Exhibit 1 - Agenda Information SheetCity of Denton
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AGENDA INFORMATION SHEET
DEPARTMENT: Procurement
ACM: Cassey Ogden
DATE: October 24, 2023
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 emergency property, boiler, and machinery
insurance coverage for the City of Denton through the City’s broker of record, Lockton Companies, LLC;
and providing an effective date (File 8344 – awarded to Affiliated FM Insurance Company, in the three (3)
year not-to-exceed amount of $3,795,191.00).
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 tornados.
Given the complexities of this insurance product solicitation and given that Chapter 252.024 of the Texas
Local Government Code allows the City to utilize 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 property market in Texas is already difficult. Due to adverse weather and the continued annual losses
in Texas due to wind and hailstorms, insurance carriers have left this market entirely or severely decreased
their capacity to insure commercial property in Texas. Additionally, the growing frequency and severity of
natural catastrophes – compounded by economic and social inflation, supply chain disruptions,
infrastructure challenges, and more – are driving loss costs up. Due to these adverse conditions, property
insurance rates accelerated in 2022 and have remained challenging for most buyers.
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 sub-limits, and
occurrence limits of liability endorsements.
City Hall
215 E. McKinney Street
Denton, Texas
www.cityofdenton.com
In Summer 2023, Risk Management staff engaged an outside vendor, Kroll LLC, to conduct an onsite
property appraisal to update the City’s valuation of its property assets. While the value of many of the City’s
property assets increased as expected, the value of others decreased or remained flat due to various factors
such as the age and condition of the structure. To ensure the value of the City’s property assets remains
current, values will be reviewed and adjusted annually.
The total value of the City’s non-DME properties remained essentially flat; however, the new appraised
values for the DME substations were not finalized by the time data was required for the submission of the
2023/24 property insurance renewal application. In consultation with the City’s broker of record, Lockton,
values for DME substations were increased by 5% for the renewal application with the intent to increase
values to the full value when finalized for subsequent renewals.
Lockton marketed to five commercial property insurers who declined to quote due to the aggregation of
assets in a small area experienced in the municipal market or could not compete with the premium and
competitive coverage terms provided by the City’s incumbent property insurance carrier, Affiliated FM
Insurance Company (AFM). The proposal received from the incumbent carrier, AFM, represents a 5% rate
increase over last year, which is considerably more favorable than the broader commercial property market,
which ranges between 10%-40%.
Policy Term
(Renews 10/1)
Estimated Premiums and Estimated 3 Year
Expenditure Policy Term 2023/2024 $810,431
Policy Term 2024/2025* $1,147,714
Policy Term 2025/2026 $1,492,028
Contingency (10% of Total) $345,017
Total $3,795,191
* Estimate of 2024/2025 premium includes an estimated $72,426 increase to 2023/2024 premium to accommodate
adjustment to substation values and a 30% annual increase.
Due to the impending completion of vertical construction projects for the City during this contract term,
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 increase of 30% year over year was used in the above calculations to
ensure the City has adequate spending authority approved for future policy renewals for the 2024/25 and
2025/26 policy years.
RECOMMENDATION
Approve the purchase of property, boiler, and machinery insurance coverage, in a three (3) year not-to-
exceed amount of $3,795,191.
PRINCIPAL PLACE OF BUSINESS
Lockton Companies, LLC
Kansas City, MO
ESTIMATED SCHEDULE OF PROJECT
This is a three (3) year contract.
FISCAL INFORMATION
This policy is budgeted and funded from the Risk Retention Fund account 860002.6703. Requisition
#161960 has been entered into the Purchasing software system in the amount of $810,431. The budgeted
amount of this item is $3,795,191.
EXHIBITS
Exhibit 1: Agenda Information Sheet
Exhibit 2: Pricing
Exhibit 3: Comparison
Exhibit 4: Recommendation Letter
Exhibit 5: Ordinance
Respectfully submitted:
Lori Hewell, 940-349-7100
Purchasing Manager
For information concerning this acquisition, contact: Sarah Kuechler, 940-349-8356.
Legal point of contact: Marcella Lunn at 940-349-8333.