Return to Written Question 13-13(4), asked by Mr. Krutko to the Minister of Finance concerning insurance for education facilities.
1. Does the government have property insurance?
The GNWT has property insurance coverage for $1.6 billion of assets on behalf of the GNWT and various boards and Agencies under an All Property Insurance Policy. this property insurance includes all schools operated by Divisional Education boards and Councils. It does not include single family and duplex dwellings, owned by the NWT Housing Corporation.
2. Is this insurance a replacement cost policy?
This insurance is written on a replacement cost basis.
3. If it is a replacement cost policy, what is the definition of replacement cost?
Replacement cost means that, on a total loss, the insurance proceeds will pay the cost to replace the building with a building of like size, kind and quality as the original structure and will include an allowance for legislated code upgrades and of course, architectural fees. the insurance also covers the replacement or repair of building contents, demolition and debris removal if required and the incremental costs of alternate facilities. However "replacement cost" will only be received if the asset is replaced. If an asset is not replaced, the policy will pay the "actual cash value" (ACV) only. (ACV is the agreed "replacement cost" of any item of property minus its accumulated depreciation).
4. What is the process followed when the GNWT is making a claim under its policy?
The process for a substantial claim is as follows:
a) The loss is immediately reported to the Risk Management & Insurance section of the Department of Finance (RM&I) which in turn immediately reports the loss to the GNWT's insurance broker and an adjuster.
b) The Adjuster visits the loss site and determines the full extent of the loss.
c) RM&I obtains original plans for the building from the Department of Public Works & Services (PW&S).
d) On behalf of the insurers, the adjuster has an engineering firm prepare, according to the plans, specifications for the repair of the building which are then reviewed by PW&S. Any suggested changes are reviewed with the adjuster.
e) After the parties have agreed to the specifications the adjuster engages a northern contractor to provide a replacement cost estimate based on the agreed specifications. This cost estimate is also reviewed by PW&S.
f) Once agreement on this cost estimate is reached, it is established as the "Replacement Cost" for insurance purposes.
g) With this agreement, RM&I may submit an interim claim which will be limited to the least of the costs incurred to date, the agreed "Replacement Cost" or the "Actual Cash Value".
h) The replacement building does not need to resemble the destroyed building in size, kind or quality, however, the proceeds of insurance received will not exceed the lesser of the agreed "Replacement Cost" for the actual cost to replace the asset.
i) To determine the recovery for contents, a list of all contents is obtained from the department responsible with an estimate of which items are destroyed and which can be repaired.
j) Once all costs are determined and agreed, a final claim may be submitted.
5. Is there a deductible for each claim or for the whole year and if so, how much?
For losses that occurred in the 1995/96 fiscal year each loss was subject to a deductible of $ 100,000.
6. What is the link between insurance proceeds received and the amount spent on a new facility?
Insurance proceeds are credited to the GNWT's consolidated Revenue Account. The expenditures incurred to repair or replace a damaged building are subject to the normal budgetary approval processes, whether by supplementary appropriation or inclusion in the capital and main estimates. This procedure reflects the fact that:
a) the replacement may be different that the original and therefore, is not directly linked to the insurance proceeds; and,
b) a replacement may not be made but proceeds may still be received, but will be limited to the "actual cash value".