PROPERTY INSURANCE April 27, 2018

MARKET CONDITIONS To date, this year, results are totally unexpected in view of Hurricane Harvey. Seven Tier I and II districts: Values 9.4 Billion Savings $2.4 Million Savings 14% That will change. Four had no Harvey insured damage (under deductible). Values 4B Savings 2.2 M -26%

WHY WILL IT CHANGE Insurance companies use loss modeling (predictability) for pricing. Hurricane Harvey occurred after the most recent calculations. New models will be prepared later this year. Because of Harvey, Flood maps will be redrawn. MULTI-YEAR RATE GUARANTEE!

LOSS MODELING AIR or RMS (Risk Management Solutions). Determine loss probability for 250, 500 & 1,000 year periods. Gross values anticipate deductibles. Ground Up values do not include deductibles. Analysis includes Flood, Named Storm and Tornados or straight line Wind damage.

Gross Flood Hurricane Tornado/Hail 200 Year .4% 7,643,910 17,469,804 13,195,791 500 Year .2% 9,135,776 31,405,022 17,923,406 1000 Yr .1% 10,280,803 49,250,102 32,557,006 Limits Purchased 10,000,000 50,000,000 200,000,000 Concentration may be used to determine the Tornado, Wind, Hail limit. What is the total value of all schools that are in close proximity to each other?

CONCENTRATION Concentrated Values - Nimitz HS, DAB and Surrounding Area ANDERSON ACADEMY 15,676,115 OGDEN ELEMENTARY 23,205,000 NIMITZ 9TH GRADE SCHOOL 34,146,796 NIMITZ SR. HIGH 80,759,681 DONALDSON ADMINISTRATION BLDG 13,242,450 LEWIS MIDDLE SCHOOL 39,376,674 TEAGUE MIDDLE SCHOOL 36,144,576 JOHNSON ELEMENTARY (Old location) 13,440,124 MARCELLA ELEMENTARY (formerly intermediate) 23,227,750 $ 279,219,166

FLOOD Flood limits have been ignored. (Deweyville) Request agent to order Flood Determinations on all property. Zones will be redrawn because of Harvey. Is zone based on location address or elevation of building? Determine if any property is in a Flood Pool. Flood zone identification at policy issue.

WIND DRIVEN RAIN Not covered by all policies. Damage caused by water that does not enter a through a breach in the building shell. Water through windows, doors & roof structures ponds & rises. Several districts had such damage.

DEDUCTIBLES Districts experienced % deductibles for the first time. In many instances the deductible was surprisingly high. It felt like no insurance. % based on scheduled value of building – not of the loss. $100M building = $5M deductible. Should be based on damaged property only. Consider Maximum Deductible.

FEMA RELIANCE Some districts purchased minimum limits of insurance, relying on FEMA. “FEMA representatives express that School Districts and local governments must make a reasonable effort to purchase adequate insurance. Following the receipt of FEMA assistance after a loss, FEMA may impose an “Obtain & Maintain” condition that limits their future responsibilities as set forth within the Stafford Act. Therefore, purchasing higher limits for the perils of Wind, Flood and other related expenses will become more important in the future.”

RFP HINTS Calendar – start five months prior (see FAQs). Market Assignments – blocking, agent of record. Statement of Values – Roofs, Flood zones. Values – HS $160/sf, MS $150/sf, ES $140/sf. Agreed Amount, No Co-insurance, Blanket. Terrorism – Domestic, Foreign, Shooter, Bomber. Risk Pools - Audited Financials & Reinsurance. Layer diagram – easy to understand.

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