Local Government | A New Reality Has Arrived


New Zealand’s Local Government landscape is continuing to be challenged through regulatory and legislative changes, the increasing impact of climate change, economic downturn, inflation pressures, staffing shortages, supply chain disruptions, increasing technological and cyber risks, as well as changes to hazard modelling, and the social wellbeing of communities.

To work through this ever-evolving environment, Councils need to be better informed in order to make better decisions. 

Aon’s Local Government Risk Practice Group recently hosted our annual Local Government Risk Forum, specifically for local councils. The forum brings 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.

Below is a summary of key points:

  • Insurance markets are highly challenged. Prior to the 27th January weather event in the Auckland/Northland and Coromandel regions, property including infrastructure was in a continued hardened phase of the insurance cycle.  We saw 1 November renewals at ~10% increases on rate alone, but with the increased values associated with portfolios this saw premiums rise approximately 20%.  Motor was struggling with the higher rate of claim costs vs premium collected, as technological advances have been made in automotive industry increasing costs of repairs. Liability markets in the Local Government sector were still difficult especially with building and resource consenting issues. Cyber liability is now not an “if but when” cover, which means insurers are pulling their capacity in this area, unless there are stringent protections/protocols put in place by councils to protect their systems.


  • Global markets have been impacted by multiple natural disasters, from flooding in Queensland/NSW at an insured loss of ~AUD6.3bn and Hurricane Ian at USD70bn, amongst many others.  These have impacted not only the capital available, but the selective deployment of capacity in a shrinking marketplace.  Reinsurance markets as of 1 January 2023 saw increases in premium, and a change in risk appetite, within initial forecasted estimates of 10 to 15% on rates alone.  A continued focus on asset management, valuations and asset selection is especially important as we move toward the next renewal, and property programmes will have to look at loss limits. Liability programmes will have an increased focus on risk mitigations measures and climate change adaptation as building consenting issues continue. 


  • Post 27 January Weather Event and Cyclone Gabrielle - this means yet another secondary natural catastrophe loss for the insurance market, with initial estimates well in excess of NZ1bn.  These events have had a major impact on domestic and commercial insurers, with thousands of motor and property claims.  The flow on effect from these event will be the business interruption losses and alternative accommodation expenses incurred. Once again New Zealand’s reputation for Natural Disasters will be on the forefront of global insurers minds.  We can expect to see further stress on available capital, with rating increases over and above initial estimates, with an increased focus on underwriting information requirements, and possible sublimits imposed for storm/flood in some areas.


  • 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. 


  • Risk Management recommendations according to the Auditor General. Unpacking the OAG recommendations, it is better to put into 3 phases.  If any phase is missed, it will become reactive as opposed to proactive.  Initially, it is best to understand the risks, by assessing councils’ current level of risk management maturity and develop a clear pathway to achieve the desired level, by using sophisticated means to identify and management risks on key programmes, prioritising risk management resources and training.  Delving into the operational side of risk management, requires formally implementing an Enterprise Risk Management Framework, and then strategically adapting the programme of works by including BCP scenario testing, keeping a live a strategic risk register and an insurance strategy, with protocols in place in order to be prepared and mitigate risks


  • We are generating more risk, not reducing it… We continue to make development decisions that increase current risk, or create new risk, which ultimately lead to public discontent, and unnecessary future economic and social losses. Toka Tū Ake EQC invests in research and data to drive risk reduction and better response and recovery; collaborating and sharing information about natural hazards with New Zealanders and other agencies investing in natural disaster research to help communities reduce their risks; they manages the Toka Tū Ake EQC scheme so financial resources are available to meet people’s claims when they fall due; and are ready with their partners, to support impacted communities when a natural disaster strikes. The Natural Hazards Portal will be available to the public, with information on natural hazard risks and risk management. Natural hazards kill people, destroy property, and impact wellbeing. 


