A new Aon report on the local government sector has revealed tensions between the risk services company and JLT, the broker which dominates insurance in the sector.

The report says the local government sector continues to be dominated by mutual schemes, but that some councils are taking their insurance to the commercial market. It says 89% of councils place insurance through a mutual scheme.

Aon is known to have been pursuing opportunities in the council market for the past few years. And JLT does not agree with the Aon report’s figures on councils considering moving away from mutuals.

“It may have got the 89 the wrong way round,” CEO Leo Demer told insuranceNEWS.com.au.

While Aon’s report says there has been only “slight growth” in the number of councils opting to place their insurance through the open market from the previous year, it asserts more than 60 councils nationally have publicly tendered their insurance and risk management services this financial year. This compares to about 20 in the previous year.

“Testing the market represents good procurement practice and is likely to deliver savings, even if the decision is to stay with the incumbent insurer,” the report says.

It says there is strong interest in the sector from the commercial market, and councils should consider the potential benefits.

But Mr Demer, whose company manages councils’ mutual insurance schemes across the country, told insuranceNEWS.com.au the mutual channel has “never been stronger”.

“There are about 600 councils and only about 20 are not in a mutual,” he said. “Years ago the insurance market walked away from this sector and the mutuals were set up.

“They have thrived to the extent that they have significant surpluses, unbelievable risk management structures and stable premiums.

“Across the country there are accumulated surpluses of $250 million, and these are owned by the local authorities.”

Less controversial is Aon’s survey of the top risks being faced by councils, with threats to financial sustainability and stability at the top of the chart.

Then follows infrastructure, asset protection, weather, health and safety, funding, reputation and cyber, environmental and human resources – with cyber making its first appearance in the top 10.

“Government at all levels is a prime target for cyber criminals,” Aon’s report says. “In the 18 months prior to June 30 last year, the Australian Signals Directorate received 1095 reports of serious cyber assaults on federal, state and local government information system networks.”