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Title: Recommendation: I recommend that the School Board approve the purchase of property insurance effective December 31, 2005 to December 31, 2006 at a premium cost not to exceed $9.4 million. Description: · The policy will cover $2.948 billion in total property values, with catastrophic policy limits of $215 million. There is a $314 million increase (11.9%) in total insured values due to the opening of four new schools; additions and modernizations to existing schools; an increase in square foot replacement value of approximately 8%; increased values for replacement of furniture, fixtures and equipment; and a premium rate increase of approximately 35%. The premium equates to 30.59 cents per $100 of total insurable values. · The premium also includes projected premium ($100,000) to add two new schools to our schedule when they open next August. This projected premium would not be paid until the schools actually become the property of the District in August. · There is a potential $25 million of increased policy limits above the current $190 million which may be purchased for an additional $250,000 to $300,000. With the probable maximum loss (PML) for a 100-year storm ranging from $156 million to $330 million, we recommend purchasing the additional capacity, if available. · The named windstorm deductible has increased from 4% to 5% of values at damaged locations subject to a $10 million overall per occurrence minimum. There is no maximum limit on the named windstorm deductible. · The new policy will have an all risk minimum deductible of $10 million rather than our current Self-Insured Retention (SIR) of $10 million. This change should clarify dealings with The Federal Emergency Management Agency (FEMA), which has denied reimbursing for SIR’s, but considers deductibles to be reimbursable upon the Declaration of a Federal disaster. · The District has previously requested and received confirmation from the State Office of Insurance Regulation of the “Reasonableness” of our property insurance program to comply with the Stafford Act requirements from FEMA. The District will again request this confirmation from the state upon Board approval of this agenda item. · For four years the District has chosen to self-insure the first $10 million of any loss (after the per location deductible) for a total four-year premium savings of $6.0 million. We now recommend accepting the all risk deductible in place of the $10 million SIR for an estimated savings this year of $2.5 million. · As of December 1, 2005, at least 10 current carriers in our program have declined or reduced their participation. If the Broker is unable to replace this lost capacity, the District will have to assume the coverage in those layers with a corresponding reduction in premium. As of 12/01/05 the unauthorized/unfilled capacity is $109 million. If and when market conditions improve, our broker will continue to place carriers into these uncovered portions of our program for a pro-rated premium. · The Risk Management Department and our Broker (Arthur J. Gallagher & Co.) have analyzed the advantages and disadvantages of “pooling” the District’s property insurance with other entities/pools and do not find “pooling” to be a viable alternative. · Our broker has contacted more than 50 insurers/reinsurers and assembled a consortium of carriers in order to cover our property insurance renewal. · Arthur J. Gallagher & Co. is compensated on a flat fee basis, which will be reduced by any commissions received when a carrier refuses to reduce their premium when not paying commission, as approved by the Board on July 21, 2004. · The Districts’ Finance Committee has reviewed this recommendation. Financial Impact: For Additional Information, contact: Josepy Joseph M. Moore (Moorej@palmbeach.k12.fl.us) / Dianne L. Howard Attachments (list):
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