Agenda of Risk and Assurance Committee

Risk and Assurance Committee

07 June 2023

6.5 Insurance Renewal Strategy Update

File No.: 23/344

1. Purpose

1.1 To provide an update on the 2023 -24 Insurance Renewal Workstream, this is established to maximize the accuracy and effectiveness of Horowhenua District Councils Insurance Renewal submission. Necessary to ensure the impacts of sharp increase of inflation, significant weather events causing damage and GEO Economic Confrontation is having on rising insurance premiums, doesn’t impact on our community through increased rates.

2. Recommendation

2.1 That Report 23/344 Insurance Renewal Strategy Update be received.

2.2 That this matter or decision be recognised as not significant in terms of s76 of the Local Government Act 2002.

2.3 That the Risk and Assurance Committee endorse the proposed planned approach for the Insurance Renewal.

3. Discussion

Introduction

Due to timing and the urgency surrounding the 2023/24 Insurance Renewal Process (T1 & T2 below), there was a need to start work in March 2023 to identify our approach immediately. This would give us the best possible chance to provide a Renewal Submission that is well informed and accurate for key areas such as the Asset Register, Valuations, Asset location mapping with natural hazards against associated risks and disaster recovery priorities.

Subsequently an Insurance Renewal Working Group was established (table T3) to concentrate on updating the asset register(s), asset mapping overlaid with our existing hazard mapping, valuations, research on deductibles and comparisons with other Councils and LG Agencies.

T1. Property

March/April 23

May 23

7 July 23

August 23

October 23

1 November 23

Pre renewal review

Schedules provided to Council

Meeting with AON re submission

Council submit renewals to AON (Broker)

Renewal Submissions to Insurer (London)

Confirm Renewal

Start new schedule and premium

T2. All other lines of coverage

March/April 23	7 July 23	September 23	October 23	1 November 23
Pre renewal review	Council submit renewals declaration to AON (Broker)	Renewal Submissions to Insurer	Confirm Renewal	Start new schedule and premium

T3. Insurance Renewal Working Group

Team Member

Position

Rob Benefield

Cathryn Pollock

Ann Clark

Stephen Emerson

Barrie Wallington

Steve McTaylor-Biggs

Abraham Chamberlain

Risk Manager

3 Waters Transition Manager

GIS Analyst

3 Waters Technical Lead

Information Services Manager

Business Financial Analyst & asset Management

Manager Financial Planning

Risk Retention & Transfer

As indicated we are faced with an opportunity to reassess how we manage the risk associated with our Insurance Coverage of our key assets. The diagram illustrates the risk transfer options on axes of the two elements – likelihood and size of loss. There is a higher likelihood of small losses than of larger ones, and catastrophic losses have a very low probability. As an organisation that main revenue stream relies on rates from the community, we need to be accurate when assessing the level risk we retain and the level we want to transfer to insurance coverage. As an organisation in the past we have decided to transfer a high level of risk without undertaking the appropriate due diligence to ascertain what our levels of risk looked like i.e. over the last 3 years we have invested over $5M in Insurance premiums to transfer risk whilst on making claims of $45k in motor vehicle claims and $42k for a weather event (tornado) claim.

T4. Risk Transfer Options

Current Insurance Climate

The rising costs of claims for extreme weather can have “far-reaching” implications for businesses, governments and individuals. Extreme weather insurance claims in New Zealand were at almost $200 million for the year ended 30 June 2022 that was well on track to break the record amount of $324 million set in 2021. In 2023 we have already witnessed two significant weather events with Cyclone Gabrielle the most significant weather event NZ has seen in a century, which highlights the continuing increase in climate-related insurance costs. Early estimates from AON for the 4 councils, Hastings District Council, Napier City Council, Central Hawkes Bay and Hawkes Bay Regional Council is that claims for the damage to council owned infrastructure is approximately $109 million.

Climate coupled with rising building and development costs, impacted by increasing interest rates and inflation continues to damage New Zealand’s reputation in Global Property Markets and Re-insurance Markets. It is expected the rating increases plus 10% – 15% before rate adjustment on individual loss ratios. In the short to long term as Insurers look to balance their books and return to making profit we could possibly experience similar increases for the next 2-4 years.

In the past, insurers’ role has been to provide clients with relief when disaster strikes. But in a world where disaster doesn’t strike so much as steamroll, the role of insurance companies is changing. Rather than being reactionary, insurers are becoming more proactive in helping clients avoid and plan for disasters. Insurance companies are taking steps now to encourage better environmental planning & practices. They will be more selective where they deploy capital and applying risk tolerance to specific areas.

As a council we need to distinguish ourselves by providing accuracy to our renewal submissions, this will require a programme redesign driven by an Insurance Strategy. This will enable us to consistently provide our annual renewal submission with confidence that our coverage provides an acceptable level of risk that is accurately defined.

