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Councils return to mutual insurer as market hardens

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The Municipal Association of Victoria (MAV) says all local governments in the state are participating in its mutual insurance scheme this financial year, with some returning after finding it tough to acquire cover in the wider market.

MAV’s Liability Mutual Insurance provides public liability and professional indemnity protection through programs arranged by broker JLT, whose local government mutuals cover more than 500 councils around Australia.

MAV Insurance GM Owen Harvey-Beavis says all 79 councils have joined the scheme following the June 30 renewal period, rising from 70 last year. Participation had fallen to a low of 68 two years ago. All 29 councils have also come on board in Tasmania.

“The sense we got was that there was some narrowing of coverage available in the private market for some of the local governments’ areas of risk,” Mr Harvey-Beavis told insuranceNEWS.com.au.

“We have been able to retain coverage for those risks and provide an insurance solution for councils across their full risk profile.”

Insurers have become warier of certain areas of cover, such as those related to municipal building surveyors and combustible cladding, while COVID-19 exclusions have also created challenges.

The Victorian scheme was established in 1993 to provide policies to councils that couldn’t obtain cover following the collapse of Municipal Mutual. Similar arrangements to provide stability have also filled market voids in other states.

Victorian Auditor-General reports have in the past been critical of the schemes, and have suggested councils could obtain cheaper prices in the open market.

JLT, which was taken over by Marsh & McLennan two years ago, is the target of class actions in NSW and Victoria that maintain councils have paid excessive premiums.

Mr Harvey-Beavis says the mutual model works best when members are committed through the full market cycle and recent changes in insurance markets highlight that they are required.

“We have had a number of years of criticism around what the schemes can provide and whether or not they are justified,” he said.

“There may well be times in that cycle when we are more expensive but we are the sustainable solution, and I think that is what this renewal has ultimately shown.”

MAV also offers the Commercial Crime Fund which covers against losses from fraudulent or dishonest acts and the Community Group Insurance scheme which provides protection for not-for-profit clubs and community groups.