Monday, October 3, 2011

Follow the money

One of the the lovely things about being the church is that we dream dreams and run with ideals, and have a lot of exciting discussions in the process. But somewhere in all the envisioning, the crashing reality of money constrains the actuality of what happens. When I was in the Diocese of Nelson we dreamed a dream about Bishopdale Theological College, but something I hope future historians acknowledge when telling the College's story is that the dream only became a reality when a couple of financial factors kicked in: some long-standing debts within the Diocese's accounts were paid off, and a new inheritance was received. On many matters about how and why things take place in the church I suggest we need to 'follow the money' in order to tell our story.

Now in Canterbury, indeed the whole of New Zealand, we face an extraordinary financial reality, that the mixture of an inability to insure buildings as we would wish and the sheer cost of insurance premiums will drive wholesale rearrangements of parish boundaries, size of church buildings and maximization of church building usage.

Yes, it is true that a new insurance relationship in theory could be taken up with an insurer which has outstanding capital funding and reinsurance contracts. Find that insurer and the questions I raise below may never need to be asked.

These questions, I suggest, are going to need to be courageously faced by many churches in New Zealand as insurance premiums sky rocket and/or earthquake coverage is denied. To give just one example of an increased insurance, I heard the other day of an independent church whose premium will increase from $40000 p.a. to $150000 p.a. and its excess will go out to 10% of the valuation of the property.

In one report on the situation we read the following which is slightly bizarre while putting the issues in a blunt manner:

"Anglican Insurance Board chairman Don Baskerville said the move to refuse any new earthquake cover, and to renew existing cover only until December 1, could lead to some churches being sold to private investors.

"If it is a small town and there are three churches, we may have to speak to the other two denominations and work out which one we would use.

"The other ones could be sold to become a restaurant," he said.

At-risk churches that sat unused and could not be sold could face demolition.

"But the issue is whether churches can afford to insure their building. If they can't, then they wouldn't be able to rebuild should it come down in an earthquake."

Mr Baskerville estimated 300 Anglican, 150 Presbyterian, and 50 Methodist churches would be affected, along with those of other denominations, including all Catholic churches in the South Island."
The bizarre aspect of this article is that it reads as though the Anglican Insurance Board will be making decisions about which churches survive and which don't, and about whether one denomination will continue in a town when the others won't!! The blunt reality, however, is that whoever makes the decisions, according to whatever appropriate decision-making process, the outcome could be pretty much as Don Baskerville says, where there are three church buildings now, there will be one in the future.

So, to some questions which arise about the way in which basic financial considerations - nothing to do with strategic planning or dreaming dreams - will force change to churches in NZ:

Will 'sacred space' be affordable? That is, will we be able to justify having sacred spaces used for a few hours on a Sunday and as required for weddings and funerals during the week? Will flexible spaces, utilized seven days a week, be the only affordable way for a church to consider ownership of a building?

Will denominations need to radically revise arrangements in regions so that they have less churches? For churches used to boundaried divisions of regions (i.e. "parishes"), will we need to rearrange boundaries so that we have fewer-but-equal-sized parishes?

Will some or many of our buildings be uninsured?
In the future of our churches and halls, the most radical changes may be led by the colour of our money, or lack of it, not by our dreams and hopes. But that may be a good thing, leading to a church lighter and nimbler on its feet as journeys into the future. 


hogster said...

Here is a thought. As much as I like beautiful buildings an we want to honor God in the way we build, the church is the people. If you simply build a large weatherproof space the cost of building less and also the insurance of that building.

I would rather worship with 500 people in a tin shed than be the caretaker of an expensive but mostly empty which is unfortunately the case for many worship spaces around the city.

Rick MacKinnon said...

It's much better to have the decisions about which parishes survive taken by a small committee appointed by the bishop and set up without terms of reference, isn't it Peter?
For openness and transparency, give me the Anglican Insurance Board any day.

Peter Carrell said...

Hi Rick,
Just in case your comment refers by implication to the Diocese of Christchurch and its Strategic Working Group, let me say that:

(1) +Victoria has promised that the terms of reference of the SWG will be published shortly

(2) As a member of the SWG I am not aware of any particular power being bestowed upon us to make "decisions about which parishes survive". Our role is to research, dream dreams etc.

(3) While I am not exactly sure where the power to make such decisions lies (my book of diocesan statutes is not at hand), I would be very surprised to find that Synod itself was not part of making such decisions.

(4) The most important power concerning the future of parish churches lies with the people of the parishes: I cannot see the existence of any parish which is engaging in its ministry and mission tasks being brought to a end by Synod.

(5) The point of my post above is that we may be moving into a situation where the financing of parish ministry viz a viz buildings is one in which each and every parish is concerned about its survival and the only way to future peace and prosperity is for all parishes to work co-operatively on a better future.

Pageantmaster said...

In case it is of any help, here is how it looks over here from someone who has seen a little of how the insurance markets work.

It looks as if NZ has looked to its tradtional church insurer and hasn't really looked outside that market for a while. My suspicion is that Ansvar and the CofE based insurer behind it had bitten off more than they could chew, not having the size and range of other business which could absorb such large specific losses. That I suspect is why they withdrew wounded. I wouldn't take it as either indicative of the insurability or the rates you will have to pay for your churches.

It might be worth getting an insurance broker to look into the possibilities in the specialist insurance markets such as Lloyds of London and the company market including the large worldwide insurance companies. [It might be worth asking other denominations such as the RC's and Methodists how they deal with insurance and for any experience they have with other insurers.]

