COMMISSION 
AGENDA MEMORANDUM                Item No.       4c 
ACTION ITEM                   Date of Meeting   November 22, 2016 
DATE:    November 14, 2016 
TO:     Ted Fick, Chief Executive Officer 
FROM:   Jeff Hollingsworth, Sr. Manager Risk Management 
SUBJECT:  Property insurance broker services 2017 
Amount of this request:           $450,000 
Total estimated project cost:         $450,000 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute a contract with an
insurance brokerage firm for the purpose of procuring property insurance for the Port over a
three-year period with two one-year extension options. The procurement of property broker
insurance services for the three years plus the two one-year renewal options will utilize a
competitive process and is estimated at $450,000. 
EXECUTIVE SUMMARY 
The Port uses insurance brokerage services to assist in the purchase of property insurance from
various insurance carriers. The current property insurance brokerage contract for the Port
expires on March 19, 2017. Upon selection of a broker, the Port will utilize the broker to submit
insurance marketing information, applications, and specifications to various insurance markets
to solicit bids on property insurance coverage. 
The broker will be licensed in accordance with RCW 48.17 and authorized to serve as a broker
(agent) of the Port in these transactions. Premium payments for insurance will be paid directly
to the broker who in turn will pay the insurance companies. The broker will also provide ongoing
service throughout the policy year in other areas such as notice of claim submissions,
claim evaluation, pressure vessel inspections, loss prevention, endorsement issuance, and
insurance certificate issuance. The scope of work will be in effect in 2017 through 2020 with
two additional one-year extension options for 2021 and 2022 (insurance to expire on June 30,
2023). 
The Port's property insurance renews annually and is purchased prior to or no later than July 1
for the ensuing 12 months. 


Template revised September 22, 2016.

COMMISSION AGENDA  Action Item No. 4c                        Page 2 of 5 
Meeting Date: November 22, 2016 
JUSTIFICATION 
The Port purchases property insurance to provide recovery dollars in the event of physical
damage to Port assets. The Port will competitively procure broker services for the purposes of
procuring property insurance for Port assets. The Port utilizes the services of a Washington
State licensed broker to facilitate the purchase of insurance. Licensed brokers have the ability
to find suitable insurance carriers that have the financial strength to insure Port assets. Neither
the Port nor other private or public entities with the operational size of the Port can approach
and negotiate directly with most insurance carriers with respect to the insurance transactions
involved in binding adequate coverage. Firms like the Port use a licensed broker to secure the
best terms and coverage at a cost-effective price. 
The solicitation process will evaluate the availability of qualified small business, minority owned
business, or disadvantaged business enterprises that can do this work. If there are small
business opportunities available, they will be included in the evaluation and selection process. 
DETAILS 
The Port is currently using Hugh Wood Inc. for the purchase of property insurance through June
30, 2017. Th e cost of the current annual property insurance premium renewed on June 30,
2016 was $1,404,465. 
Scope of Work 
The services the broker will provide include: 
(1)   Submission of marketing specifications to various insurance markets for the purposes
of soliciting  quotes on coverage from qualified and financially solvent insurance
markets. 
(2)   Coordinate with the selected insurer the completion of all state and city required
pressure vessel inspections. 
(3)   The execution of all insurance purchase transactions in both the admitted and surplus
markets. Premiums will be paid to the broker who in turn pays the respective insurance
companies. 
(4)   Serve as the Port's insurance broker of record. Insurance transactions have to be done
by licensed and bonded brokers or agents as defined in the Revised Code Washington. 
(5)   Monitor the financial solvency of insurance companies who are insuring the Port and
replace carriers as needed if they fall below an acceptable financial solvency rating. 
(6)   Coordinate additional coverage for new capital projects as needed to ensure assets
under construction are adequately insured during the course of construction. 
(7)   Provide insurance support services in the area of loss control, property valuations, and
underwriting studies as requested by the Port. 


Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. 4c                        Page 3 of 5 
Meeting Date: November 22, 2016 
Schedule 
The Port will hire a broker by April 1, 2017, to allow for binding of property insurance coverage
on July 1, 2017. 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Do not hire a licensed insurance broker and do not purchase commercial
property insurance. 
Cost Implications: There are no direct costs to the Port with this option. 
Pros: 
(1)   The Port is not required by statute to purchase property insurance. The Port could
choose to wholly self-insure all property assets any commercial insurance. If the Port
self-insured all property risks, without any commercial insurance, it would not require
the services of a licensed insurance broker and would generate premium savings. 
Cons: 
(1)   This could have a severe financial impact on the Port if a catastrophic unforeseen
event damaged one or several of the Port's properties. This would require the need to
use other funds for repairs or rebuilding critical facilities. This could then impact the
Port's funding of future projects if funds have to be diverted for rebuilding assets in
lieu of developing future projects. 
(2)   No other public entities similar in size to the Port use this approach. 
This is not the recommended alternative. 
Alternative 2   Do not hire a licensed insurance broker and try to purchase sufficient
commercial property insurance coverage without a broker. 
Cost Implications: The Port would save on broker service fees but not on the insurance itself. 
Pros: 
(1)   The Port could seek insurance companies who may work directly on providing the Port
a policy for property insurance, and thus save on the fee for a broker. 
(2)   In the event of a claim involving the insurance, the Port could negotiate directly on the
adjustment of the loss rather than dealing with its broker. 
(3)   There is the opportunity of more tailored servicing by dealing directly with an insurer. 
Cons: 
(1)   There is only one identifiable property insurer who would work directly with the Port.
This could reduce competition on price. 
(2)   If the Port needed specialized insurance the selected insurer may not have the ability
to meet this need, thus then requiring the Port to hire a broker to find suitable
coverage for the specialized need. 
(3)   If the Port could not reach agreement on the price or on terms of coverage with the
direct insurer, the Port could end up with no coverage (Alternative 1 above). 

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. 4c                        Page 4 of 5 
Meeting Date: November 22, 2016 
(4)   The Port does not have the staff or resources to perform the functions of an insurance
broker. The Port does not purchase enough insurance throughout the year to justify
adding this resource internally. 
This is not the recommended alternative. 
Alternative 3  Hire a licensed broker to search the property insurance market place and bring
back proposals from various insurance carriers who have the ability to provide the various
property policies of insurance that the Port needs. 
Cost Implications: $ 90,000 estimated average annual broker service fee. 
Pros: 
(1)   The benefit of using a licensed broker is the broker's ability to find and connect
interested and financially capable insurance companies with the Port. Licensed
brokers have a number of different insurance companies, around the world that they
transact business with on a year to year basis. They also have knowledge of new
insurance carriers who have the solvency to underwrite large accounts like the Port. 
(2)   The cost of using a broker is less than 10% of the cost of the policy itself. The savings in
the insurance product through a competitive selection of insurance using a broker,
and the ability of the broker as an intermediary will often cover the cost of the broker
service fee. 
(3)   Using a broker frees up staff time to focus on other projects and tasks. 
(4)   In the event of an insurance claim, the broker has access to adjusters and loss
investigators that can speed up the adjustment of the claim and negotiate the claim
directly with the insurer using internal resources the Port does not have. 
(5)   In the event a project or an acquisition would require additional property insurance,
the broker would have the ability to procure this coverage in a cost effective manner
by reaching out to appropriate insurance carriers who could cover this need. 
Cons: 
(1)   A service agreement takes time to solicit and procure, and then manage over the term
of the contract. 
(2)   If a broker is selected, and the ensuing performance is poor, or the insurance
proposals that the broker provides to the Port are unsatisfactory, the Port may end up
with insurance that does not meet its needs. 
(3)   In the event the Port is not happy with the selected broker, the Port would have to
terminate the contract, and initiate a new solicitation process to find a replacement
broker. 
This is the recommended alternative. 
FINANCIAL IMPLICATIONS 
The estimated cost of the property broker services fee on an annual basis is $90,000. 

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. 4c                        Page 5 of 5 
Meeting Date: November 22, 2016 
The request for authorization is only for the broker service fees and not for purchase of
insurance. 
Annual Budget Status and Source of Funds 
Funding will be included in the annual operating budgets of Corporate Division. 
ATTACHMENTS TO THIS REQUEST 
None. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
June 28, 2016  Commission briefed on the renewal of the property insurance program. 
August 2, 2011  Commission authorized request for property insurance broker services. 













Template revised September 22, 2016; format updates October 19, 2016.