It should be noted that insurance companies are using recent events to maximise the opportunities to sell the need for insurance, often applying pressure to organisations to opt for extensions on existing policies.

Insurance Premiums & Forecast

Based on our brokers (AON) predictions Insurance premiums are set to rise 10-15% year on year for the next 3 years as Underwriters look to retrieve money paid out for natural disasters in recent years. Vehicle and Cyber Insurance by 30% this year on its own. As per Table T.5 below and based on those predictions averaging the increase at 12% per annum, HDC could see its premiums increase by approximately $575k over this period.

Valuations completed in June 2022 saw our assets change in value from $214m to $313m an increase of $99M or 46%. Such is the pressure on inflation and the impacts from Covid on supply this is the single biggest valuation increase over the last 30 years.

HDC Insurance for infrastructure below ground sits separately to our other policies above ground (MWLASS), this policy is managed through Local Authority Protection Programme (LAPP). This is a fund primarily established for disaster recovery. Our annual premium is currently set at $453,005.83 on declared asset value of $721,193,862. Our claim threshold is set at $1m and a claim deductible of $400k. The difference between threshold and claim deductible is the amount of damage that needs to be reached and the deductible is what we will pay. Beyond a threshold, central government will pay 60% of the restoration costs, leaving local authorities 40%. Of the 78 local authorities in New Zealand, 22 are currently Fund members.

T5. Premium Forecast Table

Coverage	Premium 22-23	23-24 12-30%	24-25 12 -30%	25-226 12-30%
Material Damage & Business Interruption (MD&BI)	$922,990.08	$1,033,748	$1,157,798	$1,296,734
MD&BI Excess Layer Liability	$199,172.67	$223,073	$249,842	$279,823
General Liability	$25,423.05	$28,473	$31,890	$35,717
Motor Vehicle	$21,698.17	$28,270	$36,669	$41,070
Cyber Liability	$12,149.75	$15,794	$20,553	$22,977
Employers Liability	$1,938	$2,171	$$2,431	$2,723
Professional Indemnity	$131,476.05	$147,253	$164,923	$184,784
Public Liability & Professional Indemnity Excess Layer Policy (PL&PI)	$14,111.46	$15,804	$17,701	$19,825
PL&PI Excess Layer	$1,426.63	$1,597	$1,789	$2,004
Statutory Liability	$4,967.16	$5,563	$6,230	$6,978
Aviation Hull (Drones)	$2,554.41	$2,860	$3,204	$3,588
Crime Policy	$6,390.00	$7,156	$8,015	$8,977
Fine Arts Special Risk	$2,523.21	$2,826	$3,165	$3,544
Fine Arts Service levy	$1,279.82	$1,433	$1,605	$1,798
Group Personal Accident	$714.53	$800	$896	$1,003
Forestry	$3,391.91	$3,798	$4,254	$4,765
New Contract Works Policy – Foxton Pool	$21,457.44	$24,032	$26,916	$30,146
Totals	$1,373,664	$1,544,567	$1,737,869	$1,946,413
LAPP Insurance below ground assets only	$453,005.83
Note: Bridges & Roads not covered. IT Assets not Insured. Brokers Fees $22,830.88

Claims 2018 – 2022

Since 2018 HDC has made claims for $45k for motor vehicles including windscreens. Subsequently in June 2022 HDC submitted a claim for $52,659 for the Tornado event, as per our deductible agreement ($10,000) in our MD&BI Policy $42,659 was paid out.

No other claims were made against any other of our existing policies during that period. There are several examples where we have looked to settle disputes/claims early voiding our ability to enact our insurance policies.

Broker Engagement

Our relationship with our Insurance Broker has been strong in recent years, and they have been helpful in our renewal process when making insurance decisions. However, they have influenced HDCs decisions on policies and risk through exposure to global and national events that are not always related risks associated to the Horowhenua District. Equally our decisions are influenced by decisions and directions that the MWLASS take which encompasses risks other councils in the region are assessing, which doesn’t always reflect the uniqueness of hazards and risks that are specific to our district. As part of our annual renewal and decision making process it is important that all the facts are available for ensuring decision relating to our insurance coverage is accurate and appropriate. Therefore, as part of the annual renewal process we will continue to review the accuracy of registers, upgrade the loss mapping and undertake complete risk assessments.

Renewal Review Approach – Modelling of Risk 2023/24

As indicated above in T.1 & T.2 we have until early July to review and submit our Renewals Declaration to our Insurance brokers AON, whilst we attempt to enhance existing information for the renewal process, this is insufficient time to design and agree an Insurance Strategy that directs HDCs intentions for assessing and managing risks associated with our assets, coverage and liabilities long term. For this reason the Insurance Renewal Working Group has targeted “low hanging fruit” by focusing our initial review on key renewal declaration components that will provide the Executive and Council with a level of confidence that we are taking adequate steps towards accurate and cost effective coverage outcomes.

