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 $88.68 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, 2025, through April 19, 2026.

The City’s current earthquake insurance policy, which expires on April 19, 2025, provides building, structure, and contents coverage for City-owned buildings.  Last year, the City’s total insurable value amount was $81.98 million. This year there has been an significant increase in the total insurable value to $93.68 million to account for increased costs in materials, supplies, and inflation. 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 13 carriers and secured pricing proposals from five, including the City’s current carriers. Seven carriers declined to submit quotes due to the age of the City’s buildings. One carrier declined due to water reservoirs owned by the City.

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

The most cost-effective proposal submitted for the City's consideration was a combination bid from five of the City’s current carriers. This bid (Quote 1) is from Landmark American Insurance acting as the primary insurer, with excess layers of insurance provided by General Security Insurance, Palomar Excess and Surplus Insurance, Trisura Specialty Insurance Company, and Transverse Specialty Insurance, for a total aggregate policy limit of $93.68 million at an annual premium of $385,936. This represents a premium increase of $29,755, or approximately 8.4% over the City's current premium.

Staff evaluated the costs and elements of all proposals and is recommending 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 $88.68 million policy limit at a 10 percent deductible, with a total premium cost of $385,936, which is $29,755 more than the current 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+, or A- which indicates an excellent financial strength rating, and all demonstrate a high level of financial capitalization.