ADMINISTRATIVE REPORT

                                           Date: January 8, 1997
                                           Dept. File No. fuscr.wpd
                                           C.C. File: 3651-1

   TO:       Vancouver City Council

   FROM:     Fire Chief/General Manager, Fire and Rescue Services

   SUBJECT:  Evaluation of Vancouver s Commercial Fire Insurance


        The General Manager of Fire and Rescue Services submits this report
   for Council s INFORMATION.


   On August 31, 1994, Council approved the distribution of a  Request for
   Proposal  for a comprehensive review of the Vancouver Fire Department s
   deployment of emergency staff and equipment. The review was also to
   include an unofficial assessment of the anticipated fire insurance
   classification for commercial fire protection based on the Fire
   Underwriters Survey.

   On July 5, 1995, Council authorized the General Manager of Fire and
   Rescue Services to enter into a contract with TriData Corporation for
   management and consulting services for a deployment study and evaluation
   of Vancouver s commercial fire insurance classification. 

   On April 25, 1996, Council endorsed, in principle, a Fire and Rescue
   Services apparatus and staff redeployment proposal known as  Option 6"
   as outlined in the TriData Study. Council also directed the General
   Manager of Fire and Rescue Services to report back with a detailed
   implementation plan for the proposed redeployment of fire apparatus and


   A formal survey of the existing municipal fire protection of the City of
   Vancouver by the Fire Underwriters Survey would likely result in a
   reduction in the previous Class 1 rating (obtained in 1980) to a Class
   2.  The effects on commercial fire insurance rates due to this reduction
   in classification are believed to be minimal. 
   A Class 1 rating can be maintained by implementing specified
   improvements in training, carrying out annual testing of pumps and
   aerial devices, implementing the proposed redeployment (Option 6 of the
   TriData report), and equipping new apparatus to offset deficiencies for
   inadequate equipment on existing apparatus. Some of the suggested
   improvements have already been implemented or have been initiated. The
   detailed implementation planning for Option 6 is well underway, with a
   report to Council scheduled for the first quarter of 1997.


   The purpose of this report is to present the final results of a
   consultant review of the anticipated fire insurance classification of
   the City of Vancouver.


   Vancouver was last independently reviewed by the Fire Underwriters
   Survey (FUS) in 1980. At that time, the Department received a Class 1
   commercial insurance rating. The Class 1 rating is the highest rating
   achievable under this system, and Vancouver is currently the only
   Canadian City rated as Class 1. Most large cities are rated as Class 2
   or Class 3. In North America, very few cities reach the status of Class
   1 and it is unusual for cities over 200,000 populations to be graded as
   Class 4 through 10.

   In an April 25, 1996 report to Council, the General Manager of Fire and
   Rescue Services reported the results of the (TriData) review of the
   deployment of emergency apparatus and staff and the initial predicted
   findings of their simulated fire insurance classification evaluation.
   The consultant concluded, based on an initial evaluation, that a formal
   survey by the Fire Underwriters would likely result in a downgrade of
   Vancouver s current Class 1 rating to a Class 2.

   In a letter dated July 8, 1996, the Fire Underwriters Survey advised the
   City of their intention to carry out an official survey of the municipal
   fire protection of the City of Vancouver between September and November
   of 1997.    


   The following discussion quotes the final Public Fire Protection
   Classification Grading Report prepared by TriData Corporation for
   Vancouver Fire and Rescue Services. The full report is on file in the
   City Clerk's Office.

   The Grading Schedule used by the FUS was devised as a tool to assist in
   setting fire insurance rates for each community. This evaluation of the
   fire defences of communities is used to assist member insurance firms in
   establishing fire insurance rates. Fire insurance rates for commercial
   properties are partially based on the level of public fire protection
   that is provided in each community. The fire risk characteristics of
   individual properties and historic loss experience for the loss area and
   for similar properties are also considered by most insurance companies
   to establish premium rates for fire insurance. It should be noted that
   fire insurance premiums form only a portion of the total insurance costs
   of a property. Other components of the total insurance costs include
   general liability, earthquake, business interruption, and insurance for
   other risk factors. 

   The evaluation of fire defences is expressed as the City s  public
   protection classification,  which is rated on a 1 to 10 scale. Class 1
   represents the highest level of fire protection, while Class 10
   represents the absence of any effective public fire protection. The
   grading process evaluates a city s fire suppression and control
   capabilities. It considers the operational capabilities of the Fire
   Department, the availability of an adequate and reliable water supply
   for fighting fires, and the systems that are in place for receiving and
   handling fire alarms.

