The Pinnacle
Issue 44 (May 2023)
Is the only way up?
In this issue of The Pinnacle we share the current market commentary and why insurance may be going up. We cover FENZ’s proposed levy increase and why $2 million should be the minimum supplier liability – plus why business leadership needs extra cover. Finally, we recount new worksafe guides for road workers. As always, knowledge is power, so grab a coffee and read on.
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Covering your heads
Company Directors and Officers can be held personally liable for any wrongful acts or omissions committed while carrying out their duties, which can result in significant financial and reputational damage. That’s why Apex recommends you protect the heads of your business with Directors and Officers Liability.
At Apex Insurance, we understand the importance of protecting your business and its leaders. That's why we want to introduce you to Directors and Officers (D&O) insurance, a policy designed to safeguard your company's directors and officers against a range of risks they may face in their roles.
D&O insurance is particularly important for high-risk industries such as finance, healthcare, construction, technology, and hospitality, where companies may face lawsuits from shareholders, employees, customers, suppliers, competitors, and regulators. In New Zealand, a company's directors and officers can be held personally liable for any wrongful acts or omissions committed while carrying out their duties, which can result in significant financial and reputational damage. By being personally liable this means that the directors own personal assets can be called on to repay damages and defence costs.
With D&O insurance, you can protect your company's directors and officers from legal costs and damages resulting from claims made against them. This policy can also provide coverage for defence costs, settlements, and judgements related to a variety of claims, including:
Breach of duty: Claims of breach of fiduciary duty, negligence, or mismanagement.
Employment practices: Defence costs following claims of wrongful termination, discrimination, harassment, or retaliation.
Regulatory investigations: Investigations by government agencies or regulators into alleged violations of laws or regulations.
Shareholder actions: Claims by shareholders alleging mismanagement, fraud, or other breaches of duty.
In addition to providing protection for your company's leaders, D&O insurance can also be a valuable recruitment and retention tool. Potential directors and officers may be hesitant to take on roles that expose them to personal liability without adequate insurance coverage. By providing D&O insurance, you can attract and retain top talent, demonstrating your commitment to protecting their interests as well as the interests of the company.
At Apex Insurance, we understand that each business has unique risks and requirements. Our team of experienced brokers can work with you to tailor a D&O insurance policy that fits your company's needs and budget. We can provide coverage for small businesses, startups, and large corporations, with options for excess coverage and retentions to meet your specific needs.
In conclusion, D&O insurance is a critical policy for any company with directors and officers. By investing in this coverage, you can protect your company's leaders from the risks they face while carrying out their duties and provide peace of mind to your entire organisation.
Click here to learn more about Directors & Oifficers Liability or to discuss your company's needs, please contact your Apex Broker.
New worksafe guides for road workers
The recent wild weather has seen widespread damage to the roading network and the list of repairs needed is extensive. WorkSafe has published new and comprehensive Good Practice Guidelines for PCBUs on how to keep workers healthy and safe while working on the road or roadside.
The Good Practice Guidelines are a substantial 176 pages long and provide general advice on risk management as well as specific advice on dynamic risk and risk through the contracting chain. They also cover a wide range of hazards including work near live traffic and mobile plant, work near services, utilities and the rail corridor, confined spaces, remote work, hazardous substances, biological hazards and extreme weather conditions. And in what may be a first for WorkSafe guidance, the Guidelines acknowledge Aotearoa New Zealand’s unique cultural context by providing an introduction to te ao Māori and risk management, and advice on engagement with local iwi.
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The latest market commentary
The severe weather and the implications for New Zealand are very much in the spotlight in this latest market summary from NZ Brokers.
Click here to read how it may affect your business and personal insurance and the strategies you could take to lessen the impacts.
Higher limits of liability
Clients may require higher limits of liability as a requirement via their suppliers or customers for a variety of reasons. Here are a few possible reasons why:
Protection against large claims: Higher limits of liability provide clients with greater protection against large claims that may arise from a product or service provided by a customer or supplier – for example, if a subcontractor or reseller causes damage or bodily injury, a higher limit of liability may be necessary to cover the cost of the damage or damages. Defence costs in particular are increasing and there needs to be adequate allowance made.
