Title: IN1 Property Insurance

Recommendation:
I recommend the School Board maintain the current Property Insurance Policy limits of $50 million at a cost of $8,921,144 effective December $31, 2006 to December 31, 2007.

Description:

On December 13, 2006, The School Board approved the attached Agenda Item #IN4 which allowed the District to purchase up to $140 million of property insurance at a premium cost not to exceed $16.66 million.

After continued deliberations with the market, The District purchased $50 million in coverage at a cost of $8.92 million.  Per the attached Exhibit I, this $8.92 million premium is $1.12 million more than the District paid last year for $125.4 million in coverage.

The District had our Broker continue to explore the purchase of increased policy limits.  They have reported that The District can purchase an additional $10 million in coverage for $1.1 million plus $75,240 as an assessment to Citizens.  They were not able to find enough companies to provide $25 million excess of our existing $50 million coverage for a reasonable premium.

Exhibit I also shows that over the last three years, the District spent more than $19.3 million in premiums for more than $125 million in coverage.  The District suffered $65 million in damages from three catastrophic hurricanes during that period.  The total potential recovery from property insurance for the $65 million in damages is only $4.8 million for Hurricane Wilma and nothing for Hurricanes Jeanne and Frances. 

Therefore, the question becomes, "When does spending an increase of millions of dollars in premiums become unreasonable when compared to District budget constraints and only minor potential recoveries from insurance carriers?"  Under current conditions, we do not believe the expenditure of more than a million dollars for only $10 million more than the existing $50 million in policy limits is a financially prudent decision for the District at this time.

We also believe that the State Office of Insurance Regulation will continue to confirm the "Reasonableness" of our property insurance program to comply with the Stafford Act requirements from FEMA.

Financial Impact:
Zero

For Additional Information, contact:
Joseph M. Moore (moorej@palmbeach.k12.fl.us)/ Dianne L. Howard

Attachments (list):
Property Ins attachments.doc