The recent revaluation of the Three Waters assets meant the material damage cover increased from $775m to almost $1.2 billion for the 2024/2025 year. (file image) Photo: RNZ / Tracy Neal
Marlborough residents are facing a rates hike of just over 13.6 percent, in part, to meet the rising insurance premiums for the district.
Last week, Marlborough District Council said it needed to find an additional $548,000 to cover its insurance premiums for 2024-25, up $1.2 million on the previous year.
The council had budgeted for a 20 percent increase in insurance costs, but the final figure, finalised at the end of June exceeded that.
Elected members agreed at an extraordinary meeting on Thursday to fund the increase through rates.
Marlborough Mayor Nadine Taylor said it was in a difficult position but it needed to make sure its assets were fully insured.
"It is frustrating that it has to be rates funded at this point in time, when the good work has been done through the LTP process and we thought we had got to a conclusion, but we also realise the reality of the situation and the reality is we must keep Marlborough insured.
Marlborough Mayor Nadine Taylor Photo: Marlborough District Council
Chief financial officer Geoff Blake said it had been a difficult insurance renewal, with a number of changes in the direction of the insurance in the past few months.
The council had received the quotes on 26 June and had reviewed it and sought alternative professional indemnity and public liability cover from AON, which needed to be in place by 30 June.
The recent revaluation of the Three Waters assets meant the material damage cover increased from $775m to almost $1.2 billion for the 2024/2025 year.
Both the public liability and professional indemnity cover had reduced from $300m to $15m, something Blake said was becoming increasingly difficult to secure.
General counsel Robert Foitzik said the $300m cover was "a bit of a red herring" as it was excessively high and that amount had not ever been paid out in New Zealand. AON said the maximum amount it had paid out was $30m.
"It looks like we have lost a lot, but realistically we are still well covered."
Council staff recommended that the increase be funded through rates. Photo: Supplied/ Marlborough District Council
Staff recommended that the increase be funded through rates, $548,000 in 2024/25 and $300,000 in 2025/2026, which resulted in an additional 0.64 percent increase in rates for the current year.
Reserve funding was not recommended as its "reserves were very much depleted" and deferring payment would result in higher costs the following year.
Councillor Ben Minehan asked which departments were at the biggest risk, based on previous insurance claims.
Contract and risk policy manager Greg Townsend said fire, flood and earthquakes were most likely to cause material damages, and AON had reiterated that the building consent process was one of its most risky operations.
"Where the risks are low, we have lower levels of insurance but the higher levels are because that is where our major risks are and our major assets are and that's with external advice from our brokers."
Councillor Barbara Faulls said the reduction in cover for public liability, the Harbourmaster's liability and wreck removal, especially in light of the recent Aratere stranding, appeared to be a taking a risk but Blake said the council was limited by what insurance providers were prepared to offer.
Flooding at Spring Creek on 12 April, 2024. Photo: RNZ / Samantha Gee
Council staff were pursuing further "excess layer" cover, which increased the total cover for public liability and professional indemnity as well as Harbourmaster's liability and wreck removal.
Blake said the recent events with the Aratere were not a liability on the Harbourmaster, but things like aged navigation that was not properly maintained, or decision or a directions made by the Harbourmaster could be.
"I had a talk to the Harbourmaster yesterday and he's reasonably comfortable with the level of cover we have managed to get and the risk involved."
Councillor Gerald Hope said it had been a "tough, torrid time" and he felt the public would question the poor timing, given it came on the back of the long-term plan deliberations, and work to keep rates at below 13 percent.
"We had days and days of submissions from the public, days and days of honest toil by councillors to actually wade through the submissions and come up with a very modest rate increase ... now we are over 13 percent."
Councillor Deborah Dalliessi said she was uncomfortable with the fact they had to ask ratepayers for "even a slight increase" so soon after the long-term plan deliberations.
"They are households, landlords and businesses all facing the same rate premium increases, they have all had to absorb it and all had to plan for it and they have had to tighten their belts ... we have to ask ourselves as a business, how do we tighten our belt, how do we go back and look at our operational costs and see where we can find this money each year."
The council also agreed to undertake a strategic review of its insurance and budget processes.