   This fire insurance grading system was not intended or designed as a
   guide for fire protection decisions, although many cities attempt to use
   it in that way. Therefore, it should be noted that the FUS fire
   department rating should not be the sole source of evaluative
   information on a fire department. Although useful as one source of
   information about a fire department, community interests and those of
   the Grading Schedule do not necessarily coincide. The Grading Schedule,
   for example, is directed primarily toward preventing property losses.
   Deaths and injuries are also prevented as a result of this concern, but
   they are not the foremost consideration. The Fire Suppression Rating
   Schedule does not address emergency medical or rescue services and does
   not directly address fire prevention, code enforcement, public fire
   safety education, organizational efficiency, and many other important
   factors considered in a total evaluation of a fire department. In
   addition, it has been impossible to determine what real financial impact
   the rating has on local insurance costs compared to the sometimes
   significant costs of improving the rating. 

   A classification or  grading  study is conducted every 10 to 15 years in
   most Canadian cities. Since Fire and Rescue Services was to undergo a
   comprehensive deployment review (TriData), it was considered an
   opportune time to carry out a simultaneous (although unofficial)
   evaluation of the anticipated fire insurance classification. An estimate
   of the resources required to either maintain or  achieve a Class 1
   rating (if that is ultimately Council s wish) could then be carried out.
   We have been informed by the Fire Underwriter s Survey that they intend
   to officially review Vancouver s rating in late 1997.

   TriData s classification was based on the Fire Suppression rating
   Schedule developed by the Insurance Services Office (ISO)/Commercial
   Risk Services Inc. in the United States. The Canadian FUS uses a very
   similar rating system, however it may not be identical in all respects.
   Although the grading process is influenced by subjective
   interpretations, the actual evaluation should come very close to the
   results predicted by the TriData study. According to the consultant, the
   degree of variation that may occur through the official process in 1997
   is not likely to change the overall predicted classification.

   The grading process was conducted by applying the ISO rating schedule to
   the Vancouver Fire and Rescue Service as it existed during 1995 and
   early 1996. In addition to estimating the grading classification for the
   existing organization, an attempt was made to identify changes and
   improvements that could be made to improve the grading classification. A
   second evaluation was then conducted, using the proposed resource
   deployment known as  Option 6". O ption 6 was the plan that was
   recommended and accepted (in principle) by Council as a result of the
   TriData project for the future redeployment of the Vancouver Fire and
   Rescue Service.

   Grading Results

   The application of the Fire Suppression Rating Schedule to the existing
   resources of Vancouver Fire and Rescue Services concluded that Vancouver
   would achieve a Class 2 rating under the current grading schedule. The
   initial evaluation gave Vancouver 80.65 points out of a theoretically
   possible 100 points. This is within the range for Class 2, but near the
   bottom of the range. A Class 1 rating requires a minimum of 90 points.

   Areas for Improvement

   In the current evaluation the fire alarm and water supply categories
   both came close to their maximum possible scores. The simulated grading
   revealed a number of weaknesses in the current organization and
   operations that could be addressed to quickly and affordably improve the
   grading score. It was found that an increase of approximately 7.58
   points could be achieved by making specific improvements in two areas.
   This would include conducting annual pump tests of all major apparatus
   and making significant improvements in training facilities, programs,
   and record keeping. The enhancements in training are planned and some
   have already been implemented. The pump testing will also be implemented
   in the near future when the testing facility is completed (currently
   under construction).

   While improvements in these two areas would improve the point total (to
   88.23), they would not yield enough points to improve the net score from
   Class 2 to Class 1.

   The cost of an improvement to Class 1 with the existing resource
   deployment was estimated by determining the minimum on-duty staffing
   that would be required to gain 1.8 additional points (to achieve 90
   points), assuming that the personnel would be assigned to existing
   engine and ladder companies. The minimum on-duty staffing for each shift
   would have to be increased from 131 to 155, which would provide a
   minimum of 4 personnel for each existing ladder and rescue company, plus
   a fifth crew member for 11 companies. To implement this change,
   approximately 120 full-time positions would have to be added at a cost
   of almost $7.2 million annually. The consultant noted that this does not
   appear to be a cost-effective approach for Vancouver s present

   Revised Deployment Plan (Option 6)

   The grading was also recalculated with the recommended changes in
   staffing and deployment that would occur under Option 6, the plan
   recommended to the City by the Project Steering Committee and the Fire
   Chief. Only areas related to fire department operation were
   recalculated; the sections related to water supply and communications
   were not changed.

