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 $73.95 million to Landmark America Insurance, General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance, and Transverse Specialty Insurance for a one-year term from April 19, 2023, through April 19, 2024.

The City’s current earthquake insurance policy, which expires on April 19, 2023, provides building, structure, and contents coverage for City owned buildings. Last year, the City’s total insurable value amount was $78.06 million and this year there has been a slight increase in the total insurable value to $78.95 million.  In an effort to secure the lowest cost insurance renewal options staff requested the City’s insurance broker, Schrimmer Insurance, to solicit bids for coverage.  Schrimmer Insurance contacted 19 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. Ten other carriers declined to quote due to “no compete clauses” with the City’s current carriers. Two carriers declined to quote as they were unable to provide sufficient insurable value capacity.

Current market conditions for securing property insurance has been challenging, especially when trying to find insurance carriers who are willing to quote earthquake/flood insurance policies. This is, in part, due to the impact of cumulative loss payments made over the past several years for hurricanes and wind damage in the southern and eastern regions of the United States, as well as current weather-related events in California. As a result of these coverage events, insurance carriers appear to be allocating risk and recouping their costs by assessing higher premiums on their policy-holders. For this and other reasons, Schrimmer Insurance was only able to secure one quote that included coverage from five separate companies to provide a combination of primary and excess coverage. If approved, Landmark American Insurance would provide primary coverage, and General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance, and Transverse Specialty Insurance combined would provide excess coverage.

The proposal for the City's consideration is a combination bid from four of the City’s current carriers and one new carrier added to the excess coverage layer. This bid (Quote 1) is from Landmark American Insurance (as primary insurer), and General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance Company, and Transverse Specialty Insurance (as excess coverage providers) with an aggregate policy limit of $78.95 million and a 10 percent deductible at an annual premium of $330,977. This represents a premium increase of $28,009 from last year.

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 and with General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance Company, and Transverse Specialty Insurance in combination for excess coverage of $73.95 million policy limit at a 10 percent deductible with a total premium cost of $330,977, which is $28,009 more than the prior year premium amount.
 
Landmark American Insurance, General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance Company, and Transverse Specialty Insurance Company all have insurance ratings by A.M. Best of A++, A+, A, or A- which indicates an excellent financial strength rating, and all demonstrate a high level of financial capitalization.

Sufficient funds for the earthquake insurance premium have been included in the adopted Fiscal Year 2022-2023 Risk Management budget.  Staff recommends acceptance of the proposals of Landmark American ($5 million) and General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance and Transverse Specialty Insurance Company ($73.95 million) to include a 10 percent deductible at an annual premium cost of $330,977.