Asset Management – Is Your Insurance Adequately Covering Your Asset Risks?

By Graham Jarvis, Regional Manager Queensland

We have seen once again this year, that nature tends to be one of extremes, with several Councils and communities grappling with either drought, bushfires or major flooding events. Councils are particularly vulnerable to wide-area damage and large financial losses, including business interruption to critical infrastructure.

At the time of writing this article, the communities of Cape York are being battered by Tropical Cyclone Trevor. This is all happening while the restoration of assets continues down the Queensland coastline from Cyclone Debbie (which crossed at Airlie Beach in March 2017).

It is a timely reminder for councils to make sure that all their asset insurances are in place to adequately cover your risk exposure and that you have declared all insurable risk (and asset values) to avoid an uninsured loss. How sure are you that your insurance is adequate to cover your losses should the next natural disaster occur in your region?

Interestingly, the Victorian Auditor General’s Office has recently released a report on Local Government Insurance. The report has relevance across most state borders, given that most councils rely upon mutual insurances.

VAGO recommended that Councils:

  • Regularly review and update their risk registers and declarations (including declared asset valuations) to ensure they effectively identify and assign all risks to relevant business units to be managed. If your asset register is poor, is almost certainly means your asset insurance is not adequate. How sure are you that all your treatment plants, reservoirs and buildings are declared with appropriate valuations on your insurance schedules?
  • Review their insurable risk profiles and insurance products, identify insurance gaps and evaluate loss limits to ensure they understand their insurable risks and hold enough insurance. Interestingly, VAGO makes commentary that a council’s broker can undertake this analysis on its behalf, however, engaging an independent third party instead would minimise any conflict of interest concerns.
  • Undertake a cost-benefit analysis to evaluate whether tendering for insurance, in line with procurement better practice, would provide better outcomes

CTMG understands the uniqueness of local government assets and insurable risks – we have worked with Council assets for over 30 years. Although assets not on your declared schedule is a disaster waiting to occur, it may only take small adjustments to the way Councils declare that can avoid $millions of uninsured losses.

We also have the capability and experience to assist local governments to provide an independent review of current insurance coverage and costs to ensure the cover is adequate for the risk exposure and that Councils are getting value for money. We have no interests in insurance products, so we are completely independent.

Typically, a review would cover:

  • Review of current insurance coverage and costs
  • Profile and description of the insurable risks across assets and operations
  • Comment on the adequacy of the declared asset and insured values, as well as revenues for business interruption
  • An overview of insurance market options, including options for potential cost reductions
  • Recommendations

This is just one of the many services CT Management Group offer to support Local Government. For further information or assistance on this or any of our services, please contact CT Management Group on P: 1300 500 932 or via our Contact form below: