Local Government | How to survive and thrive in a world of evolving risk

New Zealand’s councils are operating in highly regulated and complex environments where new risks continue to emerge at an accelerating rate and existing risks are continually evolving.

There is also growing pressure under New Zealand’s infrastructure landscape with challenges such as climate change, technological advances and an ever-increasing population.

Aon’s Local Government Risk Practice Group recently hosted our annual Local Government Risk Forums, developed specifically for councils to bring together a collaboration of local expertise to promote an understanding of the current risk environment, provide insightful risk management practices and practical solutions to ensure New Zealand councils not just survive, but thrive in a world of evolving risk.

Please find below a summary of key points from these sessions:

 
  • Insurance markets are continually evolving. The market remains challenging but signs of a moderate environment are emerging. A growing gap is developing between renewal pricing from existing clients and a new insurer looking at a risk with fresh eyes. Underwriters are scrutinising natural catastrophe deductibles with the higher rate of incidence over previous years. The Liability market is requiring additional information, and these revolve more around building consenting/resource consenting issues. A greater requirement on data, and the need for Council’s to look at insurance purchasing strategically as a way of risk mitigation. 

  • Local Government insurance placements in New Zealand are not getting easier. From the hardening markets and competition for limited capacity, increasing premiums and a perception of Pan New Zealand risks, LASS purchasing of insurance programmes eases the associated risks. LASS’s are working together to improve and maintain their position in a competitive market through ensuring data is accurate, current and correct; improved understanding of risks and processes throughout Council; and SLT/Governance awareness of strategic decisions around risk mitigations.   

  • Better decisions can be made with better information. Local Government have inherent information challenges, particularly around data quality.  Cumulative Loss Modelling can quantify risk to inform strategic decisions around risk transfer and risk retention, through both insured and uninsured assets. 

  • The future of Local Government’s Three Water Assets will have a streamlined governance structure to ensure more effective long-term delivery and financial sustainability of water services in Aotearoa. Mid-2021 DIA will release national level analysis on the case for change, with cabinet decisions on detailed reform proposals due around the same timeframe.  Council decisions on whether to proceed with reforms will be made in Q4 2021, with legislation to create new water service entities drafted for introduction in late 2021 and enacted mid-2022.   

  • Liquefaction needs to be a consideration in Local Government land use planning and engineering. MBIE, EQC and MFE have released guideline documentation on improvements to the Building Code for safe solutions to building houses, planning and engineering for potentially liquefaction prone land under the Resource Management Act and Building Act. This provides a consistent approach to assessing liquefaction and enables better land use planning decisions by addressing liquefaction earlier.

  • Prepare for the risks of Climate Change to your organisation. By understanding the physical, transition and liability risks from Climate Change to Local Government, Councils can prepare.  The risks are ever increasing, and to effectively manage the risk – know the projections for New Zealand, identify potential risks and opportunities, assess the likely magnitude of the risks, incorporate climate risk assessments into planning and decision making, prioritise risks and management methods and strategies, and be flexible and adaptable.

  • Benchmarking and Resilience. Understanding Council’s ability to be resilient as an organisation, and considerations that need to be made to ensure the continual delivery of essential service.  Meeting these needs can be challenging, but can be achieved through risk management, emergency management, business continuity and organisational resilience. 

In New Zealand, Aon is the leading broker to the local government, corporate, public, primary, manufacturing, transport, and rural sectors. With over 15 years’ experience in the local government sector, working with over 70 New Zealand councils, we are well versed in providing innovative insurance and risk management solutions to meet the varied needs of councils, regardless of size.

If you would like to discuss any of the points covered above, please contact Aon’s Local Authority Client Relationship Manager Matthew Wilson.

This website contains general information only and does not take into account your individual needs or financial situation. It is important to note that limits, excesses, terms and conditions and exclusions apply to the products and services outlined on this website. Please refer to the relevant policy documents for details of cover, the provision of which is subject to the insurer’s underwriting criteria that apply at the time. Please contact us if you have any questions.