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Home My WebLink About05(F) - Resolution Authorizing the 2026 Insurance Policy Renewals Report ITEM: 5F CITY COUNCIL AGENDA REPORT MEETING DATE: April 14, 2026 PREPARED BY: Nicole Klekner, Finance Director PRESENTED BY: Nicole Klekner AGENDA ITEM: Resolution Authorizing the 2026 Insurance Policy Renewals RECOMMENDED ACTION: Approve the resolution authorizing the 2026 insurance policy renewals. BACKGROUND: The purpose of this agenda item is to consider approval of the 2026 insurance policy renewal with the League of Minnesota Cities Insurance Trust (LMCIT) for the period 02/01/2026 – 02/01/2027. History The City of Prior Lake participates in the LMCIT for securing liability, property, casualty, automobile, volunteer, and workers’ compensation insurance coverage. Council approval of the insurance policies is appropriate since the total premiums exceed the $20,000 threshold which the City Manager is authorized to approve. This approval is requested on an annual basis. The City has been insured by the LMCIT since 1987. The LMCIT is a self-insurance pool of cities formed to meet cities’ coverage and risk management needs. They provide coverage for over 90% of Minnesota cities. The LMCIT also provides a prorated dividend when claims for their long-time members are favorable and the members are successful in avoiding and controlling losses. This practice is unusual in the insurance industry. For the 2024 coverage year, the LMCIT provided the City with a $12,434 dividend on the property/casualty program. Up until 2024, there had been no LMCIT workers compensation program dividends declared since the 2012 coverage year, mainly due to rising medical costs, and now to fund compensable claim costs related to post-traumatic stress disorder (PTSD). For the 2024 coverage year, the LMCIT provided the City with at $28,924 dividend on the workers compensation program. Regarding the dividend amounts, the LMCIT fund balance reached a level where it’s more than sufficient to pay claims and plan for contingencies, so the Trust was able to return funds to its members. This evaluation is completed every year based on loss experienced by members, actuarial projections, investment results, reinsurance costs, etc. For the 2025 coverage year, the LMCIT has decided to wait until June 2026 to make decisions on whether to return program dividends to members. This change aligns with the LMCIT’s recent transition to a calendar-year fiscal schedule. This timing, considering current market uncertainty, volatility, and potential changes to FEMA and other programs, allows LMCIT to make well-informed decisions that best serve members' long-term interests and financial stability. Current Circumstances City of Prior Lake | 4646 Dakota Street SE | Prior Lake MN 55372 Item 5F Page | 2 The coverages included in the City’s Property & Casualty coverage are municipal liability, property, automobile, open meeting law, and public employee faithful performance as required by State Statutes. The City Council approved the addition of no-fault sewer backup coverage mid-year 2019. Since 2014, the city has carried a deductible of $25,000 per occurrence/$50,000 annual aggregate/ $1,000 per occurrence. Maintaining the same deductible amount for Property & Casualty coverage, the following table provides a comparison between the 2026 and 2025 insurance premiums: The City pays a $11,000/year fixed fee for insurance agent of record services instead of a commission based on the premium. The standard LMCIT commission is Property & Casualty 10% and Workers Compensation 2%. $11,000 annual fixed fee is a savings of about $23,900 compared to the standard commission. The Property/Casualty premium went down by 2.2% as compared to the prior year. Following is a summary of the drivers of the property/casualty renewal premium decrease:  Property (buildings, contents and property-in-open) is down due to rate decreases.  Equipment Breakdown is up due to increased total insurable value.  Municipal Liability Experience Modifier and Aggregate Modifier decreased, resulting in the liability premium decrease.  Auto Liability/Auto Physical Damage is up due to additional/new automobiles and rate increases.  No Fault Sewer Backup is up slightly due to the increase in sewer connections. The 2026 Workers Compensation total premium went down by 25.2% compared to the prior year.  Staff budgeted using actual LMCIT rates in all classes, but the LMCIT decreased worker’s comp rates by an average of 25%. The LMCIT notes that the primary reason for the rate decrease is because of decreases in projected actuarial estimates of losses in 2026 compared to 2025, higher investment income assumed for 2026, and a Item 5F Page | 3 decrease to the contingency margin. The contingency margin is an allowance in the rates if claim costs turn out to be greater than expected.  The City budget reflects an experience modifier of .75 (based on review of three year history). The 2026 experience mod came in lower at .62. The experience mod is the ratio of the costs of the city’s actual workers’ compensation claims compared to the expected costs for cities in the LMCIT. It came in below the LMCIT city average of 1.0. which creates a premium credit (reduction). FINANCIAL IMPACT: The 2026 budget (all funds) includes $321,480 for general liability, property, automobile, no fault sewer backup, and bond insurance. Based on the current quote of $296,830 for Property/Casualty, there will be favorability to budget of $24,650. The 2026 budget (all funds) for workers’ compensation insurance is $481,069 which is $220,949 favorable than our current quote (less than budget). $138,000 of the favorability is due to rate change (Staff budgeted using 2025 actual rates, actual was a 25% decrease) and $83,000 is due to the experience modifier coming in at .62 as compared to budgeted modifier of .75. ALTERNATIVES: 1. Motion and a second to approve the resolution authorizing the 2026 insurance policy renewals incorporating the modifications recommended herein. 2. Motion and a second to table this item and provide staff with direction. ATTACHMENTS: 1. Resolution - Consider Approval of a Resolution Authorizing the 2026 Insurance Policy Renewals 4646 Dakota Street SE Prior Lake, MN 55372 RESOLUTION 26- RESOLUTION AUTHORIZING THE 2026 INSURANCE POLICY RENEWALS Motion By: Second By: WHEREAS, the City of Prior Lake participates in the League of Minnesota Cities Insurance Trust (LMCIT) for securing liability, property, casualty, automobile, employee faithful performance (bond), open meeting law defense, equipment breakdown and worker’s compensation insurance coverage; and WHEREAS, the insurance renewal period is 02/01/2026 through 02/01/2027; and WHEREAS, premium costs for the respective coverage are as set forth in the April 14, 2026 agenda report; and WHEREAS, the insurance includes a $25,000/$50,000/$1,000 deductible amount for liability coverage. NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA as follows: 1. The recitals set forth above are incorporated herein. 2. The City Council hereby approves the 2026 insurance policy renewals. 3. Staff is authorized to transfer to the internal services Insurance Fund any property/casualty dividends and work comp retro adjustments received, as determined by the Finance Director. Passed and adopted by the Prior Lake City Council this 14th day of April 2026. VOTE Briggs Braid Churchill Lake Hellier Aye ☐ ☐ ☐ ☐ ☐ Nay ☐ ☐ ☐ ☐ ☐ Abstain ☐ ☐ ☐ ☐ ☐ Absent ☐ ☐ ☐ ☐ ☐ ______________________________ Jason Wedel, City Manager Error! Hyperlink reference not valid.