Dunedin's inability to secure insurance for $1 billion worth of underground infrastructure is a "good reason" to join the local government collective insurance scheme, the Local Government New Zealand chief executive says.
LGNZ chief executive Eugene Bowen was commenting after learning the Dunedin City Council had found itself without cover to protect its underground infrastructure assets from natural disasters.
The Otago Daily Times yesterday reported the council's existing cover had expired on July 1, and international reinsurers had baulked at offering new cover following the Christchurch earthquakes.
However, Mr Bowen said the suggestion reinsurance was no longer available because of the Christchurch earthquakes was "not true", as shown by the Local Authority Protection Programme (Lapp) fund.
The fund - providing insurance for 57 councils' underground assets - had been exhausted by the Christchurch earthquakes, but was quadrupling members' premiums to replenish itself.
Lapp had been able to secure 92% of the reinsurance needed to cover member councils' assets, and the only real "no-fly zone" for international reinsurers appeared to be the Christchurch and Waimakariri councils, he said.
"The reality is that councils are finding insurance, admittedly at a price.
"I can't make a comment about what Dunedin are or are not doing, but let's just say that the local body collective has found reinsurance.
"I don't know where Dunedin are looking - [it's] probably a good reason to join the local body collective," Mr Bowen said.
The Lapp fund was administered by Civic Assurance, which was itself owned by LGNZ.
The Dunedin City Council was not a member, and neither were the Queenstown Lakes District Council, Central Otago District Council and 17 other local authorities.
However, Civic Assurance chief executive Tim Sole said he planned to approach all 20 non-member councils to discuss joining the fund.
The Office of the Auditor-general would also be having discussions with councils to ascertain what provision they were making for insurance, he said.
Councils were expected to provide for 40% of the cost of repairs in the event of a natural disaster, with the Government then funding the remaining 60%.
A spokesman said the Office of the Auditor-general said insurance was a "regular item for discussion" between auditors and local authorities, but "particularly topical at the moment" given insurance problems.
Mr Sole said he believed Dunedin had done "nothing wrong", but may have been "a bit late . . . in trying to get cover".
"In the long run they're better off pooling and self-insuring . . . by being in Lapp; by being with 57 other [councils] all putting money in."
DCC acting chief executive Athol Stephens, asked to respond, would say only the idea the council reacted too slowly was "Mr Sole's opinion".
The council had been told by its brokers it would be able to secure cover, but the June 13 earthquakes in Christchurch meant "the rug got pulled from underneath us".
Joining Lapp would be considered, but Mr Stephens was reluctant to commit to a collective fund that could be exhausted by one or two big events.
Council staff had instead drawn up plans to rely on self-insurance, drawing on council renewal budgets and other streams together worth up to $35 million a year, which would be presented to councillors later this month.
