Funding a Disaster

When a natural disaster strikes, the immediate and necessary response is to get the systems back up and running as quickly as possible. However, soon after the initial response effort, the funding of the response and recovery phases becomes an obstacle that must be addressed. This can be complex and time consuming. Understanding the claims process when the disaster strikes and taking steps to setup a Recovery Team and collect the right data will allow the claims process with the Crown and the insurers to progress more smoothly.

Typically, Local Authorities will have a number of funding streams to claim from following a disaster. Often this is made up as follows:

1. The Crown via Ministry of Civil Defence and Emergency (MCDEM) and the Department of Prime Minister and Cabinet (DPMC) may cover 60% of underground infrastructure damage.

2. The Local Authority Protection Programme Disaster Fund (LAPP) or a private insurer may cover the other 40% of the underground infrastructure damage.

3. A private insurer will cover the cost of the above ground damage (eg pump stations, treatment plants and reservoirs etc.)

In most cases these funding streams are administered separately and all have different requirements. These different requirements are described in this paper.

The Crown’s 60% contribution covers the actual cost of the response and recovery but there is a long list of criteria that must be met to determine funding eligibility. The Crown is likely to stay engaged until the end of the infrastructure recovery.

40% of the underground costs may be claimed through LAPP, if the local authority is a member. This will likely be 40% of the asset valuation amount but the fund is discretionary and the final amount will be decided by the LAPP trustees. Nevertheless, there is a rigorous process where every cost needs to be assigned to an asset. Proof of damage is required for the claim that can be difficult to obtain.

All aboveground asset damage costs are claimed through an insurer or a panel of insurers. Claims will be limited to the asset valuation. If repairs can be made to bring the asset back into service, rather than replacing the asset, then this will likely form the basis of the claim. Any betterment to relocate the structure is paid for by Council. A financial settlement is possible if both parties can come to an agreement.

It is recommended that an Infrastructure Recovery Team is formed soon after a disaster to oversee the recovery process including claims. It is best that this team is driven from within Council but, more likely than not, it will include external resources to cover the short-term increase in work load.