Wellington cable car and stadium grapple with booming insurance

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The Sky Stadium is just one of many countries facing rising insurance costs and the trust that runs it has had to reduce its cover.

Monique Ford / Stuff

The Sky Stadium is just one of many countries facing rising insurance costs and the trust that runs it has had to reduce its cover.

Soaring insurance costs are hampering two of Wellington’s greatest assets – the cable car and the stadium – and they are not the only ones, with rising costs for homes and commercial buildings across the city.

Documents presented to a Wellington City Council committee this week show cable car insurance costs have risen by 160 per cent over the past four years, while the trust behind Sky Stadium has had to cut its cover and would run out of $102 million if the stadium needed replacement. The replacement was valued at $302 million in 2019.

“Early indications show premiums will rise again,” said a report from Wellington Cable Car Ltd (WCCL) to a board committee. Rising insurance costs were “a significant business risk and a key factor in preventing WCCL from returning to a profitable state.”

Wellington’s two drawcards aren’t the only ones facing insurance hikes as the industry responds to climate change and greater awareness of earthquake risk.

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Insurance Council chief executive Tim Grafton says New Zealanders underpaid for insurance for years, then the earthquakes in Canterbury and Kaikōura prompted insurers to start looking at the true cost – and it increased the bonuses in the capital. The 2016 Kaikōura earthquake cost insurers more than $1 billion in Wellington alone, he said.

There were global issues, including more one-time events related to climate change and “double-digit building inflation” – making rebuilds faster and more expensive – driving up costs, he said.

The organization behind the Wellington cable car has seen a big increase in insurance premiums.

ROSA WOODS / Stuff

The organization behind the Wellington cable car has seen a big increase in insurance premiums.

The Wellington Regional Stadium Trust, which runs Sky Stadium, recently secured a $1.5million debt-financed council grant to support it after major Covid-related losses, has now painted a dire financial picture for the council, which owns the stadium along with the Greater Wellington Regional Council.

“[Financial autonomy] no longer feasible for the Trust given that the stadium is now an aging facility, the additional seismic requirements, the significant increase in insurance premiums and the impact of the Covid-19 pandemic over the past two years “, says the report.

The insurance, along with $36 million in projected spending on the building over the next five years, meant the stadium struggled to stay black.

Councilor Diane Calvert, chair of the finance and performance committee where the papers will be presented Thursday, said rising insurance costs are being felt across municipal, commercial and residential properties.

She said the council needed to lobby insurance companies to look at ways to cut costs and could consider more self-insurance, where it did not get outside insurance but covered the costs if and when they came.

Mayor Andy Foster released an Insurance Task Force discussion paper in 2019 that suggested creating a group, co-chaired by him and the Earthquake Commission minister, to oversee an “implementation plan” and investigate why the owners had not taken out insurance.

Calvert said Sunday that nothing more has happened with the task force since 2019.

But Foster said an increase of $150,000 to $300,000, starting in October in the upper limit the Earthquake Commission paid on residential homes, was partly due to the task force. But it was no secret to any Wellington property owner that the city’s risk profile and insurance costs were rising, he said.

Property Council chairman Scott Pritchard has confirmed that the Christchurch earthquake in 2011 and then the Kaikōura earthquake in 2016 pushed Wellington’s commercial insurance to the point that the capital was now more expensive than Auckland.

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