The eight areas we have committed to for 2023-24 renewal submission include.

1. Providing an accurate Asset Register – The team including a short-term resource to assist’ have been working hard to update the register to ensure the register is a true reflection of what assets we have, the year they were built, construction materials used and their location. Location is ultimately important when mapping the risks associated to the asset specific to the hazards in our region i.e. Liquefaction, Flooding, Fault Lines, and Tsunami. Equally important is the need to remove assets at the end of their life i.e. the old existing Waitarere Surf Club isn’t worth insuring with the new development underway; or wouldn’t be rebuilt if destroyed; or the state of depreciation within the organisation. It is important to understand if our Asset Register is 100% accurate on all important information required for renewal they will have significantly improved on past years provided a solid foundation to work from. Also note that as part of the Insurance Strategy business rules will need to be developed to ensure that asset registers remain current and accurate at all times.

Currently we provide a number of community groups including Marae’s and Rural Community Halls etc support by allowing their insurance requirements to be a part of the HDC Policies, the main reason for this is to provide a better value (Cheaper) policy through our premiums and valuations. This does expose HDC and the community risks if they provide inaccurate declarations or valuations.

2. Asset Coverage – Timeframes for the Asset Register to be at a reasonable standard for this year’s renewal submission is to be completed by 31 May 2023. This will allow time for Group Managers and Managers aligned to assets to assess the need or option of each asset to be covered or not i.e. if an asset was destroyed or partially destroyed we wouldn’t replace it. This assessment would include looking at updated loss mapping information and risk profiling to identify the type of risk the asset is exposed to, the likelihood and the impacts associated with the risk.

Motor vehicles Insurance is generally where we make the majority of our claims, additions and deletions on the asset register and renewal schedules is important, as is ensuring current market values are accurate.

3. Valuations - Overstated values consequently cause an organisation to carry more insurance than necessary and pay excessive premiums. On the other hand, an even worse scenario is an organisation with understated values. Even though a company would likely be paying less for premiums, the financial impact could be devastating if that company suffers a loss.

Best practice is to have big tick assets revalued annually, due to the tight timeframes of the renewal process and reliance on an accurate asset register there is no practical time to engage a valuer to update our asset value for 2023. For that reason we will use the 2022 valuations (which realised the impacts of inflation and supply as our values increased by 44%. The necessity for applying relevant percentage uplifts if no recent insurance valuations have been completed, below (T.6) is an indication of percentages which can be applied to various assets for renewal purposes. Aon Valuations have compiled this, taking into consideration the current inflation rate, costs of building products and services as well as the length of time it is taking to obtain both of these; as well as utilising the Statistics New Zealand information.

T6. Valuation reset percentages for 2023

Asset Type	12 months
Dwelling Units	12.96%
Commercial Buildings	10.49%
Factories, industrial, and storage buildings	10.09%
Hotels, motels, boarding houses, and prisons	9.44%
Systems for Water and Sewerage	15.02%
Land Improvements - Irrigation and Land Drainage	20.33%
Land Improvements - Reclamation, Slope Stabilisation and River Control	5.92%

4. Deductibles – Currently HDC applies the lowest deductible in the Region set at $10,000 per event or claim. Councils such as Whanganui have deductibles that range from $25k to $100k, Horizons Regional Council up to $200k. A number of councils in other regions have set deductibles at $3-400k depending on the risk profiling. We have asked AON to provide a schedule that provides indicative savings should we apply a different level of deductible.

5. Loss Mapping & Risk Profiling – Insurers look favourably on organisations when evaluating a submission who have under taken comprehensive Loss Modelling Programme. Such modelling would include an increased focus on improved underwriting information i.e. Construction, Occupancy, Protection and Exposure (COPE - risk characteristics an underwriter reviews when evaluating a submission for property insurance). Risk profiling our assets looking at their location against the hazards associated with that area is important. For that reason the Insurance renewal team are loading the location of our assets onto our Geographic Information System (GIS) and overlapping and integrating the information with our existing Hazard Mapping i.e. Liquefaction, Flood Areas, Fault Lines, Coastal movement etc. Whilst this information is limited it does give us a significantly improved overview of the risks associated with each asset.

As part of the Insurance Renewal Strategy we will be looking to enhance our mapping data and information as it is important for HDC when establishing other strategic decisions such as future growth and developments, locating and upgrading infrastructure, consenting and managing risk.

