Wakefield Council exposed to £370m financial risk by failing to insure buildings
A report said Wakefield Council also faced “signifcant reputational risk” unless “sufficient and appropriate insurance cover” for its properties was found.
A council has been exposed to a £370m financial risk due to some of its buildings being uninsured for almost three years.
A report said Wakefield Council also faced “signifcant reputational risk” unless “sufficient and appropriate insurance cover” for its properties was found.
The number and identity of local authority buildings currently uninsured or underinsured have not been publicly revealed, but some are described as “heritage buildings.”
Details of the “shortcomings” are outlined in an interim report by an external auditor.
A councillor described the document as “very damning” as it was discussed at a meeting on Monday (January 27).
The council’s chief legal officer said the lack of insurance related only to the rebuild value of properties, not council staff working in them.
The report, by auditors Grant Thornton, said: “In October 2022, as part of an internal transfer of responsibilities, council officers alerted senior management, including the chief finance officer, of underinsurance and lack of insurance coverage for several buildings (including some heritage buildings) with a book value of £18m and a potential rebuild value (the value used for insurance purposes) of up to £217.6m which poses a potentially significant financial risk and reputational risk.”
According to the report, the council’s insurer had withdrawn insurance because there had been a lack of progress by the council in clearing ‘risk improvement actions’ (RIAs) following site surveys.
It said: “Resolving any RIA raised by the insurer is an important element of managing insurance risk.
“The potential financial exposure identified was significant.”
At the time, the cost of insurance premiums, in-house claims handling, and insurance tax premiums was estimated at around £1.4m per year.
The report also said: “The issues had taken some time to escalate to senior management.”
In January 2022, the insurer notified the council of its intention, from April 1, 2022, to reduce insurance cover on four properties and to withdraw insurance on five unoccupied properties.
The council also carried out its own review which “indicated shortcomings in risk management”.
The auditor said the council is “still exposed to significant loss” and the number of uninsured buildings had increased further.
The report continued: “A list of buildings without insurance provided to us by the council in November 2024 suggests that the number and value of buildings without insurance has increased since the problem was first raised, with a total exposure of up to £370m based on rebuild value.”
The report highlights a number of areas where the council has taken steps to address the issue, including adopting a new estate strategy for 2025-28.
In October 2023, the council entered into new contracts with providers for facilities management and property services.
The authority is also expected to agree a contract with a new insurance provider this month.
A procurement process closed in early December and the contract is expected to start in April .
The report said: “It is possible that this exercise will lead to an increase in insurance premiums.
“As things stand, we consider this area represents a significant weakness in arrangements and raise a key recommendation.”
One of the recommendations calls for the council to ensure all buildings have sufficient and appropriate insurance cover.
Further advice by the auditor states: “The council needs to be assured that the improvements it is making to the way it manages its estate are resulting in a reduced level of risk and a reduced financial exposure to potentially significant insurance loss.”
The report was discussed at the council’s audit committee at Wakefield Town Hall.
Committee member Nadiah Sharp, independent councillor for Wrenthorpe and Outwood West, asked Gareth Mills, a director at Grant Thornton: “It is very damning.
“Are we sitting in a building that’s included as one of those heritage buildings?
“Which buildings are we talking about? You have made that statement, but then you have not highlighted which buildings we are talking about.
“I would like to know what those heritage buildings are. I think it is very, very important.”
Jacquie Speight, chair of the committee, said details of the buildings were contained in a paper that would be considered in private.
Caroline Carter, the council’s chief finance officer said: “It’s a private item for a reason, because there is a procurement process. If possible, can we defer it until the private part of the meeting?”
Coun Sharp continued: “Why have we not had insurance since 2022?”
Ms Carter said further explanation would be provided during the private session.
She added: “We have had insurance in the vast majority of our properties. There is a small number that we don’t have insurance in.”
Gillian Marshall, the council’s chief legal officer, said: “When we are talking about not having insurance, it’s about the rebuild value of the properties.
“It’s not about the people working in them. That is still insured. I just want to be really clear about that.”