A Marsh McLennan risk advisor and insurance broker issued a warning of a “perfect storm” set to affect premiums for local authorities in his message to a finance committee.
Speaking to the South Wairarapa District Council (SWDC), risk advisor Darren Williamson said that cost rises are inbound not just for the district, but the whole region. In addition to South Wairarapa, Williamson also works with both Carterton and Masterton District councils.
“2023 has been the perfect storm when it comes to property insurance renewal for all our clients,” Williamson said in a report from the RNZ. “It isn't just limited to New Zealand, it's global. 2022 was the worst year on record in terms of losses through natural disasters in the world.”
The current period is one of the most challenging the market has faced since the earthquakes in Christchurch, a blend of inflation-driven rises in value and increased numbers of both claims and losses, both of which are continuing to drive premiums to skyrocket in prices.
“A lot of insurers who are available to the council network, with particular reference to the councils located in Wairarapa, Wellington, and the lower North Island – ultimately it is a case of insurance is going to get increasingly hard to obtain, and more expensive if it can be obtained,” he said.
Williamson added that while the situation is not unexpected, it might be the time to consider alternative risk mitigation strategies as councils face higher costs. A SWDC finance spokesperson said that the council’s material damage policy has risen from $50 million to $86 million.
“It's how you plan in terms of your longer-term future for reliance less on insurance, using insurance as a partial means of funding losses. Otherwise, it will be incredibly expensive,” Williamson said. “Looking ahead to perhaps 2027 or 2028, you will find this year would be a very good year in terms of the changes you've unfortunately had to endure as an entity that buys insurance as its main means of funding losses.”
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