To support the mapping the risk profiling also needs to include research of the risks associated with natural hazard for the Horowhenua District against other councils in New Zealand and the region, this research includes:

a. Historical local natural hazard events, the damage caused and the cost of recovery?

b. The geographical layout of our terrain – most of our district is fortunate to be made of a natural flood plain that sees water recede quickly or flow naturally to the coast line.

c. Where fault line sit and the activity experienced in the past and more recently.

d. Coastal erosion, the rate it is eroding, the impacts on our assets and infrastructure over the year associated with the year of renewal and for outlying years. – A big part of the coast in the Horowhenua district is moving in the opposite direction and has an accreting shoreline.

e. Understanding how good our resilience is in recovering from an event/disaster i.e. Emergency response and planning and or access to resources during and post an event or disaster?

f. Understanding our risk appetite to extent the risk we take when transferring risk to insurers, this balanced with the impacts of inflation and the cost of living crisis much of the country is experiencing at the moment. Whilst we can provide the greatest risk assessment possible there will be an increase in the risk we take in reducing coverage in certain ways.

For the 2023 renewal we will be better informed from loss mapping when looking at the deductible level for this year, assessing the adequate level of coverage

6. Cyber Insurance Risk Assessment - Identifying and addressing data risks, including costs, litigation, mitigation and loss of reputation. Currently HDC Cyber security is spread across a number of different platforms making it difficult to understand our risk exposure with layered levels of visibility.

Currently the Information Services Manager and Risk Manager are reviewing our risk exposure, assessing our current security platforms assurance effectiveness and consolidation of costs associated with maintaining our Cyber security. This review includes looking at a best practice framework that provides a governance based approach; and in one platform for ease of reporting on progress and Cyber vitality; and external assurance/assessment that addresses People, Process and Tech controls; and produces an Improvement plan that gives your Cyber program structure and reporting to present to your Executives and RAC; and tracks progress on the plan and assist with assessments on our 3rd party suppliers; and importantly the platform is measured against a number of International Security Standards i.e. ISO27001 & NIST, providing ongoing assessment of our organisations security against the standards highlighting and gaps or risks. Having this framework will provide leverage with our underwriters and reduce premiums associated with transferring our risk to Insurance Policies. This will come into effect for our 2024-25 renewals submission.

Our Information Services Manager is currently completing the Cyber Liability Assessment for our renewal submission for 2023-24. The Risk Manager will be undertaking a Cyber Security Audit with the Information Services Team in July 2023.

7. Policy Layer Extensions – In recent years HDC through the MWLASS has elected to take extensions on its Material Damage & Business Interruption and Public Liability & Professional Indemnity Policies. The intent behind extending our policies have been basically the increase in asset values coupled with increased significant weather events. The drive to add additional layers has also been heightened by the Insurance Brokers pressure on existing influences. Policy Layer Extensions need to be assessed against risks each council are faced with which fits outside the LASS approach. A good example is the damage to the 3 Council’s (Hastings, Napier & Hawkes Bay Regional) property as a result of Cyclone Gabrielle (Considered significant) has claims being assessed around the $100M mark. This sits $50m below the first MD&BI Policy layer with no extension layer needed. The risks associated with the 3 Councils and their location on the East Coast of New Zealand are far greater than the Horowhenua, both with flooding, Tsunami and earthquakes.

Three councils within the MWLASS have declined the additional layer of coverage. Removing the MD&BI Excess Layer for 2023/24 will save on premium increase projections.

Secondly the two extensions on Public Liability & Professional Indemnity were taken out with the reduction from Insurers in the level of coverage they were willing to underwrite to $15M. Again this was a decision made by LASS looking to extend the coverage to a higher level in transferring the risk of large scale claims against councils. Again this decision was made with considering the exposure of risk each council was exposed to. Areas that need to be assessed include any large scale subdivisions, projects that are built in natural hazard areas or have the potential to consenting liabilities attached to them i.e. Okarito Ave Sub Division. We also need to considerer that New Zealand has The Accident Compensation Commission (ACC) which does cover injury in a workplace and prevents organisations from being sued for workplace accidents. Public Liability is required to cover property, death or injury in circumstances not covered by ACC, however the $15m liability coverage is adequate based on historical claim experience.

Equally with Professional Indemnity it is important as an organisation at times we will make mistakes in the course of our service delivery, most common in Local Government is with the Building Consent process. Coverage is necessary as we need to accept mistakes are inevitable and that we need to transfer a level of liability risk to insurers. There are two areas we need to consider moving forward, one is setting business rules that provide a direction on how we deal with complaints that could potentially end up in liability claims ensuring that we use our Indemnity Insurance Coverage wisely before determining resolution. Secondly we need to consider historical information relating to liability claims against Councils in New Zealand in determining examples of risk and the levels of risk we are exposed to i.e. Bella Vista Subdivision and the MBIE Investigation finding against Tauranga City Council for 21 unsafe homes. It is estimated this will cost insurers approximately $14M. Also worth noting is that most Professional Indemnity policies exclude coverage for weathertightness (leaky Home) claims.

AON agreed that HDC was in a better position than other councils to remove any Excess layer Policies given our lower exposure to risks associated with PL&PI, however we should review this annually based on level of growth activity within the district. Removing the two PL&PI Extension Policies will save on premium projections.

