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A001 - Council Action Form dated June 24, 2025
ITEM #:20 DATE:06-24-25 DEPT:HR SUBJECT:EXCESS WORKERS' COMPENSATION INSURANCE RENEWAL COUNCIL ACTION FORM BACKGROUND: The City began purchasing Excess Workers' Compensation Insurance coverage brokered by Holmes Murphy on July 1, 2010, to reduce the financial risk of catastrophic self-insured worker ’s compensation claims. This coverage limits the City's financial exposure for self- insured worker ’s compensation claims (including police and firefighter Chapter 411 injury disability claims) to a maximum dollar amount per individual claim. Beginning with the FY 2014/15 coverage, this also includes an added layer of aggregate protection for multiple large claims exceeding a specified amount. The current excess coverage, which is provided by Midwest Employers Casualty Company (MWECC), will expire on June 30, 2025. Together, the individual claim and aggregate layer coverages protect the City against unlimited financial exposure for both large individual claims and catastrophic events where there are multiple injuries. Excess Workers Compensation rates are typically affected by past claims experience and national trends of overall claims experience and medical cost inflation. The City’s current policy includes a per-claim threshold of $750,000. The per-claim threshold is the amount an individual claim must exceed before the excess insurance provides coverage. All individual claims below the per-claim threshold are paid entirely by the City in a self-insured manner. This year Holmes Murphy obtained guaranteed pricing from MWECC for FY 2025/26 and FY 2026/27. This allows the City to commit to one year of coverage at a time, but be guaranteed that the premium will not raise the next fiscal year. The aggregate layer (similar to an out-of- pocket maximum for all claims incurred in a year) would increase in the second year of the quote, but remains below the level of the expiring coverage. Staff has evaluated this adjustment and believes it is acceptable. A detailed outline of the current coverage and the quoted coverage from MWECC for next fiscal year(s) follows below: FY 2024/25 FY 2025/26 FY 2026/27 Plan Feature Self-insured and insured amounts Self-insured and insured amounts Self-insured and insured amounts Per claim self-insured threshold $750,000 $750,000 $750,000 Per claim self-insured threshold for Electric, Police, and Firefighters $750,000 $750,000 $750,000 Aggregate Layer $5,172,149 $2,536,905 $4,566,391 PREMIUM COST $144,014 $151,398 $151,398 1 The City’s budget for FY 2025/26 includes $152,660 in funding for this coverage. The actual amount billed will be based on reconciliation audits reflecting the City’s actual employment numbers across various employee classifications throughout the year. ALTERNATIVES: 1. Accept the premium from Holmes Murphy & Associates, for FY 2025/26 coverage with Midwest Employers Casualty Company, at a renewal premium of $151,398. 2. Reject the quote and direct staff to search for other alternatives. 3. Decline to purchase Excess Workers Compensation Insurance and self-insure 100% of all employee injury claims that are incurred. CITY MANAGER'S RECOMMENDED ACTION: Midwest Employers Casualty Company provided acceptable excess workers' compensation coverage at a reasonable rate for FY 2025/26. Therefore, it is the recommendation of the City Manager that the City Council adopt Alternative No. 1, as described above. ATTACHMENT(S): City of Ames - Proposal (1).pdf 2 City of Ames Premium and Exposure Comparison 2 Year 2 Year 2023-25 2025-27 Change Excess Workers Compensation Midwest Employers Midwest Employers Workers Compensation Statutory Statutory Employers Liability 1,000,000 1,000,000 Insured's Retention 750,000 750,000 Aggregate Excess Layer Limit of Liability Aggregate 2,000,000 2,000,000 Terrorism Included Included Included Total Estimated Premium - Specific Excess 288,028 302,796 Total (Excluding TPA) 288,028 302,796 5% Iowa Payroll 45,935,835 48,264,611 5% Total Estimated Manual Premium 2,632,796 1,880,721 -29% Rate as % of Standard Premium 0.0547 0.0805 47% Rate Per $100 of Payroll 0.6270 0.6274 0% Coverage Casualty The information on this page is proprietary. Please do not copy or distribute to others. © 2016 HOLMES MURPHY ASSOCIATES 1 3 City of Ames Premium and Exposure Comparison Notes 1 Policy contains an aircraft exclusion for any loss arising out of the ownership, maintenance, operation or use of any aircraft that is leased, owned (in whole or in part) or operated by City of Ames. This does not include regularly scheduled commercial or chartered aircrafts. This is the same exclusion that has been on policy prior years. 2 The carrier must be notified of any aircraft changes occurring during the policy period. 3 The minimum aggregate losses retained prior to use of the excess limit is: $2,536,905 on the 2025-26 1-Year option. $4,566,391 on the 2025-27 2-Year option. On the 2023-25 term the minimum aggregate losses retained prior to use of the excess limit was $5,172,149. 4 The minimum aggregate retention for the 2-year option is $4,475,063. 5 The deposit premium for the 2-year option is $151,398 6 Higher retention options may be available. Please let us know if you would like us to get quotes for a higher retention. Coverage Options Annual Premium Yes/No Payment Options 1 All programs are annual payment at inception. The two -year program will be billed as follows: Deposit of $151,398 due 7/1/25. Remaining balance of $151,398 due 7/1/26. Binding Subjectivities 1 Completed/Signed Express Renewal Application The information on this page is proprietary. Please do not copy or distribute to others. © 2016 HOLMES MURPHY ASSOCIATES 2 4