  • Understanding risk helps to empower governance, by explaining the links between data and decision making.  Ensuring data and analytics used are current and provide the right information to adequately understand your risks and allow you to make good decisions around how the risks are managed. Queenstown Lakes District Council provided examples of how they utilised data to manage their risks, and realised that there is no big bang solution, as there are layers, and these decisions have long term effects.  There are challenges ahead for Local Government knowing how to ensure long term strategic risk management is improved; what are the key risks remaining with council following the potential changes after the Three Waters Reform; understanding how climate change is going to alter insurance in the future; what can be done regarding the constantly increasing valuations that are putting pressure on loss limits and capacity, and how is the National Seismic Hazard Model changes going to affect council’s risk profile?


  • Councils need to keep good records and have a duty of care in all they do. Claims for defective and leaky buildings continue, with other building claims i.e. LIMs, building consents, subsidence issues, planning and RMA related claims, incorrect record keeping have all been disputed in court. 


  • Will & Able are focusing on sustainable procurement. By making environmentally friendly products, and creating jobs for mentally disabled Kiwis, utilising a nationwide recycling programme to complete the loop. What is needed to help provide more jobs for these people  is support which fits into the Government ESG Broader Outcomes initiative.


  • The implications of the National Seismic Hazard Modelling and how changes to the Local Government landscape, and the engineering standards and guidelines used to inform insurance risk modelling, infrastructure management, emergency planning and response need to respond accordingly.  The update of the NSHM resulted in increases in shaking in the lower and eastern parts of the North Island and upper South Island. Future changes to the Engineering Standards will be advised following public consultation during 2023.  The focus will be on good, robust designs that allows for the uncertainty of shaking.    


  • Cyber risk is the number 1 concern for businesses since 2021 Aon Global Client Survey and predicted it would still be number 1 in 2024.  The 2016 Survey cyber was number 6.  What the past few years have taught us, is that being aware of risks is not the same as being ready for them. Cyber incidents have dropped off in 2022, but still remain significantly higher than pre-ransomware times.  This can be attributed to the global uplift in security controls and expectations, as well as the geopolitical events in Eastern Europe. Premium uplift for the Local Government renewal was below market expectations/trends.  Cyber resilience is a cyclical process – a destination is never reached and constant assessment, mitigation, transferral and recovery planning is required. Cyber security risk needs to be recorded and monitored regularly.  From data theft to data corruption, data loss, service degradation or failure, they all need to be considered and what impact they would have on your business. Top threats to your business, use of cloud services, third parties, ransomware as a service, technical debt, fear or avoidance of acknowledging the threat


  • Risk Management according to Risk NZ, requires breaking the barriers to risk. Risk needs to be uncomplicated, transparent and relevant, and leadership in risk needs to be connected, transparent and simple.


  • The Construction Contracts Act Amendment Bill is mainly dealing with retentions and is aiming to clarify how retentions should be handled to protect all those concerned. The Bill is currently in Parliament and is due to be passed by end of Q1 2023.  From Royal Ascent all parties have 6 months to comply, with MBIE providing guidelines on expectations how the Act will be interpreted. Parties are to have either a) a nominated bank account for retentions, or b) a complying instrument is utilised. Fines for breach of the Act will be imposed. Important to understand the legislation and the implications to contracts and councils.


  • Renewal information is important to be accurate and current.  With the number of costly Natural Disasters affecting the insurance markets, there is an increased pressure on rates, a greater focus on declared values and risk information. It is imperative to differentiate between other risks that are fighting for the same capital.  Relationships with London Underwriters is crucial to gaining preferential rates and coverage for your risks, which is why we take representatives from your council groups to present on your behalf. Aon is here to help you, in order to get the best out of your insurance renewal.


Aon Local Government Risk Practice

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 Government National Client Relationship Manager
Deanna Macdonald | deanna.macdonald@aon.com
Or Aon’s Local Government National Manager
Matthew Wilson | matthew.wilson@aon.com



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.