Budget ’24: City’s $350,000 insurance purchase will add 0.99 percent to tax increase

City Hall plans to improve its insurance coverage, spending nearly $350,000 to ensure its physical and digital assets are protected from threats such as fire or cyber hackers.

City Hall plans to improve its insurance coverage, spending nearly $350,000 to ensure its physical and digital assets are protected from threats such as fire or cyber hackers.

During its recent budget meeting, the city council voted unanimously to authorize the finance department to hire a $180,000 property appraisal services consultant to appraise the buildings to ensure proper insurance coverage applies to those locations.

This is a one-time expense; then there would be an annual update cost of $6,000.

The council also authorized the department to obtain cyber insurance for $169,600, which will provide $3 million in coverage.

Those two items total $349,600 and would add 0.99 percentage points to the proposed 2024 municipal tax increase.

Building insurance

Property insurance values ​​require updating so that building claims under types of coverage other than guaranteed replacement costs have sufficient coverage, a budget report says. Professional appraisal services would reduce the risks of undervalued structures.

The city has property insurance on 163 buildings, with the sites falling into three categories, the report continued. This includes Guaranteed Replacement Cost (GRC), of which there are 26 buildings; recovery cost (RC), of which there are 108 seats; and Actual Cash Value (ACV), of which there are 29 structures.

With GRC—the highest coverage—insured buildings will be replaced just as before with full funding if a disaster destroys them.

Under RC — medium coverage — these buildings will be replaced up to the amount of the liability limit. The city must insure up to 90 percent of the site’s value, otherwise it becomes a co-insurer and shares in the loss.

With ACV — lowest coverage — the payout on a destroyed building will see a deduction for depreciation.

The council is concerned that if it claims a building that is not protected by the GRC, it could be vulnerable to risks affecting its ability to repair or replace, the report added. The buildings with the highest priority for revaluation are those in the RC category, which will soon be reclassified.

“A building with guaranteed replacement costs will be rated, but if it falls off the list, the insurer no longer rates it and raises rates,” finance director Brian Acker told the council. “We have a significant number of buildings that are undervalued and therefore underinsured. We might have a serious problem there.”

It is the supplier that moves the buildings to lower categories because as the structures age, the suppliers do not want them at the GRC level because of the risks they carry, he continued. Still, updating the ratings on older buildings should protect them for five to seven years.

The city gets full insurance coverage for that $3 million value, though that’s a cap because insurers want to limit their losses, the finance director added. In addition, City Hall pays $600,000 a year on its insurance premiums.

Cyber ​​insurance

City Hall does not have cyber insurance, which is worrisome because there are daily reports of organizations — including municipalities — suffering a virtual attack or breach, Acker said.

The administration has not been able to obtain such insurance in the past few years because the requirements have changed so much, he continued. However, if they purchase coverage, not only will they have financial protection, but a professional team will also repair the breach.

“It’s only a matter of time before that happens,” Acker added.

IT Director Wade McKay said all city staff are trained to watch for phishing emails and scams, while education is the main area of ​​focus. Providers require such training before even providing coverage.

Another secure method the department encourages is the use of multi-factor authentication when accessing online accounts.

Count. Crystal Froese agreed with cyber insurance, pointing to world events and, closer to home, the virtual attack on Saskatchewan Polytechnic a few years ago. She noted that this institution is silent on how the situation happened and how much money it cost to remove it.

“I think it’s really important to be properly insured. If a building collapses, we have big problems in terms of insurance,” she added.

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