Negotiations continue on Council insurance
Christchurch City Council has succeeded in securing limited insurance cover for some of its assets, however its brokers are still negotiating in overseas markets to obtain cover for the remainder of its assets.
The Council’s General Manager Corporate Services Paul Anderson says the Council’s insurance brokers have been looking for a new insurance provider because its current provider Civic Assurance is unable to reinsure its cover for the Council’s $4.2 billion assets. Following the repeated earthquakes, insurers and reinsurers have an embargo on providing new policies in the Canterbury region. Earthquake damage to the Council’s assets to date is fully covered by insurance or Government contributions.
Mr Anderson says the Council has secured insurance cover for fire for 2202 of its housing units that are not damaged or in the red zone. Each unit also has earthquake cover for up to $100,000. This provides cover for $385 million of assets. The remaining 487 units are either damaged or in the red zone and the damage is covered under our 2010/11 policy.
The Council has also secured fire cover for the CBS Arena to $50 million, along with cover for its fleet, art collection, public liability and professional indemnity and other minor covers such as marine and standing timber.
“While our brokers are also trying to place the remainder of our assets in the London market (including two visits to that market), we have been advised this market has very limited earthquake capacity. Also to obtain cover in that market, the underwriting is done on a per asset basis with insurers carrying out full modelling on each individual asset. “
Mr Anderson says it is likely that even if we can get this cover, it will be restricted to fire and defined perils only. There is every likelihood that no earthquake cover will be offered. The Council’s brokers have also investigated the possibility of securing insurance from the United States – particularly from specialist markets which underwrite programmes on the earthquake-prone West Coast of the United States.
A further issue frustrating the process is that new insurers must receive full information about the condition of and damage to our assets, Mr Anderson says.
“This is a big task for the Council because of our large number of assets, and the 13 June aftershocks require them all to be re-inspected for damage. We have provided this information for 30 critical assets valued at $631 million. This includes major city venues, Christchurch Wastewater Treatment Plant, pumping stations, Art Gallery and libraries. Our brokers will continue to seek to place this insurance directly into overseas markets.”
Mr Anderson says the Government has said any further damage to essential infrastructure will be repaired.
“The Government is mindful of Christchurch’s limited ability to pay and has pointed out that cost-sharing initiatives are already being used,” he says.
“Further, the Minister of Finance has given an assurance that the Government will reimburse the four affected Canterbury councils its share of any response and recovery costs.”