Board acts to ensure skyrocketing insurance costs are covered

GRF BOARD RECAP

by Ruth Osborn

Communications Director

Upon the recommendation of the Finance Committee, the GRF Board of Directors unanimously voted on Oct. 22 to postpone two months of contributions to the reserve fund to use the funds to help cover the downpayment for the annual insurance policy renewal, in light of the unprecedented high cost for this needed expense.

This vote came two days before a special meeting to pass a 2025 GRF budget on Oct. 24. The GRF Board deliberated for 2.5 hours before adjourning without approving a budget.

A special meeting was set for Oct. 30, at which time a budget must be approved to meet notification deadlines. At its meeting Oct. 22, the board voted to earmark reserve contributions in November and December to accrue $421,900 in cash in the GRF operating account for the insurance downpayment.

The budget currently forecasts an insurance premium of $2.7 million for the year, an increase of $933,000 from the 2024 budget, according to a presentation given at the special board meeting Oct. 24.

The number is based on forecasts provided by the GRF insurance broker, and accounts for the unbudgeted increase of 2024 and the forecasted increase for 2025.

Insurance costs are skyrocketing nationwide because natural disasters have caused a surge in claims, driving up costs in California and beyond. Also, the number of liability claims involving attorneys is on the rise, further fueling historically high costs.

To make a bad situation worse, there are a limited number of carriers who will insure communities like Leisure World.

The insurance policy downpayment is due in December and is more than what is currently in the GRF operating fund.

In 2023, the GRF was able to make this payment by depleting the operating contingency fund and taking money from the capital fund. This will have to happen again in 2024 but would leave both the operating fund and the capital fund largely depleted.

To mitigate this outcome, the board voted to halt contributions to the reserve fund in November and December, which will channel $421,900 in cash for the insurance downpayment.

The unpaid contributions will show as a liability on the GRF balance sheet until they are paid back in the future. There is no timetable for when those payments will need to be made up.

The GRF reserve fund is 78% funded, which is considered healthy. The delay of contributions will not have a material impact on the health or stability of the reserve fund.

The GRF reserve fund is 78% funded, which is considered healthy.