Another possibility is to self-insure your own churches as a 'mutual'. That means that, say, the whole of the province would be mutually supporting of one another's churches and absorb as a collective group the costs of any damage so that although the losses have been devastating for Christchurch, across the whole of the province the losses would pan out proportionately to be managable. Instead of paying insurance premiums for each church, the mutual would ask for an assessment of likely calls for the year for damage and make an advance assessment; at the end of the year any balance could be returned or retained as a reserve against future losses, or if greater losses are incurred an additional call could be made. It might lead to lower calls being made than the premiums the market would charge.

The advantage of the mutual insurance model, is that just like primary insurance, the mutual would be able to limit its exposure by reinsuring either a proportion of the risk or insuring a monetary cap on the losses for any one year. As a large mutual, that reinsurance business could well be very attractive to the insurance market. It could save the province to go to this model, which is after all the model of mutual insurance which the CofE used which developed into Ecclesiastical Insurance, the owners of Ansvar.

If this is of interest, the first port of call is to talk to insurance professionals about the possibilities. The largest insurance contract in the world is taken out by a group of shipping mutuals, and there are specialist managers who would be able to manage the mutual for the church if it did not wish to manage it in-house.

Just a suggestion in case it might help.

Andrew Reid said...

Hi Peter,
I'm just wondering why this is specifically an issue for churches? Aren't NZ commercial and residential property owners facing similar issues to the churches with premiums and affordability? Is it just because specialist insurance companies like EIG can't cope with a disaster of this magnitude?
On the suggestion from Pageantmaster about mutual insurance, I would urge that if you go that route, you make sure it is managed by someone who has real expertise in insurance and risk assessment. The diocese of Melbourne had a very nasty shock a while back when it thought it could run its own car leasing scheme and put an administrative person in charge, rather than a car expert. A few hundred thousand dollars in the red later, they realised that was a bad idea.
Hope you're able to return to Theology House soon, and continue to pray for comfort, wisdom and hope for the people of Christchurch, and that God's people can be instrumental in that process.

Peter Carrell said...

Pageantmaster: the powers that be may be considering such a scheme; they may be considering finding another (better endowed) insurer.

Andrew: insurers vary; entities have different capacities to absorb costs (businesses can put up prices, churches can only beg for more); but, absolutely, an insurer needs to run an insurance scheme.

We will never return to the building we are currently in. It will almost certainly be demolished as there is no case for investing money in its strengthening and repair to meet new building codes. Theology House in the future will have different premises; in the meantime we are wanderers in the wilderness. :)

Pageantmaster said...

Thanks Peter
I think Andrew Reid's comment is sensible - this is not an area to be managed DIY, but with professional assistance if you go that route.

Prayers for a good outcome to this - and I am sorry for what you all are going through, but am sure good things will happen for you in the future, and perhaps an opportunity for wonderful things. I do trust so.

Father Ron Smith said...

As a 'wanderer in the wilderness', Peter, perhaps you can relate to the poverty of Saint Francis of Assisi, whose day it is today.

He was all for restoring damaged buildings - not with the help of insurance, but by getting stuck in with his own hands and the hands of sympathetic friends - to restore the ruins of San Damiano church in Assisi. He was initially inspired by a vision of Christ speaking to him from the San Damiano Cross in the ruined church. He was only later - after helping to restore that building - aware that Jesus, in calling him to "re-build my Church" was really speaking about the Body of Christ - His people.

From that time on, Francis gave his life for the task of re-building the People of God by his preaching of Love, Peace and All Joy - in Christ.

Francis concentrated on 'God's little poor', and one can't help thinking that, among them today, he would reiterate Christ's message of Love for all - even LGBTs.

It's important to note that Francis was never in favour of building great edifices, and would have been horrified at the work of Brother Elias in erecting the great Basilica of Saint Francis in Assisi, which was badly damaged by earthquake last century, but restored through the beneficence of devotees of St. Francis (and a bit of help from the State).

When one visits another Basilica, of Saint Mary of the Angels, in Assisi, one is struck by the beauty and simplicity of the tiny Chapel of the Porziuncula (Little Portion) in the basilica, which remains as a tribute to the poverty with which Francis pursued the Gospel message.

Don said...

Don Baskerville of AIB here.
Sorry I did not find your blog sooner but I have been a tad busy.
One of the frustrations with the press is that they do not report everything said.
They report shared usage but niot the motivations or the decision making process.
I mentioned the gospel imperatives from St Matthew's Gospel urging us to visat prisoner, feed hungry and clothe naked. I stated a reluctance toi divert funds from these ministries to increased insurance premiums. I stated that decisions would be made by bishops, trustees and other stakeholders. Then I mentioned a possible outcoem and only that was reported.
Pagentmaster obviously knows his/her stuff and we are exploring every avenue so a decision is based on exhaustive investigation. Ansvar have several people of good will and strong intellect working on our behalf in Lloyds and otehr markets. AIB is working with 9 other denominations with the same problem - that cooperation trebles our market size.
Our task may be difficult but my brothers and sisters in Christ in Christchurch have a more difficult one.
Our intention is that we will have a coherent report to make to the church in Advent. Then Peter can make the decisions.

Peter Carrell said...

Hi Don
Really good to have your explanatory comment here: thank you.

I am going to have to learn to report on press reports with the byline, "X probably didn't say what he is reported as saying here because X is much wiser than that."!!

Don said...

Hi Peter
A quick comment to apologise for the abysmal spelling above - long comments in small windows is not a good idea.
Don Baskerville