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DECISION TAKER: Councillor Margot Power, Cabinet Member for Finance and Value REPORT Title: Extension of Insurance Contracts 5 december 2022 Contact Officer: Liz Keys Tel No: 01962 848226 Email lkeys@winchester.gov.uk WARD(S): All

PURPOSE The purpose of this report is to seek approval from the Cabinet Member for Finance and Value for an extension to the council’s current insurance policies (contracts) for a period of 12 months from 1 April 2023. By extending the term it is in the best interests of the council as detailed within this report.

RECOMMENDATIONS: That the Cabinet Member for Finance and Value approves an Exception to Contract Procedure Rules to enter into a 12-month extension of the Long-Term Agreement (LTA) for Insurance Services and associated policies (contracts) from 1 April 2023. That Authority is delegated to the Corporate Head of Finance (s151 Officer) in consultation with the Service Lead – Legal Services (Interim) to seek insurance premiums for the period 1 April 2023 – 31 March 2024 and enter into the policies (contracts). That Authority is delegated to the Corporate Head of Finance to review and progress options recommended by the Hampshire Insurance Forum (HIF) for insurance policies from April 2024 onwards.

IMPLICATIONS:

COUNCIL PLAN OUTCOME

Effective use of insurance as part of the council’s risk management approach supports the management of threats and opportunities to achieve the priorities included in the Council Plan 2020-25.

FINANCIAL IMPLICATIONS

The 2022/23 premiums are set out in the table below:

Policy (contract)	Insurer	2022/23
Renewal premium (£)
ex IPT
Property damage & business interruption	Protector via AJG	233,790
Property Owners (commercial tenants)	Protector via AJG	23,213
RTB Leaseholders	Protector via AJG	27,059
Terrorism	RMP via AJG	13,025
Liability - EL, PL, OI, PN	Protector via AJG	128,677
Motor fleet	Protector via AJG	12,986
Engineering insurance	Zurich Municipal	3,029
Personal accident	Zurich Municipal	1,269
Crime	Zurich Municipal	5,108
Engineering inspection	Zurich Municipal	21,309
Total cost of premia	448,156
IPT @ 12% not reclaimable	53,779
Total cost of services	21,309
Total cost of insurance	523,243

The cost of the council’s 2023/24 insurance premiums and renewal terms will not be known until closer to 1 April 2023 but increases are expected to be within budget. Officers are currently working with the council’s insurance broker AJG on preparation for the annual renewal.

LEGAL AND PROCUREMENT

The Long-Term Agreement (LTA) for insurance services was procured collaboratively as a single group made up of ten Hampshire borough and district councils via a public procurement process compliant with the Public Contracts Regulations 2015 (PCR2015). Each borough and district subsequently has its own policies (contracts) under the LTA.

The council’s Contract Procedure Rules (CPRs) allow for contract extensions where they are put in place before the contract expiry date and where the proposed extension is in accordance with the contract terms.

The Exceptions to CPR’s 41.1 process sets out circumstances in which an Exception can be used. The relevant Exception for this extension of the insurance services policies (contracts) is:

By extending the term (either by exercising an option within the contract or otherwise), or varying and/or extending the scope an existing contract, it is in the best interests of the Council

CONSULTATION AND COMMUNICATION

Consultation on the content of the report has been undertaken with the	Cabinet Member for Finance and Value and Executive Leadership Board	(ELB).

ENVIRONMENTAL CONSIDERATIONS

None directly as a result of this report.

PUBLIC SECTOR EQUALITY DUTY

There are no direct PSED issues arising from the content of this report.

RISK MANAGEMENT

The council’s overall risk appetite is defined as ‘moderate’, tending always	towards exposure to only modest levels of risk in order to achieve acceptable	outcomes.

The council’s Risk Management Policy 2022-23 sets out an approach to	controlling risks which is described as the five key elements or ‘5 T’s’;

Tolerate

Treat

Transfer

Terminate and

Take the opportunity

Insurance is one way that the council transfers financial risk and it is an	integral part of our risk management strategy.

OTHER KEY ISSUES

None.

SUPPORTING INFORMATION:

Ten borough and district councils from the Hampshire Insurance Forum (HIF)	worked collaboratively to procure a Long-Term Agreement (LTA) for	insurance services from 1 April 2020 for an initial 36-month period with the	potential to extend up to 24 months. Fareham Borough Council led the	procurement on behalf of HIF via an OJEU Open Procedure in accordance	with the Public Contracts Regulations 2015.

A collaborative tender was agreed by the members of HIF (with the exception	of one Authority), to maximise economies of scale and buying power. Across	the ten Authorities, approx. £2.67m savings have been calculated to have	been achieved across the initial 36 months of the LTA.

As a collaborative the HIF authorities committed to spend via the LTA	approximately £4 million a year on insurance premiums covering a number of	risk areas including employers and public liability, property material damage,	motor, professional negligence, personal accident, terrorism and engineering.

Each of the ten Authorities have entered into their own polices (contracts)	under the LTA. WCC’s current policies are detailed above in 2.1. Please	note that the LTA does not cover cyber insurance. The decision to procure	cyber insurance was made after the aforementioned tender process was	completed, hence the cyber policy is a standalone contract. It is not subject to	an LTA agreement and is renewed each year in accordance with CPR’s.

Individual policies are tailored to each Authority which means that each	authority’s claims history and risk management influences their premium	rather than the group’s premiums and vice versa.

The current LTA is due to end on 31 March 2023 and all HIF members have	been asked for their agreement to extend this by 12 months.

HIF is supported by the professional service of insurance broker AJG whose	role is to act as an insurance intermediary. The council is the client and AJG	offer access to insurance products and services which would otherwise not be	directly available to the council. As an insurance broker, AJG are permitted to	provide advice on insurance matters and are regulated by the Financial	Conduct Authority (FCA).

When the HIF collaboration went out to tender in 2020 the insurance market was becoming much more challenging after an unprecedented period of soft (low) rates. The subsequent Covid pandemic and other more recent developments and geopolitical events have also added uncertainty. The market has hardened and this combined with inflationary factors within the current economic environment has meant that premiums are generally increasing across the board. The increases indicated by the current provider for a one year extension are generally in line with what can be seen from other insurers; this is also borne out from the council’s insurance broker AJG’s experience of recent tender results.

Due to the above, AJG is suggesting to HIF that that the one-year extension is exercised at this juncture with incumbent insurers. As soon as this process is finalised, AJG will complete a soft market testing exercise in order to establish, at an early stage whether consideration should be given to tender in advance of the renewal 2024 or whether a further one year extension would most likely achieve best value.

OTHER OPTIONS CONSIDERED AND REJECTED

The council could choose not to agree to an extension of the LTA and conduct	a tender process in isolation. This would not secure the council best value as	we would not benefit from the economies of scale released through the	collaborative arrangement. The state of the market is	anticipated to soften in the next few months which will potentially result in better premiums and renewal terms if an approach to the market is made next year rather than now.

In addition, AJG have advised that there is currently a large increase in the	number of public insurance tenders due to Covid delays and the market is	flooded. Demand is expected to fall over the next few months and an	extension and later tender to the market from HIF could attract better terms	and/or a higher number of tenders returned.

BACKGROUND DOCUMENTS:-

Previous Cabinet/Committee Reports or Cabinet Member Decisions:-

None.

Other Background Documents:-

Winchester City Council Risk Management Policy 2022/23

APPENDICES:

None.