7b

PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.       7b 
STAFF BRIEFING             Date of Meeting    June 28, 2016 

DATE:    June 10, 2016 
TO:     Ted Fick, Chief Executive Officer 
FROM:    Jeff Hollingsworth, Sr. Manager Risk Management 
SUBJECT:  Report on the Port Property Insurance Renewal for the Policy Year
beginning on July 1, 2016 
SYNOPSIS 
This report is on the upcoming Port's property insurance renewal. The Port's current
property insurance program expires on June 30, 2016. The Port is in the process of
finalizing the purchase of this coverage for the policy year starting on July 1, 2016, and
expiring on June 30, 2017. Under the current delegation of authority, the CEO has the
authority to purchase the insurance. 
BACKGROUND 
The Port's property policy covers many hazards and perils that can cause direct physical
damage to Port assets and create business interruption. It also includes coverage for direct
physical loss caused by electrical and mechanical equipment (equipment breakdown
coverage). The renewal process for this policy includes updating the Port's underwriter
on current assets, revenue streams, and future capital projects. Claims and losses from the
current policy year and prior policy years are reviewed as well. The Port uses an
insurance broker, Hugh Wood Inc. to help collect and aggregate the renewal data and
then submit the data to incumbent and prospective insurance carriers to obtain quotes for
the renewal. 
The basic elements of the property insurance program consist of a $750 million peroccurrence
limit at a $500,000 per-occurrence deductible. Terrorism coverage is provided
with a sub-limit of $350 million per occurrence. Coverage for flood is capped at an
annual aggregate of $25 million above a flat $500,000 deductible. Property insurance
coverage extends to scheduled assets as well as new assets under construction (up to $50
million in value), including renovations to existing assets. The insurance is purchased on
a replacement cost basis. 
The Port does not purchase earthquake insurance for its property or assets but reviews
this coverage annually. Earthquake insurance is not currently offered at a reasonable cost
nor with adequate limits for the Port to consider purchasing this coverage. In 2014, the
Port reviewed the costs associated with purchasing a catastrophe bond with limits of $100

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 28, 2016 
Page 2 of 3 
million. The pricing for the bond exceeded $3 million in additional premium a year. The
bond was deemed to be too costly for the limits offered. 
The assets the Port will renew its property insurance on include assets that are currently
under the management of the Northwest Seaport Alliance. The Port of Seattle as the
current owner of these existing assets continues to  purchase property insurance (i.e., 
continue to insure) on these assets. The Port of Seattle's cost for the property insurance
on these assets is a reimbursable expense of the Northwest Seaport Alliance. 
Risk Management is also working with the project teams on the property insurance for
two Airport projects that exceed $50 million, the North Satellite Renovation and
Expansion, and the International Arrivals Facility.  Due to the values associated with
these projects, property insurance will be purchased for the value of these assets, while
they are being built, through a separate policy, a builder's risk policy, one policy for each
project. When these projects are completed in the future, they then will be insured under
the Port's main property insurance policy. A builder's risk policy was bound on the
North Satellite Renovation and Expansion project in May and covers both the Port and its
contractors as insureds for the full project value. The cost of this builder risk policy is not
included in the renewal cost of the Port's July 1, 2016, property insurance renewal. A
similar policy will be purchased for the International Arrivals Facility prior to the start of
construction in August of this year. 
The current state of the insurance markets dictates in a large part the type of pricing that
the Port will obtain on its renewal. Property coverage for the past year has been flat in
terms of the rate per value of insured assets (insurable values). The property insurance
industry as a whole has a lot of capacity to underwrite risks in 2016, in part due to a low
number of natural catastrophes in 2015. The Port in the past year has had its insurable
values adjusted upward to approximately $4.95 billion since the renewal a year ago. The
value of the Port's insurable assets are the largest cost driver of the Port's insurance costs.
The chart at the end of this memo illustrates the increase of the Port's insurable values
over the years relative to the cost of property insurance. The Port has been able to
minimize the cost of its property insurance relative to the increase of its insurable values. 
Risk Management will review the final quotes and coverage options that our broker
provides and will then consider options to limit or enhance coverage. The goal is to
minimize premium increases but at the same time not under-insure critical property. Risk
Management will review options with division budget and finance to get their input prior
to binding coverage on June 30. 
The insurance was renewed on June 30, 2015, at a cost of approximately $1.51 million. 
The renewal cost for July 1, 2016, is anticipated to be between $1.585 million and $1.60 
million.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
June 28, 2016 
Page 3 of 3 
$6,000,000
Property Insurance Renewal July 1, 2016 
Premium versus 
$5,000,000                          Port Insurable Values 
Property Insurance Premium
Property Value x $1000
$4,000,000

$3,000,000

$2,000,000

$1,000,000

$-
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Est

ATTACHMENTS TO THIS BRIEFING 
None. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
September 8, 2015  Briefing on liability insurance renewal. 
June 9, 2015  Briefing on property insurance renewal.

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