Insurance arrangements

Report: 12
Date: 27 September 2002
By: Treasurer

Summary

This report explains the arrangements put in place for the Authority’s liability insurances, outlines the results of the competitive run for insurance advisers and reports on progress in the employment of the Risk Manager. 

A. Recommendations

The Committee is recommended to:

1. note the arrangements put in place for liability insurance;
2. note the appointment of Willis as the authority’s insurance advisors; and,
3. note the progress of the appointment of a Risk Manager.

B. Supporting information

Liabilities insurance

1. The former Finance, Planning and Best Value committee agreed in April 2002 to extend the present arrangements with Aon for a further year to manage the renewal of both liabilities and property insurances.

2. Liability insurances agreed under urgency procedure on 30 July 2002 have now been effected from 1 August for a further year. The insurances now in place replicate last year’s policies and range of coverage with one important difference. Mitsui have advised that they will not be renewing their current layer of £10 million over £65 million. AIG have agreed to step down a layer from £10 million over £75 million to £25 million over £65 million. RJ Wallace are now covering the layer of cover from £90 million to £100 million.

3. The elements of cover remain as before. Cover therefore includes employers liability, public/products liability, third party motor, officials indemnity and fidelity guarantee, but excludes employment practices liability, employment related costs and/or counsels fees and employment tribunal awards.

4. The basis of cover for the insured period continues to be on ‘claims made’ rather than the normal ‘claims occurring’. This means that the insurer’s liability will be restricted to claims arising in the insured period which have also been registered in the period. This therefore excludes claims arising from events occurring in the insured period where the claim is not made until after the end of the insured period.

5. The policy provides catastrophe cover, i.e. it is based on the MPA self funding a level of ‘normal’ losses. The aggregate stop-loss at which the insurer would become liable therefore remains relatively high at £40 million. There is no individual excess. This means that all claims, however large, have to be met in full by the MPA until total claims exceed the aggregate stop-loss.

Property insurance renewal

6. The annual property insurance renewal is due from 1 October 2002. Work is still continuing between Aon and prospective underwriters to place this risk. The Committee will be updated orally on further progress at the meeting. 

Appointment of insurance advisers

7. An Appointment Panel for the letting of the contract for insurance advisers on a permanent basis met on 11 September 2002. The Panel comprised Graham Tope (Chair), Nicholas Long, Peter Martin MPA, Mike Birt and David Hill MPS. The Panel saw three firms, Willis Ltd, Marsh UK Ltd and Aon Ltd.

8. The Panel decided to appoint Willis Ltd as the MPA’s insurance advisers on the basis of their fixed tender fee, with risk management and other works to be called off as required. Willis were not the lowest tender, but the Panel felt that on balance they had prepared the most economically advantageous bid. The ranking in terms of tender bid price was as follows: 

Rank 1 was the lowest priced tender.

Appointment of a risk manager

9. Following the decision to appoint a Risk Manager an executive search agency were appointed. There has been a good response and a long list of 11 candidates has been prepared. The short list will be prepared week commencing 23 September with the appointment being made in October. I will be on the appointment panel.

C. Equality and diversity implications

None specific to this report although equality of opportunity issues were addressed as part of the appointment process for the insurance advisers.

D. Financial implications

The prime insurer is American Re who bears the first £10 million losses above the £40 million stop-loss. Additional layers of cover are available as follows:

There has been a substantial increase on last year’s insurance rates (14%/£58,500). Insurance premium tax is payable in addition to the above figures. The additional premium costs will be contained within existing budgets.

E. Background papers

• None

F. Contact details

Report author: Peter Martin, Treasurer.

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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