M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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Information Paper

Business Administration Committee

Annual Operational Insurance Policy

Renewals

November 2015

M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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• Tradition to present to Committee the

results of the insurance renewals

• Provide information on the annual, October

1 renewal of the insurance policies

Purpose

M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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• Insurance premiums decreased 14.4

percent or $855,164 over the previous year. – Property program premiums decreased by

21.3 percent or $784,216.

– Casualty program premiums decreased by 3.1

percent or $70,948.

Renewal Highlights

M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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Property Insurance: ‒ Increased coverage limit from $1 Billion to

$1.5 Billion

‒ Added coverage for fungus and mold

‒ Non-Certified Terrorism now included at full

limit of $1.5 Billion (previous was $5 Million)

Renewal Highlights

M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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Workers Compensation Insurance: ‒ Lowered Deductible from $750,000 to

$500,000

Network Security & Privacy Insurance: ‒ Added enhanced coverage with a Data

Breach Fund up to $5 Million when using the

insurer’s preferred vendors.

Renewal Highlights

M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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Summary Results

10/1/14 – 15

Premium

10/1/15 – 16

Premium

Percent

Change

Property

Program

$3,676,966 $2,892,750 -21.3%

Casualty

Program

$2,261,074 $2,190,126 -3.1%

Grand Total $5,938,040 $5,082,876 -14.4%

M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y

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INFORMATION PAPER FOR THE

BUSINESS ADMINISTRATION COMMITTEE

ANNUAL OPERATIONAL INSURANCE POLICY RENEWALS

NOVEMBER 2015

PURPOSE

This paper provides information on the Metropolitan Washington Airports Authority’s

(Airports Authority) property and operational casualty insurance program insurance

policy renewals effective October 1, 2015.

DISCUSSION

The annual renewal of the Airports Authority’s property/casualty operational insurance

program was executed on October 1, 2015. A comprehensive package of exposure

information was submitted by the Risk Management Department, through the Airports

Authority’s property broker, Aon Risk Services, Inc., and casualty broker, Wells Fargo

Insurance Services, Inc., to selected insurance carriers prior to the expiration of the

current program.

Attachment 1 summarizes the property program and Attachment 2 summarizes the

operational casualty program. A brief summary of the renewal results for the insurance

coverages follows.

Property

The property insurance placement was marketed this year to take advantage of the very

soft and capitalized property insurance market. Receiving competitive quotes which

provided a lower property rate and premium savings along with enhanced coverages, the

property program was placed with AIG. The property program is providing

$500,000,000 more in the maximum coverage limit for a $1.5 billion limit and a

$100,000 combined deductible. There is coverage for fungus, mold, and spore up to $1

million per occurrence which was previously excluded. All acts of terrorism are covered

at the maximum coverage limit whereas non-certified acts of terrorism were previously

limited to $5 million per year. The soft property insurance market and competition

provided the Airports Authority with a significant increase in coverage with a significant

decrease in premium. Despite the increased cost of construction factors and a 3 percent

increase in Total Insured Value from new construction coming online, the overall proper-

ty premium was reduced by 22 percent.

Nuclear, Biological, Chemical Radiological (NBCR) Coverage

A customarily excluded peril in the property marketplace is any occurrence involving a

Nuclear, Biological, Chemical or Radiological (NBCR) event. In 2013, the Airports

Authority first purchased this stand-alone primary coverage for terrorism occurrence

stemming from a NBCR event. The 2014 renewal had a 21.5 percent decrease in

premium. This year the coverage was renewed at the same coverage limits and deducti-

bles with a 2 percent decrease in premium.

Airport Owners and Operators Liability

The aviation insurance market remains soft. Airport Liability coverage will again be

provided by ACE USA and Lloyd’s of London which offered the same coverage limits

and deductibles with an 8.7 percent decrease in premium and the terrorism portion with a

15.3 percent decrease in premium.

