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 $70.69 million to Everest Indemnity, QBE Specialty Insurance, and General Security Insurance for a one-year term from April 19, 2021, through April 19, 2022.

The City’s current earthquake insurance policy, which expires on April 19, 2021, provides building, structure, and contents coverage for City owned buildings.  Last year, the City’s total insurable value amount was $75.56 million.  This year there has been a slight increase in the total insurable value to $75.69 million due to some improvements made at City facilities. 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 17 carriers and secured pricing proposals from eight firms, including the City’s current providers.  Two carriers declined to submit quotes due to the age of the City’s buildings.  Seven other carriers declined to quote due to “no compete clauses” with the City’s current carriers. 

Staff reviewed the viable proposals that were submitted and rejected two that had a high primary coverage premium.  The City’s required insurance coverage level is $75.69 million based on the building replacement and content values.  Coverage limits of less than that amount would not provide sufficient coverage in the event of a widespread catastrophic earthquake.

The most cost-effective proposal for the City's consideration is a combination bid from four of the City’s current carriers.  This bid (Quote 1) from Landmark American Insurance (primary insurer), Everest Indemnity, QBE Specialty Insurance, and General Security Insurance has an aggregate policy limit of $75.69 million and a 10 percent deductible at the annual premium of $293,538.  This represents a premium increase of $13,657 from last year.
 
A summary of the City’s current coverage and all feasible quotes are listed as follows:

Company Policy Limits Deductible Premium Current Coverage Landmark American Insurance $5 million 10% $279,880 (2 layers) Everest Indemnity, QBE Specialty Insurance &         General Security Insurance $70.56 million       Total Policy Limit $75.56 million     Quote 1 (Recommended) Landmark American Insurance   $5 million 10% $293,538 (2 layers) Everest Indemnity, QBE Specialty Insurance &         General Security Insurance $70.69 million       Total Policy Limit $75.69 million     Quote 2 Arch (primary) $5 million 10% $200,000 Quote 3 ICW (primary) $5 million 10% $185,000

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 Everest Indemnity, QBE Specialty Insurance, and General Security Insurance for the excess coverage of $70.69 million, for a total of $75.69 million policy at a 10 percent deductible with a total premium cost of $293,538, which is $13,657 or approximately five percent above the prior year's premium amount.

Landmark American Insurance, Everest Indemnity, QBE Specialty Insurance, and General Security Insurance all have insurance ratings by A.M. Best of 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 2020-2021 Risk Management Budget.  Staff recommends acceptance of the proposals of Landmark American ($5 million) and Everest Indemnity, QBE Specialty Insurance, and General Security Insurance ($70.69 million) to include a 10 percent deductible at an annual premium cost of $293,538.

General Plan Goal LU 17.1 Adequate Community-Supporting Uses