Agenda item

(To receive a report from Mandy Knowlton-Rayner, Insurance and Risk Lead, which invites the Board to consider a report on the Insurance Portfolio – Extension to Current Contract which is being presented to the Leader of the Council between 28 August 2020 and 2 September 2020. The views of the Board will be reported to the Leader as part of his consideration of this item)

Consideration was given to a report by the Insurance and Risk Lead, on the extension of insurance contracts which was due to be presented to the Leader of the Council between 28 August 2020 and 2 September 2020. The views of the Board would be reported to the Leader as part of his consideration of this item.

The report recommended a delay to the procurement and proposed the extension to the current insurance arrangements for no more than two years, with the tender to take place in April 2022 or April 2023, depending on the outcome of the extension offers by the current insurers. Also recommended was a corresponding extension of the broker contracts to realign to the procurement process for the tender. The insurance portfolio was due for tender in April 2021. The total current contract values amounted to £2.2m. The Public Contracts Regulations 2015 permitted such an extension.

The total insurance premium  spend for 2020/21 was £2,159,412 and the current insurance programme consisted of 18 different policies of insurance. The main ones related to employers and public liability, property, motor and professional indemnity.

The Board was informed that there were a number of factors currently affecting the insurance market which included: the capacity of insurers to underwrite risks; the number of insurers in particular markets - a reduction in the number of insurers for Public Sector risks; the premiums being charged for those risks and the policy cover being provided with additional exemptions or restrictions being advised. It was also noted that 2019 had been the fourth costliest insurance claim year in history, affecting the profitability of insurers. Lincolnshire County Council had to a large extent been protected from wholesale premium increases over the last five years. 

It was noted that the ability to have sustained premiums for liability insurances for five years was almost unheard of and the closest public sector comparators had experienced increases of between 10% - 30%. Covid-19 had further impacted the market.  As the full impacts of the virus were not known or yet clearly modelled for, insurers of risk were withdrawing from areas of the market and were also looking to significantly increase premiums to cover the uncertainty. An indication of expected premium increases across all lines of cover was between 15% - 35%.

Members of the Board asked a number of questions, when the following points were confirmed:

·         The extension to the broker contract was required as the Council's access to the insurance market would be severely impacted if the broker was not available to support access to the market.

·         Property insurance costs were high due to a number of fire and storm related losses over the past five years. There had been a significant loss every year for the past four years which included a fire at a county farm, an arson attack at a youth centre, and a fire at a depot in Barrowby. In addition, there was the recent storm damage caused to the windmill in Burgh le Marsh. Fire risks were a concern to insurers, particularly in educational settings.  As a result, the Council had a higher self-insurance level on schools. The cost to the Council was £10,000 per claim for fire damage with the majority of the cost borne by the insurer, who reflected these costs by increasing the insurance premiums.

·         The potential saving to the Council from delaying the procurement was between 15% and 35% by avoiding the expected premium increases which other councils had incurred. The Board therefore considered the extension of the current contract a good idea as it would save the Council some money.

·         Academies could not be insured through the Council's insurance portfolio.  The Council had worked with the West Midlands Academy group to facilitate an insurance product for Lincolnshire's academies to access, but as the take up was low, the Council would no longer be involved in that. Going forward the majority of the academies would be part of the Government's risk pooling arrangements (RPA) which would now be open up to schools to access as well. There had been a gradual reduction in the property portfolio due to the increase in academies, but the liability to the Council still existed because of ongoing claims which arose from incidents in schools whilst the Council was the insurer.

RESOLVED:

1.    That the Board unanimously support the recommendations to the Leader of the Council, as set out in the report;

2.    That a summary of the above comments be passed on to the Leader of the Council as part of his consideration of this item.