Title
[Contracts] Authorizing City’s Insurance Broker to Renew the City’s Contracts for Insurance for Fiscal Year 2026/27 [Two-Thirds Vote Required]
End
FileID
File ID: 2026-01183
End
Location
Location: Citywide
End
Recommendation
Recommendation: Pass a Motion by two-thirds vote: 1) waiving the requirement for 10-day posting of all agreements greater than $1,000,000; and 2) authorizing the City Manager or designee to authorize Alliant Insurance Services, Inc., the City's insurance broker, to secure annual insurance policies for Excess Liability, Excess Workers' Compensation, Property, Fine Arts, Aircraft, and other insurance including Crime, Pollution, Underground Storage Tank, Special Events, and Airport Liability, for an amount not-to-exceed $26,009,461.24.
End
Contact
Contact: Natalie Dempsey, Risk Manager, (916) 808-8587, ndempsey@cityofsacramento.org, Department of Human Resources
End
Presenter
Presenter: None
End
Attachments
Attachments:
1-Description/Analysis
2-Attachment A Fiscal Year 2026/27 Insurance Premiums
3-Attachment B Schedule of Insurance
4-Attachment C 2025 Risk Management Workshop
End
Description/Analysis
IssueDetail
Issue Detail: The City is exposed to a broad range of complex risks that have the potential to result in significant or catastrophic losses. The City utilizes professional insurance brokerage services to place a variety of commercial insurance policies to protect the City from these losses. The City currently contracts with Alliant Insurance Services Inc. (Alliant) to perform this function. By maintaining appropriate insurance coverage, the City safeguards its financial stability against severe liability, automobile, and Workers’ Compensation losses.
Additionally, purchasing insurance protects the City from loss due to damage or destruction of City assets, pollution, crime, fine arts, cyber liability, special events, and airport/aircraft exposures. The City’s insurance broker marketed all lines of insurance coverage to ensure all viable options were considered. The City Manager’s Office, the Department of Human Resources, Risk Management Division and Alliant have evaluated each of the insurance programs in terms of potential loss, coverage, self-insured retentions, deductibles, premiums, and policy limits and recommend the purchase of insurance as outlined in Attachment A. Attachment B provides a comparison of insurance policies for Fiscal Year (FY) 2025/26 and F 2026/27.
In FY2025/26, Alliant placed insurance policies for the City with a total cost of $22,876,685.15 and the FY2026/27 estimated total cost of insurance is $26,009,461.24, a 14% increase. The increase is primarily driven by higher excess liability insurance costs which are discussed below. The insurance market continues to present significant challenges, and, consistent with past renewal cycles, the City is experiencing increased costs across several lines of coverage, reflecting trends affecting public entities statewide and nationwide. These recommendations for insurance policies, premiums, self-insured retentions, and deductibles may change as most quotes are not finalized and in some instances the City may receive additional insurance quotes that would change the costs and information outlined in this report.
On December 9th of 2025, the Risk Manager, the Workers’ Compensation Claims Manager, and a representative from Alliant presented to the Budget and Audit Committee the 2025 Risk Management Workshop which provided an insurance market update, comparative benchmarking, actuarial results, liability claims, as well as various other topics impacting the City’s insurance premiums. This presentation can be found in Attachment C.
End
PolicyConsiderations
Policy Considerations: Failure to secure adequate insurance coverage would leave the City financially vulnerable to catastrophic losses, potentially resulting in substantial and unbudgeted financial obligations.
The Sacramento City Code Section 4.04.020 and Council Rules of Procedure (Chapter 7, Section E.2.d) mandate that unless waived by a 2/3 vote of the City Council, all labor agreements, and all agreements greater than $1,000,000 shall be made available to the public at least ten (10) days prior to council action. This provision will be waived by City Council.
End
EconomicImpacts
Economic Impacts: None.
End
EnvironmentalConsiderations
Environmental Considerations: This report concerns administrative activities that will not have a significant effect on the environment and does not constitute a “project” as defined by CEQA [CEQA guidelines Sections 15061(b)(3); 15378(b)(2)].
End
Sustainability
Sustainability: Not applicable.
End
Commission/Committee Action
Commission/Committee Action: Not applicable.