Compliance with regulations: Some industries or jurisdictions require those contracting to carry specific minimum levels of liability insurance. For example, in some areas, contractors may be required to carry a minimum of $2 million in liability coverage to work on public projects. For leases to operate in shopping malls in New Zealand there is often a $10M minimum requirement.
Increased confidence in the insured: Customers and suppliers may feel more confident in an insured who carries higher limits of liability insurance. It may be viewed as a sign that the vendor takes their work seriously and is financially responsible in the event of a claim.
Mitigation of risk: By requiring contractors or suppliers to carry higher limits of liability insurance, insureds may be able to mitigate some of the risk associated with their projects. In the event of a claim, the insurance coverage may help to cover some or all of the costs, which can reduce the financial impact on the insured’s own insurance record.
Overall, higher limits of liability insurance can provide insureds with greater protection, confidence, and peace of mind when working with suppliers, customers, contractors and sub-contractors. The specific limits required will depend on the nature of the work being done, the industry, and any relevant regulations or requirements.
Your Apex Account Director will work with you to ensure that limits meet requirements for your industry, exposure and any contracts that there may be in place.
FENZ proposes new levy hike
Fire and Emergency New Zealand (FENZ) has proposed a 12.8% increase in the levy on insurance policies to cover a funding shortfall caused by salary increases flowing from a collective wages agreement with firefighters.
Levies on property and motor vehicle insurance provide 97% of Fire and Emergency’s revenue. If approved, the impact on insurance premiums could pour more fuel on the inflation fire.
“We have previously considered whether expenditure reductions could be used to meet the costs of settlement, cover the funding shortfall and maintain cash reserves, however, we do not consider this to be realistic,” a consultation paper on the levy increase says.
Reducing capital expenditure would require cuts of at least $NZ48.8 million ($45.3 million) each year, which represents 55% of the annual capital program, it says.
Fire and Emergency proposes the levy increase would apply for two financial years starting July 1 2024. The levy is currently operating under transitional arrangements ahead of a new system and further adjustments that will take effect in July 2026. Insurance Council of New Zealand (ICNZ) CEO Tim Grafton says on LinkedIn that Fire and Emergency “sneaked out” the levy consultation on the eve of Easter, and that during a holiday period it had provided just 14 business days for submissions. “Wonder how hard they have looked to make efficiency gains,” he says. “We’ll be asking questions like this.”
Fire and Emergency says the Government has acknowledged the funding issue and will provide a $NZ75.4 million ($70 million) loan to be repaid over ten years. The loan ensures short-term funding, but Fire and Emergency says it still needs additional money to repay the Government and meet projected deficits, and deferring levy increases would mean requiring another loan and lead to future issues. “The recommended approach is therefore one of increasing the transitional levy now to smooth out the impacts across the years and ensure minimum cash reserves are maintained,” it says.
Levies on property and motor vehicle insurance provide 97% of Fire and Emergency’s revenue. It also receives a $NZ10 million ($9.3 million) Crown contribution towards the public good component of services provided.
Fire and Emergency in December reached a wages settlement with the New Zealand Professional Firefighters Union and says the increases will also have a flow-on effect across other staff. The settlement includes provisions to jointly consider issues of concern, such as fleet, equipment, and frontline staffing levels, and these will all result in increased costs that can’t be met within existing funding levels, the consultation paper says.
Before the settlement, Fire and Emergency expected small financial surpluses through to 2026/27. Following the deal, it has flagged deficits across the five-year period, including a net deficit of $NZ40.1 million ($37.2 million) next financial year and $NZ53.3 million ($49.5 million) in fiscal 2025.
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Disclaimer
This publication has been prepared for your general information. While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions.
This publication does not constitute financial or insurance, or home loan product advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any insurance product or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication.
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