Council in new insurance contracts after being exposed to £370m financial risk

In January, it emerged the council faced “significant reputational risk” due a number of key public buildings being uninsured for around three years.

The number and identity of local authority buildings currently uninsured or underinsured have not been publicly revealed, but some were described as “heritage buildings”.

The council’s audit committee was told on June 30 that new insurance contracts had been entered into.

Committee members were told the arrangements were in place for three years and the risk to the authority had now been reclassified from “very high” to “high”.

A report said: “This is due to new insurance contracts, providing comprehensive cover across all council property being in place.

“The residual risk of premium increases later in the long-term agreement period remains.

“However, these will be reviewed against contract terms.

“There is also the need to rationalise some smaller ‘bespoke’ policies.”

Earlier this year, a report by external auditors said senior management had first been made aware of problems with insurance cover for buildings in October 2022.

At the time, the council’s chief legal officer stressed that the lack of insurance cover related only to the rebuild value of properties, not to council staff working within them.

The document said: “Council officers alerted senior management, including the chief finance officer, of underinsurance and lack of insurance coverage for several buildings, with a book value of £18m and a potential rebuild value (the value used for insurance purposes) of up to £217.6m, which poses a potentially significant financial risk and reputational risk.”

Auditors subsequently concluded the list of buildings without insurance provided two years later, in November 2024, suggested the number and value of buildings without insurance had increased since the problem was first raised.

Their report estimated a total exposure of up to £370m based on rebuild value.

According to the report, the council’s insurer had withdrawn insurance because there had been a lack of progress by the council in clearing “risk improvement actions” following site surveys.

In January 2022, the insurer had notified the council of its intention to reduce insurance cover on four properties and to withdraw insurance on five unoccupied properties from April 1 that year.

The report also highlighted a number of areas where the council had taken steps to address the issue, including the adoption of a new estate strategy for 2025-28.

A further report, published in March this year, said the council was facing a “significant” increase in premiums to insure some of its buildings.

The financial document said costs were currently £100,000 higher than expected.