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Exhibit 1 - Agenda Information SheetCity of Denton _____________________________________________________________________________________ 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 primary 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 8384 – awarded to Homeland Insurance Company of New York (Resilience), in the three (3) year not-to-exceed amount of $494,585.00). STRATEGIC ALIGNMENT This action supports Key Focus Area: Pursue Organizational Excellence and Collaborative and Respectful Leadership. INFORMATION/BACKGROUND The City of Denton purchases cyber network liability coverage should the City become a victim of malware, data breach, or ransomware. 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 Cyber Insurance Market: Cyber network liability has become a significant threat to municipalities. Cyberattacks on municipalities and governments are growing at an alarming pace, with no regard to size, location, or agency type. Local cities have reported millions of dollars in ransomware costs, including paying ransoms, retooling systems, and missed revenue. In recent years, insurance companies have doubled cyber insurance premiums and implemented strict requirements for specific security controls that municipalities must have before obtaining cyber insurance. Despite the challenging cyber security landscape for municipalities, increased competition and carriers’ focus on growth have resulted in present conditions in the cyber insurance market that are more favorable than just a quarter ago. After sizable rate increases over the past two years, insureds are now able to renew at flat rates or with 5%-7% rate reductions. While the current market conditions are a relief, insurers are closely monitoring emerging cyber threats, and the current favorable market is expected to be short-lived due to ransomware attacks on other municipalities and the associated claims activity earlier this year. City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com The softer cyber insurance market allowed the City to enhance the current cyber liability insurance coverage by purchasing a primary cyber liability policy and an excess cyber liability policy to provide an added layer of protection to the City’s self-insured program. Homeland Insurance Company of New York (Resilience) and the incumbent carrier, Corvus Insurance Agency (Corvus), presented the most competitive retentions (deductibles) terms and conditions, and pricing. Resilience offered an increased primary limit of $3M and generated premium savings by bundling the policy with their EDGE Cybersecurity Services and Resources package. As the incumbent on the current cyber liability policy, Corvus leveraged their relationship with the City and offered an excess coverage package that provided an additional $2M of limit in addition to the $3M limit provided by the primary policy through Resilience. The combination of the primary and excess policies provides the City with a total of $5M in coverage. Despite the current favorable cyber liability market, challenges in the municipal cyber liability insurance market have been present for several years, with several high-profile ransomware attacks significantly impacting municipalities in recent months. In the event the market returns to the hardened state of the last few years and the potential impact 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 primary cyber network liability insurance coverage, in a (3) year not-to-exceed amount of $494,585. 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 860002.6704. Requisition #161959 has been entered into the Purchasing software system in the amount of $90,206.12. The budgeted amount of this item is $494,585. EXHIBITS Exhibit 1: Agenda Information Sheet Exhibit 2: Recommendation Letter Exhibit 3: 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.