Christchurch city council struggles to get insurance for underground piper

Christchurch City Council has been crunching the numbers over the past few months on how much insurance to get and how to get it for the costs of the underground pipes. Photo / Christchurch Star

The Christchurch city council is facing a multi-billion dollar problem as it tries to find an insurer and options to cover the network of underground pipes.

It has been crunching the numbers over the past few months on how much insurance to get and how to get it.

Currently, there is $6 billion of underground infrastructure with $100 million cover through the Local Authority Protection Programme Disaster Fund.

Above ground, buildings and other assets are well-covered, with $1.8 billion coverage for $2.2 billion of assets, but underground is another story, said Christchurch city councillor and the insurance committee deputy chairman, Raf Manji.

"Certainly it is a risk that we've had to carry for a long time. We do have a huge amount of underground infrastructure that is not insured," he said.

It's a risk mitigated by the "resilience" built into the networks - plastic pipes instead of ceramic that could take "a lot of shaking", Cr Manji said.

The problem is to go to market insurers need enough information to base a price on, said city council financial officer Peter Gudsell.

But Christchurch is still undergoing extensive repairs, meaning there is "insufficient information to seek a response from the market", he said.

The city had $200 million of cover with LAPP after the September 2010 and February 2011 earthquakes, which was paid out.

Cr Manji favours getting "catastrophe insurance" or parametric insurance for the underground infrastructure. This insures for a particular event.

In a disaster, the Government covers 60 per cent of the cost, with councils paying the remainder.

But that is under review by the Local Government Risk Agency, forcing councils to look at other insurance options.

"I think the gut feeling is councils will be taking on more of their own risk," said Cr Manji.

Auckland City Council director legal and risk Katherine Anderson said it was looking to purchase cover for its underground stormwater assets, with a replacement value of $2.9 billion.

The normally candid deputy mayor, Vicki Buck, who is on the committee, said she preferred not to comment on the "minefield" that was the city council's insurance.

But she did say that after the issues with Civic Assurance, the city council has been more cautious.

It took a year of mediation with Civic Assurance's re-insurers before it received its global settlement in December of $635 million.

"Our approach to insurance is once burnt [be] incredibly careful. Insurance is a regular subject and there are regular updates," she said.