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 $584,588 for the period from July 1, 2006 through July 1, 2007; and
Authorize City Manager to pay additional premiums to Driver-Alliant Insurance Services, equal to the proposed "all risk" premium rate of $.0429 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 1,2007.
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 $750 million, 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
$584,588. This represents an increase of 12 percent over last year's premium. This
was expected because of the losses incurred by insurers from Hurricanes Katrina and
Rita. Property insurance coverage for the Queen Mary, which is included in this total, is
approximately $196,606. The RMS Foundation will reimburse the City for the actual
insurance purchase amount associated with this coverage.
Additional premiums at a rate of $.0429 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
$1.359 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. Our broker was unable to procure any quotes for earthquake coverage
because of the large catastrophic losses insurers had from Hurricanes Katrina and Rita.
The City will continue to monitor insurance markets and, in the meantime, rely upon
FEMA's 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 Assistant City Attorney Michael Mais and Budget
Management Officer David Wodynski on June 9, 2006.
TIMING CONSIDERATIONS
City Council action is requested on June 20, 2006, to allow the City to officially bind
insurance coverage by the renewal date of July 1,2006.
FISCAL IMPACT
The total premium cost is $584,588. 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.
Respectfully Submitted,
KEVIN BOYLAN |
APPROVED: |
DIRECTOR OF HUMAN RESOURCES |
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GERALD R. MILLER |
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CITY MANAGER |