End
RationaleforRecommendation
Rationale for Recommendation: The recommended insurance policies are as follows:
Excess Liability: As in recent years, the excess liability insurance renewal continues to be extremely challenging for the City and public entities throughout California and the nation. The public entity liability insurance market continues to harden due to a combination of factors, including escalating claim frequency and severity, increasing plaintiff settlement demands, larger jury verdicts, nuclear and thermonuclear verdicts (those over $100M). For example, in 2024 there were a record 49 U.S. verdicts in excess of $100 million.
Another significant factor contributing to the current market conditions is “social inflation,” a term used to describe social and behavioral trends that expand the tort liability of parties alleged to be responsible for harms and their insurers. Social inflation is often associated with increasing jury awards, broader interpretations of liability, growing public distrust of institutions, aggressive litigation strategies, and a willingness by juries to award substantial damages. These trends have contributed to larger settlements and verdicts, increasing the overall cost of claims for insurers and public entities alike.
The chart below is from a 2024 Rand Corporation study, titled What Is the Evidence for Social Inflation? Trends in Trial Awards and Insurance Claim Payments by Lloyd Dixon, Nicholas M. Pace, James Davidson, Jamie Morikawa illustrates the dramatic increase in jury awards for personal injury and wrongful death litigation in the last ten years.
Unfortunately, these increases appear to reflect a long-term market trend rather than a temporary fluctuation. Over the past decade, claim costs have grown at an average annual rate of approximately 11%, driven by factors such as social inflation, rising litigation expenses, increasing medical costs, and larger jury verdicts. The market has also experienced a reduction in the number of reinsurers willing to underwrite public entity liability risks. This contraction in available reinsurance capacity has limited competition among carriers and reduced the overall capacity available in the marketplace. As a result, public entities continue to face higher premiums, more restrictive underwriting standards, and fewer options for securing excess liability coverage at historical pricing levels.
To address the challenges presented by the current excess liability insurance market, the City participates in the General Liability 2 (GL2) program through Public Risk Innovation, Solutions, and Management (PRISM), a member-directed risk-sharing pool that enables public entities to collectively purchase excess liability coverage and leverage greater buying power than would otherwise be available in the commercial insurance market.
For the General Liability Program (GL2 PRISM Program), the City maintains a $2 million self-insured retention (SIR) per occurrence and a $2 million annual loss corridor deductible. The loss corridor deductible functions as an aggregate deductible applicable to claims that exceed the City's $2 million self-insured retention, providing an additional layer of shared risk before excess coverage responds. In recognition of increasing claim severity, rising settlement values, and the growing frequency of large jury verdicts, the City also secures Optional Excess Liability (OEL) through PRISM’s OEL Program. Following a significant adverse jury verdict in Spring 2026, and in light of ongoing market trends, the City has elected to increase its OEL coverage from $40 million to $50 million aggregate coverage. Our FY 2025/26 premium was $14,550,701.00 and our FY2026/27 premium is estimated to be $18,000,000, a 24% increase. The premium estimates presented reflect a fiscally responsible and conservative approach to budgeting. This additional liability coverage enhances the City's protection against catastrophic losses and helps safeguard the City from the financial impact of increasingly severe liability claims. The selected coverage level is consistent with the City's size, operational complexity, and risk profile, and reflects the City's ongoing commitment to maintaining a prudent and financially responsible risk financing strategy in an increasingly challenging liability insurance environment.
Excess Workers’ Compensation: The City is self-insured for the first $2 million of each Workers’ Compensation claim and purchases excess Workers’ Compensation coverage through Public Risk Innovation, Solutions, and Management (PRISM), one of the largest and most established public entity risk-sharing pools in the nation. The City has participated in PRISM’s Excess Workers’ Compensation Program since 2007 as part of its long-term strategy to manage catastrophic Workers’ Compensation exposures while maintaining the financial benefits of self-insurance. By participating in PRISM, the City benefits from economies of scale, diversified risk sharing, strong financial resources, and a Workers’ Compensation program that has demonstrated long-term stability through changing insurance market conditions.
