Council tightens spending on insurance

Published on 25 October 2024

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Whanganui District Council continues to rein in spending – this time by tightening up on the cost of insurance.

At their October council meeting, councillors passed a resolution to achieve cost-savings by removing a number of medium-to-low criticality property assets from the council’s insurance schedule.

Chief financial officer Mike Fermor says, “The council will effectively be self-insuring these assets, which have been ranked according to the council’s asset criticality framework.”

In a second resolution passed by the council, further savings would be achieved by increasing the excess for assets that the council continues to insure.

He says insurance premiums increased by 50 percent in 2023-24. “On that basis, we need to find savings of at least $350k to stay within budget for 2024-25 – and probably significantly more. The decisions made at this meeting are the types of decisions many businesses around New Zealand are making in an attempt to reduce costs of insurance.”

The council’s insurance brokers are currently engaging with insurers in the Singapore and London markets for pricing for the 2024/25 renewals.

Mike Fermor says, “While the council has yet to receive notification of what the final premiums will be, we expect there will be savings achieved as a result of the council’s resolutions.”

He says, “Insurance decisions are about risk transfer – a balancing act of deciding how much risk should be transferred to third parties and how much risk should be retained.”

“The greater the risk transfer, a risk that may never materialise, the greater the cost to the council, and ultimately the ratepayer.”

Mayor Andrew Tripe says a strategic approach is prudent. “The council is committed to turning over every stone to find savings in this current environment. With insurance costs through the roof, we are looking to achieve the right balance by accepting some of the lower risks ourselves.

“This is about finding a sensible middle ground, where we have sufficient insurance to protect our critical assets, but carefully examine the value of paying high insurance premiums for less critical assets that might not need to be replaced, or that could be reinstated or repaired over time.” 

Whanganui District Council recently undertook loss modelling under a major earthquake scenario to understand what potential losses could be for assets insured under its infrastructure insurance policy. 

Mike Fermor says, “The results showed we have sufficient insurance coverage in place. In the near future we will also be undertaking similar loss modelling for those assets listed on our material damages policy.

“While Whanganui has not had any issues with obtaining insurance, what we have decided to insure has come at a high cost.”

Mayor Andrew says, “All councils are experiencing cost pressures, insurance being just one of these. We will continue to address these line-by-line, while at the same time looking to engage with central government on the bigger questions around regional growth opportunities and improved funding models to reduce the impact on rates.”

ENDS

 

 

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