T7. Policy Layer Extension Example

MDBI Change in Values					Extension layer on kicks in when primary layer is exhausted
MDBI Change in Values					Extension layer on kicks in when primary layer is exhausted
	2019 TDV	2022 TDV	Change	Example loss		share of $150M	Share of Excess Layer $150m	Total Received	Shortfall
Horizons	$94.7M	$127M	$32.2M	$23,963,718		$11,981,859	$11,981,859	$ 23,963,718	$ -
Horowhenua	$214M	$313.4M	$99.4M	$59,129,734		$29,564,867	$29,564,867	$59,129,734	$ -
Manawatu	$173M	$228M	$55M	$42,987,282		$21,493,641	$ -	$21,493,641	-$21,493,641
Rangitikei	$115M	$184M	$69M	$34,771,288		$17,385,644	$ -	$17,385,644	-$17,385,644
Ruapehu	$91M	$116M	$25M	$21,917,075		$10,958,537	$10,958,537	$21,917,075	$ -
Tararua	$115M	$146M	$31M	$27,487,475		$13,743,737	$13,743,737	$27,487,475	$ -
Whanganui	$335M	$476M	$141M	$89,743,428		44,871,714	$44,871,714	$89,743,428	$ -
Total	$1.1B	$1,595B	$452M	$300,000,000		$150,000,000	$111,120,715	$261,120,715	-$38,879,285

8. Self-Insurance - The portion of risk not transferred to the insurance market should not be ignored (this is non-insurance) but managed as a budgeted expense item. This means any damage or loss should be investigated, costed and set against the budget in much the same way that an insurance company would process claims. HDC already has a deductible level of $10,000 on its policies, this sees a number of our assets repairs, replacements as part of our budgeted operating expenditure, and this is evident from the zero claims made against our assets in the last 3 years.

As a note HDCs administration of a self-insurance programme should include identification and separate accounting treatment of opportunistic upgrading – taking advantage of an accident to make improvements – so that a proper record of self-insured damage costs can be maintained. If such losses are allowed to disappear among other operating costs, various inefficiencies will creep into risk handling programmes and continuing review of whether to retain or transfer risks will be compromised. The cost of risks can be carried as a charge against operating budgets if they are small to medium losses that are an inevitable, regular expense. Provided such losses can be identified and quantified, then their costs can be budgeted; they may range from accidental damage to vehicles to pilfering or damage to office equipment.

9. Other opportunities

a. Skinning vehicles, whilst our branding is important skinning a vehicle costs us approximately $5k per vehicle and increases the value of the coverage or claim. This may be an opportunity to reduce our expenditure on our vehicles and overvaluing claims.

b. Remove windscreen coverage as this immediately impacts renewals in the following year by the dollar value claimed and another 20%. This is managed holistically through MWLASS so we are subject to premium increases based on what other councils are claiming. Any change to this policy would need to be managed through the MWLASS.

c. Investigate the opportunity to improve systems such as those used for our Asset Register and Cyber Assurance Modelling.

d. Provide business rules that influence the way we as an organisation deal with Complaints that could potentially lead to claims. As an Organisation that is judged on its service delivery including prompt resolution, too often we are seeking to rectify or assess the context that sits behind the issue, risk assessment, liability, or the risk we have transferred by Insurance Policy coverage.

Insurance Strategy & Workplan 2023 - 25

As indicated earlier, organisationally we need to distinguish ourselves to insurers by providing accuracy and long term planning that determine the quality of our renewal submissions, this will require a programme redesign driven by an Insurance Strategy. The strategy will be the vehicle that outlines our direction for insurance coverage, enabling HDC to consistently provide our annual renewal submission with a high level of confidence that Insurance Certificates offer the best value for the business and the community. Equally the strategy will assist in modelling risk that informs master planning and the Long Term Plan. As part of the Insurance Strategy and Workplan a set of business rules need to inform the way we manage our annual renewal submissions rules would include are not limited to:

a) Ensuring valuations are updated annually where possible

b) The Risk Register is maintained as part of an asset managers day to day duties

c) Our Loss Mapping of Natural Hazards are continuously reviewed and updated with the latest information or technology, including information from other Government Agencies i.e. EQC

d) Our Loss Mapping is updated annually in line with our Asset Register.

e) An organisation risk assessment is undertaken annually to review risks associated with deductibles, coverage and climate or environmental trends.

f) Group and Activity Managers review the Asset Register annually to inform asset coverage exclusions. Accurately define our coverage, what assets do we insure and identify assets we no longer need to insure.

g) Investigate the opportunity to self-insure and recommend Loss Limit options (a property insurance limit that is less than the total property or asset values at risk but high enough to cover the total property values actually exposed to damage in a single loss occurrence). Much like deductibles we accept some value liability. More extensive loss modelling and Loss Modelling Policies will be required to determine appropriate limits, this will be captured in the strategy.

