HomeMy WebLinkAbout12/17/2003 - STAFF REPORTS (17) DATE: December 17, 2003
TO: City Council
FROM: Director of Human Resources
Assistant City Manager
EXCESS EARTHQUAKE/FLOOD INSURANCE RENEWALS
RECOMMENDATION:
It is recommended that the City Council adopt a Resolution approving the City's excess
layer of Earthquake/Flood insurance coverage.
SUMMARY:
The City has primary insurance coverage for earthquakes/floods totaling $2,500,000. On
November 19, 2003 the City Council approved the purchase of an additional $32,500,000
in excess earthquake/flood insurance coverage. On December 3, 2003, Councilmember
Pougnet requested that this matter be brought back for further consideration of the City's
excess coverage.
BACKGROUND:
The City Council approved the current $2,500,000 in primary earthquake/flood insurance
coverage on June 18, 2003, at a cost of$142,800. On November 19, 2003, the City
Council discussed several options for excess layers of coverage. After considering the
options, the City Council approved an additional $32,500,000 in coverage at a cost not-to-
exceed $235,000.
On December 3, 2003, Councilmember Pougnet requested a report on the City's excess
insurance coverage. Table 1 shows the current level of excess insurance that the City
has purchased along with the available layers of additional coverage:
TABLE 1
Excess levels of insurance over primaryoverage of$2.5 million
Earthquake/ Flood Cumulative Premium for Cumulative
Placement Insurance each Level Cost of
Coverage Insurance
*First layer I=!$7.5 millidn $10,000,000 $ 107,100,00 .$ 1,07,100,00
*Second layer =$25 million , :$35,000,000 $127,899.75 $234,999:75
**Third layer= $25 million $60,000,000 $77,343.75 $312,343.50
**Fourth layer = $25 million $85,000,000 $28,359.38 $340,702.88
**Fifth layer= $25 million $110,000,000 $21,914.06 $362,616.94
* current placement as of 11/20/03. `�
** available layers of additional coverage. nn
l LIT
According to the City's Insurance Broker, Ross Jones, the London Markets have provided
a quote of$103,125 for an additional $50 million in coverage in excess of$35 million.
Although this quote is somewhat less than the cost of purchasing the third and fourth
layer separately, the London Markets are nearing capacity of their Reinsurance Treaties
and may not be able to provide this coverage. If this occurs, the City could still purchase
the third and fourth layer of coverage at a slightly higher cost.
The current estimated value of all City property is $199,981,459. Table 2 summarizes the
property value history, earthquake/flood insurance coverage and deductible over the last
ten years:
TABLE 2
Year Property Value Insurance Deductible
History Coverage
1994 $137,130,461 $20,000,000 10%
1995 $141,071,896 $20,000,000 10%
1996 $142,521,871 $20,000,000 10%
1997 $144,302,534 $86,803,070 5%
1998 $147,823,510 $86,803,070 5%
1999 $149,650,839 $86,803,070 5%
2000 $152,729,810 $50,000,000 5%
2001 $175,042,804 $50,000,000 5%
2002 $182,071,385 $73,500,000 5%
2003 $195,186,338 $82,500,000 5%
2004 $199,981,459 $35,000,000 5%
If the Council approves an additional $50 million in excess coverage ($85 million total
coverage), our broker will pursue the London Market quote for$103,125. If our broker is
unable to bind this coverage, the City Council could authorize staff to proceed with the
third and fourth layers of excess coverage at a cost of$105,703. Sufficient funds are
available in Earthquake Insurance (5905-48655) to cover both options. The City Council
also has the option of purchasing a fifth layer of excess coverage which would bring the
City's cumulative insurance coverage to $110,000,000. The cost of this additional layer is
$21,914. If the City Council decides to add this layer of coverage a supplemental
appropriation of$16,679 will be needed.
Y L. BU
As stant City M ger
APPROVED
City Manager //
City of Palm Springs DIC Placement and Proposed Placement 2003
Table 1
Excess Levels of Insurance over primary coverage of$2.5 million
Earthquake/Flood Cumulative Premium for Cost per Million Cumulative Cost
Placements Insurance each Level of Insurance
Coverage
First layer= $7.5million* $10,000,000 $107,100.00 $14,280.00 $107,100.00
Second layer-- $25 million* $35,000,000 $127,899.75 $5,115.99 $234,999.75
Third layer--$25 million** $60,000,000 $77,343.75 $3,093.75 $312,343.50
Forth layer-- $25 million** $85,000,000 $28,359.38 $1,134.38 $340,702.88
Fifth layer-- $25 million** $110,000,000 $21,914.06 $876.56 $362,616.94
k Current DIC Placement as of 11-20-2003
** Proposed additional DIC coverages. Including taxes and fees for all layers.
Marketing Report:
London Markets: $50 mil x of$35 mil @ $103,125.
(London is reaching capacity of Treaties,may not be able to fill this layer)
London Markets: $25 mil x of$35 mil @ $77,343.75
Westchester Fire: $25 mil x of$60 mil @ $28,359.38
Great American: $25 mil x of$85 mil @ $21,914.06
Ins Co West: $10 mil x of$50 mil @ $37,000.
Redlands his: $5 mil x of$40 mil @ $30,000.
RESOLUTION NO.
OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS,
CALIFORNIA, APPROVING THE CITY'S EXCESS
EARTHQUAKE/FLOOD (DIFFERENCE IN CONDITION)
INSURANCE RENEWALS.
WHEREAS the City of Palm Springs contracted with Davis and Graeber Insurance
Services, Inc., a California corporation, on October 3, 2001, to perform services as
the City's Insurance Broker of Record to solicit insurance proposals from qualified
carriers upon renewal of these policies, and
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm
Springs, approve the following insurance coverage renewals:
Earthquake/Flood Difference in Condition Premium 12/19/03 through 12/21/04
Excess of$35, 000,000 Net of commission
Third Layer Excess of$35 Million $77,343.75
Insurance Company
Best's Rating
Limit of Coverage $25,000,000
Fourth Layer Excess of$60 Million $28,359.38
Insurance Company
Best's Rating
Limit of Coverage $25,000,000
TOTAL $105,703.13
ADOPTED this 17th day of December, 2003.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
REVIEWED & APPROVED AS TO FORM