Marlborough District Council will meet next Thursday 11 July to discuss increases in insurance cover for the current financial year. The meeting is from 8.30am, prior to the Environment and Planning Committee.
Chief Financial Officer Geoff Blake said insurance renewals for this year were challenging given changes in insurers’ risk assessments for the New Zealand market.
“Marlborough District is facing the same insurance premium cost pressures as other councils around New Zealand. These costs are outside our control, although we have been able to make some savings by reducing our insurance cover in some areas.”
“However Council needs to find an additional $548,000 for 2024-25 to cover the increased premiums.”
“Although we had budgeted based on a 20 per cent increase, the final figure exceeded that and could only be finalised at 30 June 2024.”
“Because this is an on-going operational cost it is recommended that this year’s increase is funded from rates,” Mr Blake said.
“This would mean Council’s rates increase for this financial year would rise from 12.96 per cent to just over 13.6 per cent,” he said.
Marlborough’s rates increase would remain below the average rise of 15 per cent across New Zealand’s councils this year. See LGNZ’s report here: www.lgnz.co.nz/news/media-releases/drivers-behind-rates-rises-across-the-country-laid-bare/
A report and further information will be provided to the mayor and councillors on how to address the shortfall.
Background
Council has various insurances in place, under three broad categories:
- The Local Authority Protection Programme (LAPP), in conjunction with AON, covering underground reticulation and river control/protection assets
- Material damage insurance covering commercial and non-residential structures (e.g. community halls, pump stations and treatment plants) and residential, such as senior housing units
- Other insurance including motor vehicles, marine, liability and plantation timber.
Council currently procures most of its insurance as part of the Top of the South council group, with Nelson City and Tasman District, excluding LAPP, elections and Marlborough Regional Forestry timber.
Insurance premium savings of around 20 per cent a year were seen from 2013 to 2016 as the market readjusted after the Canterbury earthquakes. This ‘softening market’ has inevitably been followed by a rise in premiums (a ‘hardening market’) which will be driven by various factors, such as return on capital investment for overseas reinsurers, claims and other market forces.
Traditionally this cycle occurred every seven years or so. However national and international events have contributed to the current hardening market arriving earlier than would have been expected and it’s forecast to continue longer. The hardening has also continued partly due to high building cost inflation and a global reinsurance market which had capacity restrictions. This resulted in a ‘squeeze’ on New Zealand capacity while building reinstatement costs and total sum insured values continued to rise by larger than expected amounts.
