Te Papa museum cuts insurance premiums due to 'rapidly increasing' costs

Wednesday, 12 April 2023

A new Consumer New Zealand survey shows people are increasingly worried about the cost of home and contents insurance. (Broadcast December 2022).

Te Papa has reduced its insurance premiums in a bid to cut costs, taking building damage cover for a 1-in-250 year event instead of the previous 1-in-1000 year event.

A 1-in-1000 year event is more likely to create catastrophic damage than a 1-in-250 year event.

The change is already in effect and was revealed in an aide-mémoire to former associate arts minister Kiri Allan, released under the Official Information Act. Te Papa’s contents insurance cover has not changed.

The national museum took a significant hit to commercial revenue streams as a result of Covid-19, which made up about 40% of revenue before the pandemic, and they had not recovered to pre-Covid-19 levels.

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It comes amid a global climate crisis in which experts are warning of increased risk of major natural disasters including sea level rise, flooding, cyclones and wildfires. Wellington – which sits on the Wellington Faultline and is home to the museum – is also preparing for the possibility of a major earthquake and/or tsunami at some point in the future.

Board chairperson of Te Papa Dame Fran Wilde says the museum explored its options carefully.

For several years the national museum’s board had been reviewing the “rapidly increasing insurance premiums” for Te Papa’s buildings, said board chairperson Fran Wilde.

As well as the main museum, the building cover is also for Te Papa’s research and collections facility at Wellington’s Tory St.

Te Papa pays private insurers from its operating budget, which had remained at stagnant levels until increases in the 2015 and 2019 Budgets.

The new data is likely to have implications for building, infrastructure and insurance policy. (Broadcast October 2022).

But in recent years Te Papa has had to reduce its audience-facing spend to accommodate insurance premiums, which have been increasing at an average rate of 13% per year since 2018, the released papers said.

The move would result in savings, however the exact amount was redacted. That money would go towards staff salaries and construction costs, which are also increasing.

In addition to its insurance the museum has spent about $20 million on infrastructure to ensure its collection – both front and back of house – is stored securely and safely, especially in the event of a fire or an earthquake.

After discussions with public sector officials, the museum’s board decided to reduce its level of building damage cover for replacement/rebuilding should a major event occur as the expense outweighed the benefit, according to the papers.

Generally, the international re-insurance market uses a 1-in-200 year event as a benchmark.

If damage to Te Papa’s buildings in the future was of such magnitude that it went beyond the new level of insurance, the public purse would now make up the difference – with the government of the day deciding what action to take.

The released papers said the Government would have to pay out “significantly more” in the event of a claim being sought.

The museum was built to a high standard of resilience for the risk of both earthquakes and tsunami, Wilde said. That included base isolation, which helped Te Papa fare well in the 2016 Kaikōura earthquake.

The 7.8-magnitude quake caused damage to nine objects – six on display and three in storage.

Te Papa’s main museum is a six-storey, 50,000 tonne building and its staff care for 2.2 million objects.

“We’ve explored the options carefully and taken lots of expert advice. We’re confident that the adjustment strikes the right balance between our responsibilities to insure for the future and to make sensible use of public funds today,” Wilde said.

Arts Minister Carmel Sepuloni said the previous 1-in-1000 year coverage was considered “high”. Given the current fiscal environment, the reduction was a “prudent decision”, Sepuloni said.

Last year Te Papa received $42.9m in the Budget for a new storage and research facility for 866,000 specimens of fish, invertebrates and reptiles, which are stored in jars of alcohol.