Two of the country’s biggest councils are experiencing steadily rising insurance premiums as they face more vulnerability to risks ranging from climate disasters, construction woes and increasing asset values.
Christchurch City Council’s insurance premiums have risen 72.5%, or $16.1 million, since the 2021/2022 financial year when it spent $22.2 million on insurance premiums.
The council told Interest.co.nz last week it has budgeted $38.3 million for its insurance premiums for the 2024/2025 financial period. This is $6.4 million, or 20%, higher than the $31.9 million the council spent on its insurance premiums in the 2023/2024 financial year.
The council spent $25.7 million on insurance premiums in the 2022/2023 financial period.
In the Christchurch City Council’s draft long-term plan for 2024 to 2034, the council points to construction and reinsurance risks pushing up insurance premium costs.
Christchurch City Council’s Head of Finance Russell Holden told Interest.co.nz last week inflation and world events had been causing construction costs to rise in recent years. This had driven up supply chain and logistics challenges and also increased shipping costs.
“The premiums increase to reflect the increased repair or replacement costs of insured assets. The number of insured events around the world has impacted on the level of capacity and pricing available in the New Zealand market as most NZ insurers purchase reinsurance in global markets,” he said.
“In addition to the increase in construction costs, the total insured value also increases annually due to new assets requiring insurance coverage. Insurers are also pricing into their premiums the increased frequency and risk arising from climate change related events.”
Holden said the council had “a number of New Zealand based and international insurers” that provided it with cover across various policies. The majority of them had been underwriting the council’s insured assets and risks for several years.
He couldn’t reveal which insurers were providing this coverage due to the council being at the start of its renewal process for the 2024/2025 insurance cover period.
“This spread of cover enables council to mitigate local insurance rate fluctuations and to forge long term relationships that translate into future capacity.”
The Christchurch City Council said its above ground assets have been valued at $4.4 billion as of June 30 2023, and have insurance cover of $2.2 billion.
Below ground council assets have been valued at $12.9 billion as of June 30 2023, and have insurance cover worth $580 million.
Christchurch City Council said it only insures for 40% of insurance cover required, “based on modelling and acceptable risk profiling” as Crown funding contributes up to 60% of the cost of reinstating assets.
Significantly larger
Auckland Council group treasurer John Bishop said Auckland Council has experienced a significant increase in insurance costs in the last few years.
Three factors have contributed to the council’s rising insurance costs, including increasing asset values, a claim relating to the Auckland floods, and general market increases driven by the increased losses worldwide, particularly weather-related.
The council told Interest.co.nz that previous premium costs across the Auckland Council group had ranged from $15 million to $23 million.
“These costs include Auckland Council and all four council-controlled organisations (CCOs). For 2023/24, the Port of Auckland also became completely covered by the group insurance programme,” the council said.
Approximate costs for Auckland Council’s insurance in recent years were $12 million for the 2021/2022 financial year, $14 million for the 2022/2023 financial period and $23 million for the 2023/2024 financial year.
The council said Port of Auckland was not included in the 2021/2022 figures and only partially in 2022/2023 figures.
“Council’s deductibles have also changed over time, as have the insurance policies.”
Auckland Council said it was important to note it's a unitary authority and takes in the responsibility of a regional council whereas larger councils like Christchurch and Wellington city councils are supported by regional authorities.
Bishop wouldn’t reveal the council’s current insurance premium costs for the 2024/2025 financial year, but said Auckland Council was taking a “rigorous approach” to its insurance purchasing this year.
“These include a self-insurance fund, reviews of insurance limits and deductibles, buying across the council group, diversified purchasing of insurance, reviewing insurance policies and improved asset/financial data to better inform insurers of our risk,” he said.
Auckland Council’s asset base sits at almost $75 billion which Bishop was “significantly larger” than most New Zealand councils.
Its above ground assets are insured for a $1 billion limit, and below ground assets are insured at a $1.5 billion limit.
Bishop said at the end of the council’s last financial year, asset values were approximately $20 billion above ground and $31 billion below ground.
“This requires us to have adequate insurance cover for any adverse events, as we have seen in recent years.”
Wellington City Council’s insurance costs were unable to be measured for this story due to the council turning Interest.co.nz’s query for the data into a LGOIMA (Local Government Official Information and Meetings Act) request.
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