Workers’ Compensation

The workers’ compensation coverage was a large focus of the renewal this year. An

extensive marketing effort was performed by Wells Fargo and extremely competitive

quotes with decreased deductibles were received. Costs are also driven by annual

increases in medical inflation and the increased cost of wage replacement. By placing

this coverage with Liberty Mutual for a slight increase in premium of 2.2 percent, the

Airports Authority was able to decrease the deductible from $750,000 to $500,000.

Law Enforcement Liability

The law enforcement coverage is a difficult risk to underwrite with very little competi-

tion. Five markets were approached and all but the incumbent declined to offer a quote

due to either pricing concerns or lack of willingness to take on the exposure. Indian

Harbor (XL), purchased through the Virginia Association of Counties (VACO), is now in

its seventh year of providing law enforcement liability coverage to the Airports Authority.

The policy renewed at the same coverage limits and deductible with an increase in

premium of 0.3 percent.

Public Officials Liability / Employment Practices Liability

The combined Public Officials and Employment Practices Liability policy renewed with

AIG at the same coverage limits and deductible with a decrease in premium of 5.3

percent.

Public Officials Side A Management Liability

The Side A Management Liability was first purchased in 2013 and augments traditional

Public Officials Liability coverage by adding first dollar (no deductible) defense cost

coverage where indemnification may be disputed. The policy renewed with XL at the

same coverage limits and deductible with no change in premium.

Fiduciary Liability

The Fiduciary Liability policy renewed with Chubb at the same coverage limits and

deductible with no change in premium.

Crime

The Crime policy renewed with AIG at the same coverage limits and deductible with an

increase in premium of 3.5 percent.

Network Security & Privacy

The Network Security & Privacy Liability policy provides coverage in the event of a data

breach or a release of personally identifiable information and was first purchased in 2012.

Despite the frequency of high profile breaches in the media, the network security and

privacy marketplace remains stable with modest premium increases and with the product

coverage evolving, the underwriters continue to offer programs based on individual risk

and exposures. By renewing coverage with ACE USA for an increase in premium of 8.5

percent, the Airports Authority was able to increase the Data Breach Fund coverage limit

from $1,000,000 to $5,000,000 when using the insurer’s preferred vendors.

Business Travel Accident

The Business Travel Accident policy was renewed for a three-year pre-paid term with

AIG for a decrease in premium of 53.0 percent. This policy renews in 2018.

Special Coverage

This special coverage policy renewed last year with Hiscox for an additional three-year

term at the same coverage limits and deductibles with no change in premium. This policy

renews in 2017.

Environmental Liability

The Environmental Liability policy to cover site pollution was placed with ACE USA for

a three-year term in 2013 with the entire premium paid in 2013. This policy will renew

in 2016.

Vehicle Liability and Physical Damage

Injuries to third parties and damage to their property are covered under the Airport

Liability Policy, and are subject to a deductible of $200,000 per occurrence. Vehicle

physical damage continues to be primarily self-insured. The exception is physical

damage for Fire Department vehicles and boats. A specialty program for fire apparatus

through the American Alternative Insurance Corporation (AAIC) was established

November 12, 2008. This policy provides affordable physical damage coverage for

Airports Authority fire apparatus, subject to a $1,000 deductible per occurrence. The

policy renewed with AAIC at the same coverage limits and deductible with a 9.6 percent

decrease in premium.

In 2013, all Airports Authority vehicles, regardless of the business enterprise were

covered under the Airport Liability policy for no additional premium. In 2015, this is

unchanged, allowing the Airports Authority to continue not having to purchase a separate

Auto Liability policy for the Dulles Corridor Enterprise.

Dulles Corridor Enterprise

According to the requirements of the Master Transfer Agreement, a separate casualty

insurance program with a limit of $50 million was purchased on November 1, 2008 for

the Dulles Toll Road. The 2015 General Liability program was renewed at the same

coverage limits and deductible with an increase in premium of 8.5 percent. In addition to

the casualty premium, other Airports Authority operational insurance coverages, where

applicable, have been extended to cover similar exposures for the Dulles Corridor

Enterprise. Costs of these extensions have been apportioned to the Dulles Corridor

Enterprise per approved methodologies.

