Marlborough Council grapples with huge insurance premium hike
Marlborough Council grapples with huge insurance premium hike | Insurance Business New Zealand
Insurance News
Marlborough Council grapples with huge insurance premium hike
Key factor behind significant increase revealed
Insurance News
By
Roxanne Libatique
The Marlborough District Council is dealing with an unexpected $548,000 shortfall in its insurance budget for the 2024-2025 fiscal year due to insurance premium increases exceeding projections.
Council chief financial officer Geoff Blake said the council had anticipated a 20% rise in insurance costs. However, the final figures, confirmed at the end of June, surpassed these expectations.
The total insurance premiums for the current fiscal year are now $5.9 million, reflecting a $1.5 million increase from the previous year’s $4.4 million.
“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,” he said, as reported by RNZ.
He recommended funding the ongoing operational expense increase through rates, resulting in a rise from 12.96% to just over 13.6% for the current financial year.
Marlborough District Council’s insurance policy categories
The council’s insurance policies are categorised into three main areas:
the Local Authority Protection Programme (LAPP) for underground reticulation and river control/protection assets
material damage insurance for commercial and non-residential structures
various other policies including motor vehicle, marine, liability, and plantation timber insurance
Marlborough District Council to discuss insurance premium increases
The Marlborough District Council will convene an extraordinary meeting on Thursday to tackle the substantial increases in insurance premiums for the 2024-2025 financial year. The meeting will begin at 8:30 am, prior to the Environment and Planning Committee session.
Blake highlighted the challenges posed by recent changes in insurers’ risk assessments for the New Zealand market, leading to a considerable rise in insurance premiums.
“Although we had budgeted based on a 20% increase, the final figure exceeded that and could only be finalised at 30 June 2024. Because this is an ongoing operational cost it is recommended that this year’s increase is funded from rates,” he said. “This would mean [the] council’s rates increase for this financial year would rise from 12.96% to just over 13.6%.”
This adjustment places Marlborough below the national average rate increase of 15% reported across New Zealand’s councils this year, according to Local Government New Zealand (LGNZ).
Previously, Marlborough benefited from a softer insurance market post-2016, following the Canterbury earthquakes, which resulted in a 20% annual reduction in premiums. However, recent market shifts toward a hardening phase, influenced by global reinsurer dynamics, rising building costs, and national and international events, have prompted a strategic reassessment of financial planning within local governance.
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