therefor; and providing an effective date (File 9096 – awarded to Affiliated FM Insurance Company, in the one (1) year not-to-exceed amount of $1,356,112.00). STRATEGIC ALIGNMENT This action supports Key Focus Area: Pursue Organizational Excellence and Collaborative and Respectful Leadership. INFORMATION/BACKGROUND The City of Denton purchases property insurance coverage to protect assets totaling over $700,000,000 in buildings, machinery, and contents. This property insurance policy covers City buildings and facilities from standard exposures such as fire, windstorm, hail, and tornadoes. The City utilized the services of our insurance broker of record, Lockton Companies, LLC (Lockton), to assist with competitively procuring this coverage. State of the Property Insurance Market: The commercial property insurance market is showing signs of stabilization in 2026, though municipalities continue to face challenges due to severe weather exposures and concentration of values. While average rate increases have moderated, properties vulnerable to natural disasters such as hail, wind, tornadoes, etc. are still subject to stricter underwriting and higher deductibles. Public entities are difficult for insurance carriers to insure due to the large concentration of property assets placed in small geographical areas. As carriers have left the public sector market due to losses, the remaining insurers are focusing on building valuations and restrictive language tied to them, such as sublimits and occurrence limit of liability endorsements. In Summer 2026, Risk Management staff engaged an outside vendor, Kroll LLC, to conduct a market comparison and trend for property appraisal to update the City’s valuation of its property assets. While this exercise was not complete to submit within the application period, the updated valuation will be City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com considered for the 27/28 policy renewal period. To control cost and maintain a step increase in values, an overall 2% increase in the value of many of the City’s property assets was submitted for consideration. To ensure the value of the City’s property assets remains current, values will be reviewed and adjusted annually. Lockton approached three (3) commercial property insurers. Travelers, Zurich, and the incumbent carrier, AFM. All markets Lockton approached pointed to concerns with aggregation of values, total policy limits, wind/hail deductibles, and pricing. The non-incumbent markets Lockton approached declined to quote the renewal. Zurich cited the wind/hail exposure as its largest concern and, because of this, could only offer a $10 million limit. The City would have to purchase an additional $490 million to match today’s program. Travelers cited a concern with the quantity of electric generation done by the City (Denton Municipal Electric). For this reason, they declined to offer a quote. AFM was able to offer competitive terms and pricing for the 10/1/2026-27 term. AFM has provided renewal terms at an annual premium of $1,033,663 (excluding Terrorism Risk Insurance Act - TRIA). This represents a 5% rate decrease year over year. Policy Term (Renews 10/1) Estimated Premiums and Estimated 1 Year Expenditure Policy Term 2026/2027 $1,043,163 30 % Contingency 312,949 Total $1,356,112 Due to continued challenges in the municipal property insurance market, potential increases in property values based on market trends and fluctuations, and escalating costs for equipment, materials, and construction in the event of a loss, a conservative contingency of 30% was used in the above calculations to ensure the City has adequate spending authority approved for any additional coverage necessary for any property, fleet, or machinery acquisitions during the policy period which can generate additional premium. RECOMMENDATION Award a contract with Affiliated FM Insurance Company, for property and boiler and machinery insurance coverage for the City of Denton through the City’s sole broker of record, Lockton Companies LLC, in a one (1) year not-to-exceed amount of $1,356,112. PRINCIPAL PLACE OF BUSINESS Lockton Companies, LLC Kansas City, MO ESTIMATED SCHEDULE OF PROJECT This is a one (1) year contract. FISCAL INFORMATION This policy is budgeted and funded from the Risk Retention Fund account 860002.6703. Requisitions will be entered on an as-needed basis. The City will only pay for services rendered and is not obligated to pay the full contract amount unless needed. EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Quote Exhibit 3: Marketing Summary Exhibit 4: Premium Comparison Exhibit 5: Recommendation Letter Exhibit 6: Ordinance Respectfully submitted: Lori Hewell, 940-349-7100 Purchasing Manager For information concerning this acquisition, contact: Tiffany Harris, 940-349-7822. Legal point of contact: Leah Bush at 940-349-8333.