Christchurch City Council is struggling to find ways to fully cover the risk to its underinsured infrastructure and specific scenarios, Stuff.co.nz reports.
Currently, the Crown covers up to 60% of damage to essential infrastructure – leaving the council to cover only 40% of repair costs. As the government considers amending the policy, the council is grappling with how to deal with future costs.
The council said it could “theoretically” raise money to cover any issues but it would prefer increasing its insurance coverage.
Raf Manji, the city council’s finance and performance committee chair, warned that the cost of damage from a disaster would lower the city’s asset value because not all damaged assets would require replacement.
Manji clarified that they’re “certainly over-insured” for above-ground assets but underinsured for horizontal infrastructure as insurance for below-ground assets can be both expensive and difficult to get.
The council has been looking at options to shift some coverage to insurance-linked securities and considering policies involving levels of coverage for different scenarios, such as more coverage for a magnitude-7 earthquake than a magnitude-6.
Manji, Mayor Lianne Dalziel, and chief resilience officer Mike Gillooly met with insurers in June to discuss moving to a more risk-based approach, which resulted in positive feedback.
The finance and performance committee is now focused on finding other risk management options to sit alongside traditional insurance.