Staff Report #6 – 2025 – 2026 General Insurance Program Renewal

Staff Report #6

June 23, 2025

To All Commissioners

Re: 2025 – 2026 General Insurance Program Renewal

Recommendation

That the Commission:

i. APPROVE the general insurance program for the period of June 30, 2025 through to June 29, 2026 at a total annual cost of $3,002,759 exclusive of applicable sales tax and deductible costs, the particulars of which are as follows:

ii. APPROVE the broker services for the period of June 30, 2025 through to June 30, 2026 with Marsh Canada at a cost of $105,000.

Background

In March of 2025, administration began the process with Marsh Canada Limited (the Commission’s broker) for the renewal of the general insurance program for the period of June 30, 2025 to June 29, 2026. The most challenging part of London Transit’s insurance program remains the fleet policy. Due to the size and nature of the fleet, there is traditionally a limited number of insurers willing to insure this class of business. As soliciting proposals from alternative carriers is a significant administrative undertaking for both the carrier and insured, marketing of London Transit’s portfolio is not recommended by Marsh every year. Similar to last year, the 2025-2026 renewal plan was to start early and seek renewal terms from the current carriers, noting if indications were concerning, then further reviews or “marketing” could take place. After these initial discussions, Marsh felt the renewal terms would be quite fair and recommended that focus be directed solely on negotiating with the current providers.

During the 2024-2025 General Insurance Program renewal, the property insurance carrier (Zurich) identified that a full property valuation would be a mandatory requirement for the next renewal. Further discussions with Marsh, along with additional dialogue with civic administration, confirmed carriers are quite actively requiring insureds to provide independently updated statements of values, including buildings, contents, equipment and inventory. This has been in response to significant increases in construction and equipment costs post-pandemic. With the assistance of Suncorp Valuations, Marsh completed a valuation service comprised of buildings, site improvements, and equipment located at both 450 Highbury and 3508 Wonderland. Administration worked with both vendors over the course of a week to facilitate their necessary fieldwork. Updated insured property and equipment values have been reflected in the renewal. During the last renewal, it was also recommended by Marsh, that the Commission look to enhance its coverage by adding a specific cyber policy, noting that with the growing threats of cyber crimes, base policies had essentially eliminated or excluded cyber coverage. Discussions were held with various underwriters regarding the coverages and IT best practices that should be in place to enable the coverage to be extended. The IT group has worked with the underwriter to understand LTC’s practices and as a result, the 2025-2026 renewal has the option for cyber coverage included.

After gathering all policy renewal terms, there is an overall premium decrease for 2025-2026 of 5.6%, noting this net decrease is inclusive of the premiums to add optional cyber coverage as well as increases in the property coverage limits as noted above. The renewal rates presented by Zurich specifically for fleet insurance, accounting for nearly 75% of all premiums, included a 6% rate decrease, with other reductions for the timing of bus additions also present. This rate decrease is an indication of a softening market and a welcome reprieve from significant rate increases witnessed over the past six years (an average of 16% per year). This decrease was also witnessed in the other lines (general liability and umbrella) that further enhance the limits of the coverage and are thus tied to the overall auto policy premiums. Although property insurance rates have remained unchanged, recent property valuation increases that more accurately reflect the Commission’s current replacement values have resulted in volume-related premium increases for property coverage (42.8%). The other coverage areas saw relatively flat premiums.

The recommended renewal results in an annual premium decrease of $183,974 from last year, inclusive of broker fees, the details of which are set out in the following table.

The expenditures for the insurance program included in the Commission-approved 2025 operating budget anticipated a rate increase rather than a 5.6% decrease as noted above for the renewal. Given the mid-year timing of the renewal, only a portion of the savings will be realized in 2025, while the budget for 2026 will see a full year impact. These updated rates will be incorporated into the 2026 operating budget set to be tabled in August and have also been identified in Staff Report #8, dated June 23, 2025 as expenditure reductions contributing to the requested overall budget reduction.

In addition to the premium costs, London Transit historically pays on average between $600,000 and $700,000 annually in deductible costs relating to accident benefits (as required under no-fault insurance) and public liability claims cost. For 2024, deductible costs totaled $643,374, a level exactly at the median of the last ten years’ claims.

Annual Deductible Cost History

The roles of adjuster and legal representation have significant influence on the level and extent of deductible payments made, and as such, an understanding of the nature of claims experienced by a transit provider is imperative in order to mitigate payouts to the greatest extent possible. The Commission has a long-standing relationship with ClaimsPro with respect to insurance adjusting services and Shillington McCall LLP for legal representation relating to claims. There are no recommended changes to either the adjuster or legal representation associated with this renewal.

Recommended by:

E.P. (Ted) Graham, Manager of Accounting

Mike Gregor, Director of Finance

Concurred in by:

Kelly S. Paleczny, General Manager