Council faces insurance hike to ensure to key assets covered

Whanganui's district council is facing some significant hikes in its insurances premiums as it looks to provide adequate cover of its major assets.

Council's audit and risk committee was discussing a review of council-owned assets which are either under-insured or not insured at all. In the event of a major incident the council could be faced with bearing all the risk of loss on those assets.

Mike Fermor, council's finance manager, said increasing the insurance cover meant higher premiums.

The 8387 artworks in the Sarjeant Gallery, valued at more than $29 million, are one example. The majority are owned by council, 685 are on long-term loan, while ownership of the remaining 1260 has still to be determined.

Mr Fermor said if all those artworks were to be lost council would be facing an insurance shortfall of about $19.5 million.

And after paying the owners of those works on loan, council would have about $7 million left to rebuild the collection.

With its current cover, council would only be able to restore the collection to about 30 per cent of its current size and value if it suffered total loss. He said council currently paid $28,000 for its existing cover and the committee had recommended council lift its cover to 65 per cent of its value in this financial year. That would add another $15,000 to the current premium. Insuring the entire collection would cost about $62,000.

And there is another major problem on the horizon as the Government considers its involvement in providing cover for council's three water assets - water, wastewater and stormwater.

Currently council insures 40 per cent of those assets with the Government picking up the remainder. But Mr Fermor said Treasury was looking at council providing 100 per cent cover for events up to a 500-year flood and a 1000-year earthquake event with
Government only stepping in for events above those criteria.

It costs council $170,000 a year for the present cover; 100 per cent cover would add $255,000 to the bill, a total of $425,000. The audit and risk committee is recommending that another report come back to it if the Government decides on any change.

The committee has recommended council carry out a detailed valuation of its land and buildings to determine their insurance valuation.