$65 MILLION COVERAGE UPDATE

- Section A - Property insurance coverage we have secured to date

- Section B - What I have to pay and when

- Section C - Timeline

- Section D - Why this happened

- Section E - Who are the decision-makers

- Section F - Next steps

- Section G - Other questions

Section A - Property Insurance coverage we have secured to date

Of a total $109,213,877 of Property/Fire insurance being sought by TKPOA for the Common Facilities and the 12-Coves, as of October 18th, 2023, the Association has successfully bound $65,000,000. This represents 60% of the total insurance coverage being sought. The cost of this coverage is approximately $2,544,087- 4 times last year’s cost and $1.4 million more than forecasted for in next year’s budget. Approximately 95% of this unplanned extra cost will need to be paid for by townhome property owners in the form of an emergency special assessment. Additionally, the Board has instructed our broker to continue to pursue insurance policy options for the remaining $44,000,000 of required coverage.

Section B - What I have to pay and when

The 2024 budget anticipated an increase in insurance; however, the renewal was in excess of the budgeted amount. Therefore, the Board has voted to assess each townhome owner for the excess amount. Due to the current, unprecedented, disruption within the California insurance market (see below), acquiring the full amount has offered limited options and taken longer than normal, resulting in coverages being acquired in increments. As such, TKPOA must bill our Cove members incrementally, as coverages are secured. To date, the Board has approved two special assessments (one for the first $25,000,000 in secured coverage and the second for the next $40,000,000 in coverage recently secured). The first special assessment has been mailed to each townhome owner. The due date to pay the first assessment is November 1. The specific amount each

Cove Owner must pay is determined by the relative average square footage of each cove. The second assessment will be mailed to you over the next week and will be due December 1. As our broker presents opportunities to buy the additional coverage needed to reach the full value, there will most likely be another special assessment. We will be sending an email to each cove explaining the budget and special assessments that are specific to the cove.

Section C - Timeline

• July 21, 2023 – The Commercial Property Carrier, QBE, notified the TKPOA insurance broker, Liberty Insurance, that QBE would not renew the property insurance, “Due to wildfire exposure, the risk is no longer within QBE’s property appetite.”

• July 27, 2023 – TKPOA changed insurance brokers. A “Broker of Record Letter” was delivered to LaBarre/Oksnee who specialize in HOA insurance requirements. This is the broker used by our management company, FirstService, for many of their other Associations. TKPOA chose this new broker as they have access to more carriers than are former broker.

• September 1, 2023 – TKPOA’s new insurance broker, LaBarre/Oksnee, took the Associations policies out to market. Note that insurance carriers will not submit proposals sooner than 30 days prior to the end of the current policy period. TKPOA’s policy period is October 1st to September 30th the following year.

» LaBarre/Oksnee had 30-days to solicit and receive insurance quotes.

» LaBarre/Oksnee went to 47 carriers for quotes.

» 29 of those carriers declined to bid.

» A 2nd insurance broker was engaged. The prices quoted by the 2nd broker closely matched the prices presented by LaBarre/ Oksnee.

• September 28, 2023 - the Board voted to bind the first $25,000,000 of Property/Fire insurance for the Common Facilities and the 12-Coves.

• October 18, 2023 - the Board voted to bind an additional $40,000,000 of Property/Fire insurance for the Common Facilities and the 12-Coves.

Section D - Why this happened

According to the brokers in the Tahoe basin, the California insurance market has collapsed and continues to harden. Insurance carriers face re-insurance issues, which are causing carrier capacity issues. The carriers do not have the same limits of insurance to offer as in previous years, so carriers are limiting the amount of coverage they will offer at any one location, which makes obtaining coverage for $100 million in property extremely difficult if not impossible. Other HOAs in the Tahoe Basin, as well as other parts of California, are facing the same scenario with reduced coverages and extraordinary premiums, and many cannot get more than 50% coverage of their full insurable value.

Section E - Who are the decision-makers

The TKPOA Board has the fiduciary responsibility and authority to make these decisions. The Board has consulted extensively with our broker, other brokers in the Tahoe basin, and our Association’s legal counsel. All agree that we are in unprecedented times. With much discussion, the Board has been advised to obtain as much coverage as possible up to the full amount. Note, that this may not be possible.

Section F - Next steps

The Board has advised the TKPOA broker to work to obtain the additional $44,000,000 required for full coverage as soon as possible. In parallel, the Board is investigating options for the coming years. Due to changing environmental and economic risks, the insurance industry is expected to remain unsettled for the foreseeable future.

We are monitoring options that may become available via the state of California, which recently announced new legislation around this issue. There may also be new options available via the State’s FAIR Plan to allow higher commercial coverage in the future. However, these options may not come available until as late as December 2024. Note that even with these upcoming legislative changes, it is likely that the insurance market will remain costly for the foreseeable future.

Section G - Other questions

We will continue to keep you posted with information as we receive it. Please attend the Townhall on November 7th that will provide additional information on this subject.