   The grading of this plan included several assumptions:

   1.   The recommended improvements in training would be fully

   2.   The annual testing of pumps and aerial devices would be maintained.

   3.   The recommended apparatus replacement program would be implemented
        and the new apparatus would be in service.

   4.   The new apparatus would be well equipped to offset deficiencies for
        inadequate equipment on the existing vehicles.

   5(a) In fire halls with two companies, one would be designated as an
        engine company, while the other would be designated as a ladder

   5(b) In single company fire halls a quint would be counted primarily as
        an engine company. Partial credit for ladder company service is
        allowed by the grading process.

   This calculation indicates that a score of 92.39 points could be
   achieved with the recommended deployment. A Class 1 grading would be
   achieved with this score.


   The insurance grading process infers that there is a predictable
   relationship between the cost of providing a particular level of fire
   protection and the cost of fire insurance. The more significant factor
   would be the net change in total cost to the community, which includes
   insurance premiums, insured and uninsured losses, fire department
   expenditures and the cost of built-in fire protection.

   It might be assumed that increased expenditures to provide public fire
   protection will lead to lower insurance premiums and to reduced fire
   losses, deaths and injuries, but it is impossible to calculate an actual
   cost/benefit ratio. The cost that would be involved in bringing the Fire
   Department up to a particular class can be estimated; however, it is not
   possible to calculate the difference in insurance premiums that would
   result from a change in the public protection classification or the
   impact on fire losses. The difference in premiums between Class 1 and
   Class 2 should be approximately 2 percent, although many insurance
   companies use the same basic rate structure for both classifications.

   The classification is only intended to be used for non-sprinklered
   commercial properties. Residential properties are usually covered at a
   uniform rate and buildings protected by automatic sprinklers are usually
   rated on a separate schedule. The actual cost of insurance is influenced
   by many other factors, including loss experience, governmental
   regulations, competitive practices, group rates and multi-risk packages.
   The rate structure also varies with the occupancy classification of each
   property, the construction of the building, and other factors. The
   impact of a change in the protection class would have to be evaluated
   for each individual policy.

   The 1 to 10 scale does not represent incremental steps in the
   recommended fire insurance rates. The differences between successive
   classes tend to be quite small, except for the steps from Classes 3 to
   4, 8 to 9, and 9 to 10. The intermediate levels are often grouped
   together when basic rates are established.

   Reducing the level of fire risk in the community, by eliminating high
   risk occupancies and installing automatic sprinklers, appears to have a
   more favourable impact on the total cost equation than increasing the
   level of public fire protection. The grading process does not consider
   the significant reduction in Vancouver s level of fire risk since the
   last grading or the reduction in fire losses.


   There are no direct implications for Fire and Rescue Services personnel
   as a result of this report. There are also no impacts to personnel due
   to the recommended improvements to training and annual testing that have
   already been implemented.  Any personnel implications will be reported
   as a result of the apparatus and staff redeployment proposal (TriData
   Option 6) that Council adopted in principle on April 25, 1996. 

   Council directed the General Manager of Fire and Rescue Services to
   report back with a detailed implementation plan for the proposed
   redeployment. This report will be forthcoming within the first quarter
   of 1997. That report will provide all personnel implications.


   At this time, there will be no financial implications for this report.
   Recommended improvements to training have already been planned, funded
   and are being implemented. Facilities for annual testing of pumps are
   under construction at the new Fire Training Facility, so no new funding
   is required.

   Funding requirements for the apparatus replacements required as part of
   the implementation portion of TriData Option 6 will be included in a
   forthcoming report. It is anticipated that apparatus will be funded
   through the established plant account.


   Changes and improvements suggested by the consultant will be implemented
   prior to the expected official grading study to be carried out by the
   Fire Underwriters Survey during the fourth quarter of 1997. The formal
   results of the FUS grading will be reported to Council when they become

   Detailed implementation plans for TriData Option 6 will be reported to
   Council during the first quarter of 1997.                                 *  *  *  *  *