Whanganui District Council insurance costs $300,000 under budget

Council chief financial officer Mike Fermor. Photo / NZME

Insurance costs have come in $300,000 under budget at the Whanganui District Council, one year after the organisation was hit by a 57% increase in premiums.

A report from chief financial officer Mike Fermor said insurance costs for 2024/25 would be $3.97 million.

Council-controlled organisations (CCOs) would pay $522,009, leaving the council with a bill of $3.45m against a budget of $3.75m.

The council had a $4.57m insurance bill last year, with CCOs paying $527,104.

Material damage insurance premiums have been cut on some council assets this year, including the Durie Hill Tower, Whanganui Velodrome and Virginia Lake’s Winter Gardens.

Material damage insurance protects assets against damage or loss due to events such as fires, floods, vandalism or burglaries.

Fermor’s report said a major addition to that category in 2024 was the newly-opened Sarjeant Gallery, insured for $80m.

Previously, insurance on the gallery was part of the cost of the redevelopment.

Overall, material damage premium costs dropped from $2.49m in 2023/24 to $2.18m this year.

Last December, Fermor revealed premiums went up by $1.65m - far more than the budgeted 21% increase - due to a rise in council asset values and “a hardening of the insurance market”.

Since then, staff had worked to ensure the right balance between transferring risk to a third party and the level of risk the council was prepared to accept on its balance sheet, his report said.

As well as material damage savings, there was a reduction in the council’s infrastructure insurance policy, due in part to an internal review focusing on “key assumptions, asset values, integrity of data and reconciliation of council’s asset database to the insurance schedule”.

“There are over 60,000 lines of data within the insurance schedule,” it said.

Infrastructure insurance costs dropped from $1.58m in 2023/24 to $1.27m this year.

Chief executive David Langford has a cost-saving and revenue target for 2024/25 of $13.4m, which includes reducing insurance premiums by $390,000.

Fermor’s report said the council had a self-insurance fund of $2.18m.

The fund had not been added to since the 2017/18 financial year because it was deemed to provide “a ”satisfactory level of coverage at this time“.

“If the self-insurance fund is exhausted, council will need to determine how excesses will be funded,” it said.

“This could be by rebuilding the self-insurance fund or by some other means such as targeted rates or loans.”

Fermor told the council’s risk and assurance committee more high-value assets could be taken off the council’s insurance schedule but “some fairly significant decisions' had already been made.

Being “a cautious accountant”, he warned there may be an increase in premiums in the future due to the revaluation of three waters assets.

Mike Tweed is a multimedia journalist at the Whanganui Chronicle. Since starting in March 2020, he has dabbled in everything from sport to music. At present his focus is local government, primarily the Whanganui District Council.