Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
APRIL 11, 2018
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 award All Risk Property and Boiler and Machinery insurance policies for all property at the current policy limits at a not to exceed price of $2.5 million for the 12-month period May 10, 2018 through May 10, 2019.
Issue
ISSUE
The All Risk Property and Boiler and Machinery insurance policies expire on May 10, 2018.
Discussion
DISCUSSION
Property insurance protects against losses to our structures and improvements, which are valued at approximately $12.1 billion up from last year's $11.9 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. Property insurance is required by many contracts and agreements, such as our lease/leaseback deals involving a number of our operating assets.
Natural disasters last year will take a toll on property insurance carriers. Catastrophic events included Hurricane Harvey (estimated $40 billion in insured losses), Hurricane Irma (estimated $35 billion in insured losses), Hurricane Maria (estimated $30 billion in insured losses), California wildfires (estimated $12 billion in insured losses) and earthquakes in Mexico (estimated $1.5 billion in insured losses). Commercial property prices, which had been decreasing for much of the recent past, now indicate increases in the single digits according to a March 2018 Willis Towers Watson commercial lines insurance pricing survey. Pierre Laurin, Willis Towers Watson's Americas property/casualty sales and practice leader for insurance consulting and technology, said, "Last year's weather disasters were some of the most financially disruptive in history, and the survey results indicate we're likely now ...
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