TITLE
Recommendation to authorize City Manager to purchase "all risk" property insurance for City buildings and contents through the Driver-Alliant Insurance Services, for a total premium of $528,851 for the period from July 1, 2005 through July 1, 2006; and authorize City Manager to pay additional premiums to Driver-Alliant Insurance Services, equal to the proposed "all risk" premium rate of $.0389 per $100 applied to the value of any new buildings purchased or constructed by the City or the increased value of any buildings reappraised during the term of this insurance policy. (Citywide)
DISCUSSION
The Department of Human Resources requests City Council authorization to renew and
extend property insurance coverage for City buildings and contents through July 1,2006.
Through its broker of record, Driver-Alliant Insurance Services, the City annually
purchases "all risk property insurance to cover perils such as fire, vandalism and wind
on all City buildings and contents. The proposed "all risk" property insurance policy
provides replacement cost coverage with limits of up to $1 billion, subject to a $50,000
per occurrence deductible for named perils and a limit of $10 million in coverage for
flood; it does not include coverage for the peril of earthquake. Based on the City's
current insured property valuation, the premium for the "all risk" renewal program is
$528,851. This represents a decrease of 15 percent over last year's premium. Property
insurance coverage for the Queen Mary, which is included in this total, is approximately
$170,000. The RMS Foundation will reimburse the City for the actual insurance
purchase amount associated with this property.
Additional premiums at a rate of $.0389 per $100 replacement value would be applied to
the value of any new buildings purchased or constructed by the City or the increased
value of any buildings reappraised in excess of the current insured property values of
$1.185 billion during the term of this insurance policy.
The City has not purchased earthquake coverage since 2002 due to exorbitant pricing.
In prior years, the City has purchased $10 million worth of earthquake coverage for
specific properties that are financed by bonds. Under the terms of the bonds,
earthquake insurance is required only if it is obtainable from financially secure markets at
reasonable cost. Due to continued excessive pricing, it is recommended that the City not
purchase earthquake coverage with this year's renewal. The City will continue to
monitor insurance markets, and in the meantime rely upon FEMAs public assistance
program should the need arise. If the insurance marketplace for earthquake coverage
softens sufficiently, staff will recommend the purchase of earthquake insurance at that
time.
This matter was reviewed by Deputy City Attorney Richard F. Anthony and Budget
Management Officer David Wodynski on May 31,2005.
TIMING CONSIDERATIONS
City Council action is requested on June 14, 2005. to allow the City to officially bind insurance coverage by the renewal date of July 1,2005.
FISCAL IMPACT
The total premium cost is $ 528,851, which represents a decrease of approximately 15
percent over the prior year, for the period from July 1, 2005 through July'l, 2006.
Adequate funding has been budgeted in the Insurance Fund (IS 390) and in the
Department of Human Resources (HR) for property insurance renewals. Premium costs
associated with the Queen Mary will be reimbursed in full. The cost of the property
insurance is allocated to all funds based upon total insured value of property, with
approximately 20 percent of the premium allocated to the General Fund.
SUGGESTED ACTION
Approve recommendation.
BODY
[Enter Body Here]
Respectfully Submitted,
[Respectfully Submitted,]