h) Investment in reducing risks i.e. development of a strategy and Investment plan to reduce risks associated with natural catastrophes i.e. Fit for purpose flood banks linked to climate change forecasts and modelling; and using flood and liquefaction modelling to inform our future growth decisions.

i) If the opportunity presents itself in reducing annual premiums through the renewal initiatives, there could possibly be an opportunity to explore the organisations ability to adopt a Health and Wellbeing Insurance for staff as an incentive to attract new staff and retain existing staff. Local Government Agencies find it difficult to compete with the private sector when attracting new staff or retaining the services of existing skills and expertise. With the Cost of Living Crisis impacting on our communities at present Health & Wellbeing Insurance will be seen as a lucrative and popular benefit.

Next Steps

T8. Initial Insurance Renewal Review 2023/24

Objective	Actions	Timeframes
Insurance Renewal Working Group	Form an Insurance Renewal Working Group that oversees annual submissions and informs key decisions for ELT and RAC relating to the management of our Insurance Policies	1 May 2023
2023 Insurance Renewal Process	As per tables presented in this document meet objectives in maximizing accuracy of 2023/24 renewals.	7 July 2023
Partnership with AON	Engage AON where necessary to work through opportunities to improve submission however not to assess risk.	Ongoing
Valuations	Establish accuracy of values property, vehicles and other coverage lines/assets	31 May 2023
Asset Register	Update current Asset Registers to ensure what is recorded captures accurately new assets, ownership, disposed assets, value and depreciation status	31 May2023
Define Coverage	Assess coverage limits for assets, define level of coverage measured against level of risk; Are there identified assets that we can remove from coverage; including the need for Coverage Extensions.	16 June 2023
Deductibles	Assess opportunity to increase deductibles based on level of risk associated with each asset and value returns deductible options provided by AON	16 June 2023
Renewal Submission	Present our Renewal Schedule to AON for 2023-24	7 July 2023

T9. Initial Insurance Strategy & Workplan

Objective	Actions	Timeframes
Insurance Renewal Working Group	\Insurance Renewal Working Group that oversees Strategy and Workplan to ensure it remains current & valid.	Ongoing
Insurance Strategy	Develop an Insurance Strategy that outlines our long-term approach to modelling risk, annual approach to managing annual insurance renewals, long term planning, master planning	Draft to RAC August 2023
Workplan	Develop Workplan to support the Strategy document, highlighting deliverables linked to work-streams and outlining actions required to achieving key deliverables.	Draft RAC August 2023
Partnership with AON	Engage Engineer from AON to assist with enhancing Loss Modelling programme and work stream deliverables.	Ongoing

Attachments

There are no attachments for this report.

Confirmation of statutory compliance

In accordance with section 76 of the Local Government Act 2002, this report is approved as:

a. containing sufficient information about the options and their benefits and costs, bearing in mind the significance of the decisions; and,

b. is based on adequate knowledge about, and adequate consideration of, the views and preferences of affected and interested parties bearing in mind the significance of the decision.

Signatories

Author(s)

Rob Benefield

Risk Manager

Approved by

Ashley Huria

Business Performance Manager

Jacinta Straker

Group Manager Organisation Performance

Monique Davidson

Chief Executive Officer

Risk and Assurance Committee

07 June 2023

6.8 Conflict of Interest Report

File No.: 23/332

1. Purpose

1.1 To update the committee on the Council’s planned approach to recording and managing conflicts of interest for Horowhenua District Council employees, this report does not relate to Elected Members conflict of interest.

2. Recommendation

2.1 That Report 23/332 Conflict of Interest Report be received.

2.2 That this matter or decision be recognised as not significant in terms of s76 of the Local Government Act 2002.

2.3 That the committee not the work that the Council is currently undertaking to better understand and manage conflicts of interest.

3. Background/Previous Council Decisions

3.1 A conflict of interest register is an important tool for promoting transparency and integrity in organisations, particularly those in the public sector. The register is designed to identify potential conflicts of interest that may arise between an individual's personal or financial interests and their responsibilities while being employed by council.

3.2 The importance of having a conflict of interest register can be summarised in the following points:

Avoiding actual or perceived conflicts of interest: By maintaining a conflict of interest register, an organisation can identify and manage potential conflicts before they have the ability to impact the organisation, thereby avoiding the risk of damage to its reputation or legal consequences.

Promoting fairness and objectivity: A conflict of interest register helps to ensure that decisions made by individuals are based on objective criteria rather than personal interests.

Ensuring compliance with legal and ethical standards: Many organisations are legally required to have a conflict of interest policy and register in place. Failure to comply with these requirements can result in legal sanctions and reputational damage.

Demonstrating accountability and transparency- By reporting on the conflict of interest register, an organisation can demonstrate its commitment to transparency and accountability.

