HomeMy WebLinkAbout1995-01-10 - AGENDA REPORTS - EARTHQUAKE INS RENEWAL (2)AGENDA REPORT
City Manager Approval
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Ken Pul p
CONSENT CALENDAR
DATE: January 10, 1995
SUBJECT: Earthquake Insurance Renewal
DEPARTMENT: Management Services
BACKGROUND
In 1994 the City of Santa Clarita maintained a $15 million earthquake insurance policy
designed to cover city buildings i.e. facilities, valued at $18.8 million, in the event of a
loss. The 1994 program was structured with a $5 million primary layer with a 10% total
value deductible per location. The limit was then increased with an additional two
layers at $5 million each. The total premium paid for this coverage was $64,441.
In October 1994 the City began the earthquake insurance renewal process for 1995.
However, as a result of the January 17 earthquake many insurance markets are no longer
available or have significantly restructured their programs. The City did however
receive quotations from fifteen insurance carriers. This represents the total number of
companies now writing public entity insurance programs for earthquake loss in Los
Angeles County.
Based on a review of the quotations, for 1995 it is recommended that the City continue
to carry $15 million in coverage provided in the following structure:
Level of Coverage
Deductible
Primary Layer
2nd level
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Amount
$2.5 million
$2.5 million
$5.0 million
Premium
$0
$32,500
$27,500
Agenda Item:—ffl .
3rd level $5.0 million $25,000
Total Premium 85000
This program differs from 1994 in several ways. Most significant is the format of the
deductible. As referenced, in 1994, the deductible was based upon 10% of the total value
of the facility in question. For example the current City Hall structure, exclusive of the
land, is valued at $8 million, therefore the deductible would be $800,000. Based on
changes in the market this program is no longer offered. Rather a $2.5 million total
occurrence deductible on all facilities is provided. The City could however obtain a $1.5
million deductible program however, the basic premium would be an additional $60,000
above that listed.
A benefit to the program recommended is the fact that the 1995 recommended package
includes business interruption coverage. This type of coverage would allow the City to
be covered for any loss or rents or general income derived form the use of our facilities.
This would included all rents and leases from our tenants. Coverage of this form was
not available to the City in 1994.
The total premium represented of $85,000 reflects an increase of 31% or $20,559 over the
prior fiscal year. Due to this unanticipated increase it is necessary to obtain the
additional $20,559 from the contingency fund.
RECOMMENDATION
It is recommended that the City Council authorize the City Manager to procure
earthquake coverage of the type and amounts referenced and transfer $20,559 in funds
from the Contingency account #01-4101-290 to the insurance account #26-4201-294 to
cover the increase in premiums.