$463K insurance hike was one of the biggest expense increases for St. John's, says mayor
Insuring the city properties nearly doubling in cost this year
The cost of insuring City of St. John's properties has nearly doubled in this year's budget to nearly $1 million, one of the biggest expense increases for an already financially difficult year ahead.
Mayor Danny Breen says insurance costs of municipalities have been steadily increasing for years. In the 2020 budget, there was $528,555 allotted for risk management and insurance. This year's budget adds $462,846 to the cost of insurance — an 88 per cent increase.
"We compare regularly with other similar jurisdictions across the country; we're seeing rates increase anywhere from 45 per cent to 186 per cent in one place, and so we're at the lower end of that," Breen said.
"But it's still a large amount of money and that's a significant concern to us."
There are a number of things that factor into municipal insurance rates, Breen said, adding that the market is not particularly competitive this year, meaning lower rates are hard to come by.
"One of the things that's had a big impact is the impacts of climate change, the impact of major disasters on damage to infrastructure in the country," Breen told CBC's St. John's Morning Show.
"And one of the things is it's not based solely on the claims experience of St. John's. We're obviously weighed together with a larger pool of municipalities — similar municipalities — so what happens there really has an impact on the insurance rates in St. John's."
Breen said the COVID-19 pandemic has obviously had an impact on the insurance industry, as well.
"Every business has had an issue with their bottom line as a result of COVID-19; the insurance industry will be no different from that," he said.
Another factor influencing the price of insurance, Breen said, would be the number of lawsuits the city faces, but he added that he didn't have the exact details of the lawsuits against the city.
"For us, as we're a smaller-sized municipality with a lot of similar services that larger municipalities have, so the lawsuits will have an impact on us, but a bigger impact on us is the rating of the industry as a whole," Breen said.
"The whole municipal industry is under pressure, particularly the larger ones, and that's the one where we fit in. If you were to look around the province, I don't think they'd have very significant increases in municipalities in the province in their insurance because they don't offer the same types of service and the same size of services and facilities that the City of St. John's has."
While the budget is balanced, the city made a number of cuts or decreases to do it, while also being unable to increase spending or programming for the year ahead. The money that would have been available had the cost of insurance not increased would have been useful, Breen said.
"If you look at the savings from the Railway Museum it's $200,000. Sidewalk snow clearing, we never increased that budget, so we wouldn't have taken it out of there, but yeah it would have meant less cuts, it would have meant more flexibility for us to get through this year and into next year," Breen said.
As for what he expects insurance costs to look like in the years to come, Breen said he will have to wait and see.
"It's something that we're gonna continue to work on," he said. "It's a worry like a lot of different worries that we have about the financial impacts right now.… Those analyses are ongoing and our staff continue to work on it, but yeah it is a concern for us."
With files from The St. John's Morning Show