CONCLUSION

Property and Operational Casualty Insurance Program Renewal Summary Results:

10/1/14 – 10/1/15

Premium

10/1/15 – 10/1/16

Premium Percent Change

Property Program $3,676,966 $2,892,750 -21.3%

Casualty Program $2,261,074 $2,190,126 -3.1%

Insurance Program Total $5,938,040 $5,082,876 -14.4%

Retentions for various lines of coverage remain within the Airports Authority’s opera-

tional and financial capacity. The insurance marketplace for major coverages for large,

high profile airports continues to be limited, though some new entrants have become

active.

Prepared by:

Office of Human Resources and Administrative

Services

Department of Risk Management

November 2015

Line of Business Carrier2015

Limits

2015

Retentions

2014

Premium

2015

Premium

% Change

(Premium)

Property

(includes Builders Risk)AIG $1,500,000,000 $100,000 $3,754,549 $2,399,750 -36.1%

Terrorism AIG $1,500,000,000 $100,000 $430,857 $370,500 -14.0%

20-year Membership Credit (15%) -$633,440

$3,551,966 $2,770,250 -22.0%

Nuclear, Biological, Chemical &

Radiological Coverage

(includes Builders Risk)

Catlin $10,000,000 $500,000 $125,000 $122,500 -2.0%

Total Premiums $3,676,966 $2,892,750 -21.3%

-$784,216

Notes:

Metropolitan Washington Airports Authority

Property Insurance Program RenewalOctober 2015-2016

Total Insured Value increased 3.2% over 2014 value.

Attachment 1

Line of Business Carrier2015

Limits

2015

Retentions

2014

Premium

2015

Premium

% Change

(Premium)

Airport Owners and Operators Liability ACE/Lloyd's $1,000,000,000 $200,000 $621,888 $568,080 -8.7%

War/TRIPRA ACE/Lloyd's $750,000,000 $200,000 $98,633 $83,552 -15.3%

Workers' Compensation

(includes International WC)Liberty Mutual VA Statutory $500,000 $657,003 $671,169 2.2%

Law Enforcement Liability XL/Indian Harbor $10,000,000 $1,000,000 $82,889 $83,146 0.3%

Public Officials (D&O / EPL) AIG $10,000,000 $1,000,000 $242,400 $229,654 -5.3%

Public Officials (Side A) XL $10,000,000 $0 $115,500 $115,500 0.0%

Fiduciary Liability Chubb $5,000,000 $0 $20,095 $20,095 0.0%

Crime AIG $10,000,000 $75,000 $26,749 $27,675 3.5%

Network Security & Privacy ACE $10,000,000 $250,000 $82,912 $89,930 8.5%

Business Travel Accident

3-yr term 10/2015-2018 pre-paid

Premium of $20,721 paid prior 3 years

AIG $1,000,000 $0 $20,721 $9,745 -53.0%

Special Crime

3-yr term 10/2014-2017

Premiuim was $15,212 paid in 2014

Hiscox $10,000,000 $0 $15,212 $0

Pollution

3-yr term 10/2013-2016

Premium was $160,545 paid in 2013

ACE $10,000,000 $100,000 $0 $0

Physical Damage

Fire Dept Vehicles & Equipment

American

AlternativeStated Value $1,000 $49,749 $44,994 -9.6%

Toll Road & Rail Phase 1 Pollution

10-yr term 8/2010-2020

Premium was $730,271 paid in 2010

ACE $25,000,000 $100,000 $0 $0

Toll Road & Rail General Liability

Liberty

ACE

Great American

$51,000,000 $25,000 $227,323 $246,586 8.5%

Total Premiums $2,261,074 $2,190,126 -3.1%

-$70,948

Notes:

Metropolitan Washington Airports Authority

October 2015-2016

Premiums include VA Surplus Lines Tax and Assessment Fee, as applicable.

Operational Casualty Insurance Program Renewal

Attachment 2