3.3 Overall, a conflict of interest register is an essential tool for promoting transparency, accountability, and integrity in organisations, particularly those with a public interest or regulatory function. It helps to ensure that decisions are made objectively and fairly, and that individuals act in the best interests of the organisation rather than their own personal interests.

3.4 In September 2022, a thorough review was conducted of our Conflict of Interest Prevention Policy, encompassing the comprehensive management plan and the declaration form, which was then adopted by Council. This review process was essential to ensure the policy remained current, effective, and aligned with industry best practices. The next review is scheduled for September 2024. Subsequently, in March 2023 Council appointed a Registrar of Pecuniary Interests, and the Pecuniary Interests Register where Elected Members declare interests on an annual basis to be published on the Council website.

4. Discussion

4.1 Horowhenua District Council currently maintains a register for employees who have declared any conflicts of interests.

4.2 Within our processes, there are trigger points however these are inconsistently applied across the organisation hence we need to increase focus on it and improve our processes. These trigger points include:

(a) Employment Process: We have recently strengthened the employment process by incorporating targeted questions to identify potential conflicts of interest which are then effectively evaluated and addressed. The intent of this assessment is to allow us to uncover any circumstances that may show conflicts. In cases where a potential conflict of interest is identified, we request additional information to gain a comprehensive understanding of the situation. This assessment allows us to gauge the potential impact of the conflict on the candidate's ability to carry out their duties objectively and impartially.

(b) Employee Disclosure: We rely on staff to proactively declare any conflicts of interest they become aware of, this is an area where we can improve practice. The importance of employees proactively disclosing any conflicts of interest they become aware of. This requirement encompasses conflicts arising from personal relationships, financial interests, or any other relevant circumstances.

4.3 These trigger points aim to establish a framework for managing conflicts of interest. This proactive approach enables us to address conflicts at various stages, from the initial employment process to ongoing employee engagement.

4.4 However, in our current practice, only staff members who identify a conflict of interest are required to complete a conflict of interest form. Moving forward, we propose a revised approach where all staff members will be required to complete the form, regardless of whether or not a conflict is present. This adjustment aims to establish best practices and ensure thorough compliance by acknowledging that individuals do not have a conflict of interest. The form will be completed on an annual basis. To implement this revised process, we will communicate the updated requirement to all staff members and provide clear instructions on the completion of the conflict of interest form. Regular reminders will be issued to ensure timely and accurate completion on an annual basis. By adopting this approach, we strengthen our commitment to upholding the highest standards of integrity, transparency, and ethical behaviour across the organisation.

4.5 A number of conflicts of interests have been disclosed, and there are corresponding management plans in place. These conflicts encompass various categories, including whanau/relationship, shareholder involvement in companies and community service in community organisations that receive Council funding or support. By identifying these conflicts and establishing management plans, we have ensured that there are clear plans and control measures in place. Noting that Council has conflicts with itself, these can be seen in areas such as consenting processes, where this occurs management plans are put in place which vary however can include outsourcing of the regulatory process.

4.6 As well as the HDC Employee conflict of interest form, all staff involved in projects or engaged in the tendering process are required to complete a conflict of interest and confidentiality agreement form specific to their assigned tasks. These forms are reviewed and recorded by their respective managers. While this process has been in place for a considerable period, there is an opportunity to enhance it by centralising the information into a comprehensive register. This register will serve as a repository for collecting and managing this critical information in a centralised and easily accessible manner.

5. Next Steps

5.1 Implementation of All Staff Completing a Conflict of Interest Form: Moving forward, it will be mandatory for all staff members to complete the conflict of interest form no matter if they have a conflict to declare or not. This form will capture any potential conflicts or confirm the absence of conflicts.

5.2 Biannual Reporting to the Risk and Assurance Committee: A report will be established to provide biannual updates to the Risk and Assurance Committee regarding conflicts of interest. These reports will include an overview of the disclosed conflicts, actions taken to manage them, and any emerging trends or patterns.

Attachments

No.	Title	Page
a ⇩	Conflicts of Interest Prevention Policy - adopted September 2022	230

Confirmation of statutory compliance

In accordance with section 76 of the Local Government Act 2002, this report is approved as:

a. containing sufficient information about the options and their benefits and costs, bearing in mind the significance of the decisions; and,

b. is based on adequate knowledge about, and adequate consideration of, the views and preferences of affected and interested parties bearing in mind the significance of the decision.

Signatories

Author(s)

Ashley Huria

Business Performance Manager

Approved by

Jacinta Straker

Group Manager Organisation Performance

Monique Davidson

Chief Executive Officer

Risk and Assurance Committee

07 June 2023

6.9 Legislative Compliance Report

File No.: 23/340

1. Purpose

1.1 This report provides the Risk and Assurance Committee an update on legislative compliance for Horowhenua District Council.

