New insurance deal covers $1b of city assets

More than $1 billion of previously uninsured Dunedin City Council assets are now covered in the event of a major disaster, although questions remain over some details of the new deal, council staff say.

Councillors at yesterday's finance committee meeting heard the details from council group chief financial officer Grant McKenzie, who earlier this year travelled to London in search of improved cover.

That came after the council was left with $2.3 billion of uninsured above and below-ground infrastructure assets after the Canterbury earthquakes.

The new deal meant cover was extended to include uninsured pipes and other underground assets, with the ''first loss'' cover limited to $100 million and a $2 million excess on every claim.

In a disaster, that would allow the council to cover 40% of any damage bill, which was required to obtain the other 60% from central government, effectively turning $100 million into $250 million of cover, he said.

That still left roads and other above-ground infrastructure assets worth $915 million without cover, although, in an emergency, the New Zealand Transport Agency would pay ''a large share'' for some work, he said.

And, despite the improved cover, the total cost of council insurance would rise only slightly, from $2.18 million in 2013-14 to $2.25 million for 2014-15, Mr McKenzie's report showed.

The council also had access to other arrangements, including a $250,000 self-insurance fund and a pre-approved $200 million loan, if needed, he said.

Mr McKenzie said the deal was ''a lot better than it ever was in the past'', and at yesterday's meeting he praised the ''team effort'' by council staff for delivering the good result.

However, there was still ''room for us to improve'', including reconsidering the amount of first loss cover - or maximum foreseeable loss - the council might need in future, he said.

The amount had been increased from $220 million to $250 million for the coming financial year, but might need to rise again to cover an event like a multi-building fire in the Octagon, for example, he said.

''It's whether that number is high enough,'' he said.

''If there was an event in the Octagon, you've got the Civic Centre, library, Municipal Chambers, art gallery, all within throwing distance.''

Cr David Benson-Pope, speaking at yesterday's meeting, said the DCC was not the only council facing a similar insurance problem, and he wondered what Local Government New Zealand (LGNZ) was doing.

Mr McKenzie said he was a member of a LGNZ working party formed to address the issue, and a report containing options would be considered by the LGNZ executive in due course.

Councillors voted to accept Mr McKenzie's report.

Add a Comment