That the City Council authorize the City Manager to place the City’s primary earthquake policy with Landmark American Insurance Company at a policy limit of $5 million and assign excess coverage of $78.95 million to General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance, and Transverse Specialty Insurance for a one-year term from April 19, 2024, through April 19, 2025.

The City’s current earthquake insurance policy, which expires on April 19, 2024, provides building, structure, and contents coverage for City-owned buildings.  Last year, the City’s total insurable value was $78.95 million. This year there has been a slight increase in the total insurable value to $81.98 million.  In an effort to secure the lowest cost insurance renewal options, staff instructed the City’s insurance broker, Schrimmer Insurance, to solicit bids for coverage.  Schrimmer Insurance contacted 18 carriers and secured pricing proposals from five, including the City’s current carriers. Two carriers declined to submit quotes due to the age of the City’s buildings. One carrier declined due to water reservoirs in the City. Seven other carriers declined to quote due to the inability to compete with the City’s current carriers. Three carriers declined to quote due to a maximum insurable value of $10,000,000, $20,000,000, and $50,000,000.
 

Current market conditions across the nation have made it challenging to find insurance carriers who are willing to quote earthquake insurance policies as a result of losses due to increasing destructive weather events, rising inflation, climate changes, as well as the current weather-related events in California. As a result of these events, insurance carriers are spreading their risk among all their policy-holders in the form of higher premiums in order to pay for these claims. For this reason, Schrimmer Insurance was only able to secure five pricing proposals.
 

Staff evaluated the costs and elements of all proposals and recommends renewing the City’s earthquake insurance policy with Landmark American (Quote #1) for a policy limit of $5 million at a 10 percent deductible, and with General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance Company, and Transverse Specialty Insurance for excess coverage of $76.98 million policy limit at a 10 percent deductible, with a total premium cost of $356,181, which is $25,204 more than the prior year premium amount.

Sufficient funds for the earthquake insurance premium have been included in the adopted Fiscal Year 2023-2024 Risk Management Budget. Staff recommends acceptance of the proposals of Landmark American Insurance Company ($5 million) and General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance and Transverse Specialty Insurance Company ($76.98 million) to include a 10 percent deductible at an annual premium cost of $356,181.