2. Recommendation

2.1 That Report 23/340 Legislative Compliance Report be received.

2.2 That this matter or decision be recognised as not significant in terms of s76 of the Local Government Act 2002.

2.3 That the committee note the Council’s planned approach for improving the monitoring of legislative compliance.

2.4 Background - Legislative and Statutory Compliance

2.5 It is good practice to report on legislative compliance as an organisation whether that be to a board or in this situation Risk and Assurance or Council being Elected Members to provide assurance to Governance.

2.6 Legislative compliance refers to the act of adhering to the laws, regulations, and statutory requirements imposed by government bodies or legislative authorities on the Council such as Section 17A reviews. It involves ensuring that an organisation, such as a council, operates within the legal framework established by applicable legislation.

2.7 Legislation can include a wide range of areas, including but not limited to:

Statutes and Acts: These are laws enacted by legislative bodies, such as parliaments at the national or Councils at a local level. They establish legal obligations, rights, and responsibilities for individuals and organisations.

Regulations: Regulations are specific rules or requirements that are derived from statutes and provide detailed guidelines on how to comply with the law. They are typically issued by government agencies or regulatory bodies and are legally binding.

Bylaws: Bylaws are local laws enacted by local governing bodies, such as city or district councils. They regulate specific activities within a defined geographic area and are applicable to residents and organisations operating within that jurisdiction.

2.8 Compliance with legislative requirements is crucial to ensure ethical conduct, protect the rights and safety of individuals, maintain public trust, and avoid legal consequences. It involves understanding the applicable laws, implementing appropriate policies and procedures, monitoring compliance, and taking corrective actions when necessary.

2.9 Compliance efforts often involve regular reporting, audits, and risk assessments to assess and demonstrate adherence to legislative requirements.

3. Discussion

3.1 Currently, the Horowhenua District Council (HDC) does not have reporting in place that comes to the committee to provide assurance on the matters mentioned above. However, moving forward, officers intend to enhance the reporting practices by implementing a quarterly report.

3.2 The introduction of quarterly reporting will provide assurance and accountability. It will allow for regular updates and enables the committee to gain assurance regarding the council's activities, compliance with legislative requirements. The quarterly reports will serve as a valuable tool for members to monitor our compliance and performance and identify areas of concern.

3.3 We suggest the process going forward is for each quarter officers complete a legislative compliance declaration setting out the significant legislative requirements and declaring whether or not, to the best of their knowledge, they are aware of any compliance issues or breaches of legislation during the previous three month period in respect of the acts determined as ‘key’ by the council’s external auditors.

3.4 The suggestion for reporting on ‘key acts’ are as below however are open to other acts being added to this list:

· Local Government Act 2002

· Local Authorities (Members’ Interests) Act 1968

· Local Government (Rating) Act 2002

· Local Government (Financial Reporting and Prudence) Regulations 2014

· Building Act 2004

· Resource Management Act 1991

4. Current Status

4.1 The staff members have provided the information in the above list to the best of their knowledge but a comprehensive review has not been conducted to determine the status or compliance of each legislative requirement for this report. It is important to acknowledge that our confidence in this data is of moderate level until the review, which will commence soon.

4.2 There was one issue of statutory non-compliance declared to have occurred since 1 January 2023 being the Long Term Plan Amendment 2041 adopted by Council under received a lawful adverse audit opinion due to the inclusion of three waters information in the Long Term Plan Amendment beyond July 2024 which was not consistent with the legislation at the time.

Attachments

There are no attachments for this report.

Confirmation of statutory compliance

In accordance with section 76 of the Local Government Act 2002, this report is approved as:

a. containing sufficient information about the options and their benefits and costs, bearing in mind the significance of the decisions; and,

b. is based on adequate knowledge about, and adequate consideration of, the views and preferences of affected and interested parties bearing in mind the significance of the decision.

Signatories

Author(s)

Ashley Huria

Business Performance Manager

Approved by

Jacinta Straker

Group Manager Organisation Performance

Monique Davidson

Chief Executive Officer

Chairperson	Cr Sam Jennings
Deputy Chairperson	Cr Paul Olsen
Members	Cr Alan Young
	Cr Clint Grimstone
	Cr Jonathan Procter
	Mayor Bernie Wanden
	Jenny Livschitz	Independent Member
	Sarah Everton	Independent Member

No.	Title	Page
a ⇩	Risk Assurance Quarterly Report 2023 - March-May 2023	155
b ⇩	Horowhenua District Council - Risk Management Framework Rev 1.7 Draft	166
c ⇩	Horowhenua District Council - Risk Strategy & Workplan 2023 Rev 1.7 Draft	191
d ⇩	Operational Risk Register May 2023 Updated 10 (Under Separate Cover) - Confidential
e ⇩	Organisation Risk Register May 2023 Updated 10 (Under Separate Cover) - Confidential
f ⇩	DRAFT Risk Appetite Framework 2023-24 V3	203