Metro - File #: 2019-0027

• File #: 2019-0027
• Type: Program
• Status: Agenda Ready
• File created: 1/22/2019
• In control: Finance, Budget and Audit Committee
• On agenda: 4/17/2019
• Title: AUTHORIZE the Chief Executive Officer to negotiate and purchase All Risk Property and Boiler and Machinery insurance policies for all property at the current policy limits at a not to exceed price of $3.1 million for the 12-month period May 10, 2019 through May 10, 2020.
• Sponsors: Finance, Budget and Audit Committee
• Indexes: Budgeting, Expo Line Operating Project (Project), General Overhead (Project), Gold Line Operations (Project), Insurance, Los Angeles Union Station, Maintenance practices, Metro Exposition Line, Metro Gold Line, Metro Green Line, Metro Orange Line, Metro Rail A Line, Metro Rail B Line, Metro Rail C Line, Metro Rail E Line, Metro Rail L Line, Metro Red Line, Non-revenue Vehicles, Operations and Maintenance, Operations Maintenance (Project), Operations Transportation (Project), Owned Property (Project), Program, Project management, Purchasing, Rail Operations - Blue Line (Project), Rail Operations - Green Line (Project), Rail Operations - Red Line (Project), Rolling stock, Station operations, Terrorism, Union Station Property Management (Project)
• Related files: 2019-0281

Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
APRIL 17, 2019

Subject
SUBJECT: PROPERTY INSURANCE PROGRAM

Action
ACTION: PURCHASE ALL RISK PROPERTY AND BOILER AND MACHINERY INSURANCE

Heading
RECOMMENDATION

Title
AUTHORIZE the Chief Executive Officer to negotiate and purchase All Risk Property and Boiler and Machinery insurance policies for all property at the current policy limits at a not to exceed price of $3.1 million for the 12-month period May 10, 2019 through May 10, 2020.

Issue
ISSUE

The All Risk Property and Boiler and Machinery insurance policies expire on May 10, 2019.

Discussion
DISCUSSION

Property insurance protects against losses to our structures, fleets and improvements, which are valued at approximately $12.3 billion up from last year's $12.1 billion. The increase in total insured value is primarily due to general replacement cost growth along with revaluation of both heavy and light rail vehicles and the addition of the Southwest Yard to Metro's property program. Property insurance is required by many contracts and agreements, such as our lease/leaseback deals involving a number of our operating assets.

Our insurance broker, USI Insurance Services ("USI") marketed the property program to qualified insurance carriers to obtain property insurance pricing with coverage limits of $400 million. Quotations for our property insurance program were received from carriers with A.M. Best ratings indicative of acceptable financial soundness and ability to pay claims. Final pricing is pending, so the quotes serve as a not to exceed cost excluding contingency for unanticipated adjustments before policy binding.

The Recommended Program secures the All Risk deductible at $250,000 with no earthquake coverage and a flood deductible at 5% per location subject to a $250,000 minimum. USI continues negotiations with carriers regarding deductible limits on selected Metro assets including rolling stock, non-revenue vehicles and potential flo...