The City’s Excess Workers’ Compensation insurance premiums was $1,732,196 in FY 2025/26 and is estimated to be $2,000,000 in FY 2026/27, a 15% increase. The premium increase is primarily attributable to growth in payroll exposure, rising medical costs, workforce demographics, increasing mental health-related claims, and expanded Workers’ Compensation presumptions for public safety employees, including coverage for costly heart, cancer, and other occupational disease claims.
Property: The City obtains property insurance coverage through the Alliant Property Insurance Program (APIP), one of the largest public entity property insurance programs in the world. Established specifically to address the unique property insurance needs of public entities, APIP leverages the collective purchasing power of thousands of participating organizations to provide comprehensive coverage, stable pricing, and access to insurance capacity that may not otherwise be available in the traditional marketplace. The program's scale allows participating agencies to benefit from competitive pricing, broad policy terms, and substantial coverage limits, including access to significant flood and other catastrophe coverage. As a result of the City's participation in the APIP program, the premium for the upcoming fiscal year decreased. The premium in FY2025/26 was $6,234,829.03, and the premium for FY2026/27 is estimated at $5,593,834, representing a 10% decrease.
Conversely, the property insurance costs continue to trend upward. The market remains under pressure due to significant catastrophe losses, including the Los Angeles-area wildfires and a continued pattern of above-average natural disaster losses nationwide. These events have resulted in substantial claim payments by insurers and reinsurers, leading to higher property insurance rates across the public sector. In addition to catastrophe-related losses, broader economic factors continue to drive premium increases. Persistent inflation has increased the cost to repair and replace insured property, while rising labor costs, workforce shortages, and escalating prices for construction materials have significantly increased property valuations and replacement cost estimates. Increased fuel and transportation costs have further contributed to higher expenses associated with construction, debris removal, equipment mobilization, and supply chain logistics.
Fine Arts: To protect valuable collections located throughout the City, including the Crocker Art Museum, Discovery Museum, Golden 1 Center, the Sacramento Archives and Museum Collection, and other City-owned facilities and artwork. Coverage was placed with AXIS Insurance, which remains the City's insurer for the upcoming policy year. The City has adopted a consistent strategy of annually reviewing and increasing Fine Arts insurance limits to ensure coverage keeps pace with the growth and appreciation of the City's collections. For this upcoming fiscal year, the City's Fine Arts policy limit will be increased from $225 million to $250 million for FY2026/27. The estimated premium for FY2026/27 is $147,838.24, representing a decrease of approximately 2% despite the increase in coverage limits.
Aircraft: Aircraft insurance is purchased to protect the City's aviation fleet, which consists of one fixed-wing aircraft and five helicopters operated in support of public safety and law enforcement activities. The fleet currently includes a 1979 Cessna 172XP airplane; Bell OH-58 helicopters and one Bell 505 helicopter.
The aircraft insurance premium for FY2025/26 was $64,801.00. The estimated premium for FY2026/27 is $67,789, representing an increase of 5%. The projected increase is primarily attributable to the rising replacement cost of aircraft, increased insured values associated with the City's aviation fleet, and the addition of specialized mission-critical equipment. Maintaining adequate aircraft insurance coverage is essential to protecting the City against potentially significant losses arising from damage to aircraft, specialized equipment, and aviation-related operations. The coverage ensures that the City can continue to support critical public safety missions while safeguarding public resources from catastrophic financial loss.
Other Insurance: Other insurance coverages maintained by the City include pollution liability, underground storage tank liability, governmental crime, cyber liability, airport liability, business travel accident coverage, and specialized liability programs. These policies help protect the City from a variety of operational, environmental, financial, and technology-related risks that are not fully addressed through the City's primary insurance programs. With these various policies, the combined annual premium for these specialized insurance programs in FY2025/26 was $143,042. The estimated premium for FY2026/27 is $200,000, representing an increase of 40%.
Total Insurance Costs: Attachment A provides a summary of the FY2026/27 insurance policies and premiums. Attachment B provides a comparison of insurance policies and premiums from FY2025/26 and FY2026/27.
End
FinancialConsiderations
Financial Considerations: Sufficient funds will be available in the Department of Human Resources FY 2026/27 operating budget for the Risk Management Fund (6502) and Workers’ Compensation Fund (6504) for coverages through June 30, 2027.
End
LocalBusinessEnterprise
Local Business Enterprise (LBE): Alliant is a qualified LBE.
End