Underground Uncovered
Friday, May 6, 2011 at 12:37PM
Bill Barclay

I sought confirmation today from TCDC Chief Executive Steve Ruru concerning the story that appeared yesterday in the Waikato Times regarding the likely temporary insolvency of the Local Authority Protection Programme as a result of the Christchurch earthquake claims. This programme covers the underground assets of 59 councils.

This cover is unobtainable from any other source, and the trustees will meet with central government later this month to establish a suitable package to get the scheme back on its feet - at least until 30 June - not a prospect that I imagine Mr English will be regarding with any great delight.

TCDC is at increased risk as with any other, as explained by Steve Ruru:

"We are members of LAPP. The scheme provides cover for underground and
flood protection assets, for example, which you cannot get commercial
insurance to cover.  This is quite different to Riskpool which provides
liability cover for a large number of local authorities whereas we have
remained with a commercial insurer and have avoided the call-up and
other problems that other local authorities have had. Please note that
we do use commercial insurance for above ground assets such as buildings etc
for which there is a normal commercial insurance market.  

The LAPP scheme covers 40% of the costs of repair with the other 60% being                                   covered by central Government. It is the 40% portion that is the  problem                                               through until 30 June 2011".

The story is inaccurate in as far as the 60:40% break-up is concerned, and the short term nature of the problem. This does not gainsay the need for the fund to get back to full health through the removal of any discount provisions for 2011/12, but the risk up until 30 June will remain.

It would be very difficult for Councils to secure alternative cover either before or after 30 June, and all 59 will no doubt need to budget to return to the fold after 30 June at the full rate as anticipated by Waipa Business Support Manager Ken Morris. Waipa Deputy Mayor Grahame Webber's reported suggestion that the Council "seek a refund" on part of the 2010/11 payment, sounds like a forlorn hope. 

TCDC's decision some years ago to resist the attempts by then Hauraki Mayor Basil Morrison and others to have it join the Riskpool arrangements for other than underground cover, and to stay with a commercially brokered tender looks increasingly prescient.

It seems likely that Riskpool will indeed be at considerable risk as the result of the earthquake claims, either from Christchurch, or Selwyn unless in the unlikely event that it has 100% re-insurance arrangements.




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