7c supp
ITEM NO: 7c_Supp DATE OF MEETING:__6/22/2010_______ Property Insurance Renewal Update Presented 6/22/2010 Jeff Hollingsworth, Risk Manager Outline Property Insurance Program Recap Structure of Property Insurance Property Insurance Cost Factors Property Insurance Challenges Insurance for Capital Projects Renewal Projection for July 1, 2010 2 Current Structure of Property Program (Major Deductibles Per Occurrence) $1Million Fire and Extended Coverage $1Million Flood $50,000 Course of Construction $25,000 Fine Arts $100,000 Equipment Breakdown 3 Current Structure of Property Program (Main Limits Insured Per Occurrence Unless Noted) $1 Billion Fire/Extended Coverage Limit; $25 Million Flood Limit (Annual) $50Million Course of Construction Limit $350 Million Terrorism $100 Million Equipment Breakdown $100 Million Business Interruption 4 Current Structure of Property Program First $25 Million with Lexington (Chartis) Excess coverage with various Lloyds Syndicates A+++ Rating Procured by Alliant Insurance 5 Property Insurance Cost Re-Cap 2010 Estimate Assumes No Purchase of Earthquake Insurance $4,500,000 $4,000,000 Property Insurance Premium Property Value x $1000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Est 6 Property Insurance Coverage Annual Policy July 1st through June 30th Fire and Extended Coverage Wind, Spills, Collapse, Impact, and Explosion Covers Equipment Breakdown Mechanical/Electrical Equipment Covers Owned, Leased, Rented Property Example Applied to leased generators Covers Business Interruption If Due to a Loss Covered by the Policy 7 Property Insurance Coverage Annual Policy July 1st through June 30th Covers Flood Excludes Land Movement/Earthquake Covers Terrorism Covers Projects Under Construction * All subject to exclusions either by peril, location, or type of property 8 Property Insurance Cost Factors Rates depend on: Total Insurable Values Reported: Values of Projects Under Construction Loss Record Primary and Reinsurance Markets Underwriting of Locations (Port Portfolio) Cost of Major Materials Catastrophic Exposure (Wind, Earthquake, Flood ) 9 $3,000,000,000 Insured Values - Port Property Insurance $2,500,000,000 $2,000,000,000 AIRPORT TOTALS $1,500,000,000 SEAPORT TOTAL REAL ESTATE TOTAL $1,000,000,000 $500,000,000 $- 2009 2010 10 Aviation Property Losses Total Property Damage-Net of Collections 2005 Losses = $140,000 Recovery = $104,000 2006 Losses = $280,000 Recovery = $115,000 2007 Losses = $94,000 Recovery = $87,000 2008 Losses = $113,000 Recovery = $96,000 2009 Losses = $34,000 Recovery = $18,000 2010 Losses = $19,000 Recovery = $9,000 Collection Recovery ~ 63% 11 Non-Aviation Property Losses Total Property Damage-Net of Collections 2005 Losses = $9,000 Recovery = $3,500 2006 Losses = $61,000 Recovery = $45,000 2007 Losses = $42,000 Recovery = $26,000 2008 Losses = $67,000 Recovery = $33,000 2009 Losses > $1,000 2010 Losses > $1,000 Collection Recovery ~ 60% Excludes T-86 Spout Losses in 2006 and 2007 12 Earthquake Insurance Challenges Low limits compared to values at risk Past loss history with Nisqually in 2001 New modeling used by insurers Port has high insurable values Port has aggregation of values Insurers with aggregation of values 13 $1,800,000 Initial Earthquake Premium Quotes $1,600,000 $1,400,000 $1,200,000 $1,000,000 $50 Million Limit $75 Million Limit $800,000 $100 Million Limit $600,000 Port Insurance 2009 $400,000 $200,000 $0 Seaport Airport Real Estate Notes: Airport coverage is for AOB and Parking Garage Only Seaport is for Container Terminals, Cranes, and Cruise Only Real Estate is for Pier 69 Facility Only (Building Only and Building/Pilings) 14 Capital Projects Insurance Provided : Coverage For Projects less than $50 Million in Value Aviation Capital Costs ~ $ 70 Million* Non-Aviation Capital Costs ~ $40 Million * * Deductible of $50,000 Includes interests of contractors Rental Car Facility Port has a separate policy for this project Insured to $280 Million including earthquake East Marginal Grade Separation Project Port has a separate policy for this project Insured to $20 Million including earthquake * Excludes Rental Car Facility ** Excludes East Marginal Way Grade Separation 15 Property Renewal Forecast July 1, 2010 Port has budgeted $1.4 Million for renewal will depend on: Final rate offered to Port; Final property values used for renewal; Final list of capital projects under construction during policy year; Renewal range estimated to be between $1.3 Million to $1.4 Million; With no major changes to overall structure, including deductibles. No purchase of earthquake coverage/FEMA still a source of funds Reviewing this issue the Divisions 16
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