By Sam Richards

Staff writer

 

Tuesday, January 21 (11:00 a.m.): Rossmoor is expected to spend about $6 million less on its master property insurance policy this coming year than had originally been budgeted, but that doesn’t mean GRF can get anything close to full coverage for all the buildings and infrastructure in the valley.

The  valuation of all those buildings and infrastructure for 2025 insurance purposes has been set at $2.77 billion, a slight increase from the $2.659 billion figure used as the “value” of Rossmoor’s various assets in 2024.

The total adopted property insurance budget, to be paid by GRF and the participating Mutuals, for the master policy in 2025 will be about $19.23 million, about $6.3 million less than the $25.55 million the same level of coverage cost in 2024, said GRF General Manager Jeff Matheson. It hasn’t been decided how that unbudgeted savings will be used, Matheson said; some possibilities include buying down the cost of this insurance coverage, increasing coverage limits, additional work on fire-hardening projects and building up a “self-insurance” fund (more about that later in this story).

The Mutuals will be directly involved in these decisions, Matheson added. Only Mutual 58 (The Waterford) and Mutual 61 don’t  participate in the master insurance policy.

Rossmoor faces the same problem in 2025 as it faced last year – it can’t obtain nearly enough insurance to cover all of its $2.77 billion in assets, Matheson said. Rossmoor’s insurance broker, A.J. Gallagher, has obtained coverage for $1.26 billion, about 45.5% of the overall valuation. That is a slight improvement over 2024, and though the 45.5% number is considered enough to cover a catastrophic once-in-10,000-year disaster like a wildfire, Matheson said, it still falls short of the full insurability needed for the Federal Housing Finance Agency  and the Fannie Mae and Freddie Mac entities it oversees to guarantee mortgage loans in Rossmoor.

Insurance companies worldwide continue to be financially stretched, dealing with claims for numerous wildfires, earthquakes, floods and other disasters. In California, wildfire claims stretched insurers, and the threat of more fires caused some companies to stop writing new policies and/or cancel existing ones.

“Capacity-wise, there’s still no way to get full coverage,” Matheson said last week. “FHFA mortgages are still not any more in play than they were (last year).”

Thus, during 2024, most looking to buy a manor in Rossmoor had to come with all cash. A few lenders have been willing to make some non-standard mortgage loans, and Matheson said he expects more could emerge over time, willing to offer loans, likely with a higher percentage and/or with higher fees than all-cash offers typically do.

The number of homes sold in Rossmoor has a bearing on all residents, because for each home sale to a buyer new to Rossmoor, there is an accompanying membership transfer fee paid. This money goes into GRF’s Trust Estate Fund, from which money for major capital projects comes. So, the fewer homes sold in Rossmoor, the less money there is for capital projects — building, acquiring, or significantly improving a building or physical infrastructure like a water system or electric power system.

GRF officials have heard from a number of residents in recent weeks that self-insurance should be considered as one way to increase the amount of coverage available for the master policy. Self-insurance is, in essence, a person, business or other entity setting aside a pool of money to pay for a potential loss, rather than paying an insurance company to provide that pool of money.

A health plan with a high deductible is considered partly self-insurance, as the individual must pay a significant part of such coverage themselves. Often, those deductibles are paid through a flexible spending account, which serves as a sort of self-insurance money pool. For individuals, self-insurance could be a good option for people without dependents, high-income earners who make enough money to pay losses out of pocket, or for folks (mostly seniors) who have paid off their mortgages and who’ve built up a sufficient nest egg to cover losses.

But generally speaking, Matheson said, insurance companies provide a deeper well, better able to cover a catastrophic loss, repeated major losses or other unforeseen coverage needs.

Matheson said the first $5 million of GRF’s master policy is, in effect, self-insured. But he said that for larger amounts of protection, self-insurance “is not financially feasible” for a business like the Golden Rain Foundation.