VALUATION REPORTS – NEW ZEALAND
Insurance Valuation Reports
on from changes to the provisions for insurance under the Earthquake
and War Damage Act 1951 the NZIV revised its “Certificate of
Valuation for Insurance Purposes (Buildings)”.
November 1994 the NZIV published to members a revised insurance
reporting format, together with a guidance note.
revised insurance report “Valuation for Insurance Purposes” the
“definitions of insurance valuation terms” and the “Guidance
notes for use of Insurance Valuation Report” are now issued to
members for their use and included in this “Technical Handbook”
of the Insurance Reports and guidance notes are available from the
National Office - NZIV.
the 1st September 1992 the New Zealand Institute of Valuers appointed
a working group to review the Insurance Certificate which had been
commonly used for a period of almost 20 years.
working group was required to consider the need for a Certificate its
wording and format.
is no longer required but there is a need to provide a Valuation
Report. The Valuation Report to which these guidance notes refer has
been developed for use by members of the New Zealand Institute of
Valuers and The Institute of Plant and Machinery Valuers.
most significant changes to the former Certificate is the inclusion
of Risk Management Information and the provision of market related
most important feature of the Insurance Report is that it is a report
and not a Certificate.Valuers of both land and buildings and plant
and machinery are able to use the report format.
purpose of the report is to provide useful information for the client
as well as the insurance industry and in an easily recognisable
those values or estimates required should be entered on the Valuation
Report Form with a notation,“not required” or ‘not provided”
placed against the other headings, where appropriate. The intention
is to allow for a range of information tailored to the needs of the
opportunity exists for all valuers to liaise closely with clients so
that useful and quality information will allow a decision to be made
as to appropriate levels of insurance cover.
may be instances where the information provided in standard form is
insufficient to meet client requirements.
such cases a more detailed report should be provided. A report should
be made available.
Name of Client
this is noted as normally “the insured”, there will be occasions
when it is not the insured as in the case of a “fund manager”.The
name of the client is the actual client of the valuer, broker and
will include, in the case of the plant and machinery valuations any
structure housing these items. It should be noted that when valuing
residential property where the floor area is less than 100 square
metres as in the case of smaller unit title units, the floor area
should be provided in a covering letter or within the asset
description, to enable appropriate coverage under the Earthquake Act.
items could include, but are not limited to Sprinkler systems, lifts,
major structural and/or machinery componentry, etc.
estimated year of completion of the asset, not the commissioning
ensure uniformity classification should correspond in general terms
with those specified in the text, Urban Valuation in New
Zealand,Volume I, 1991 by Rodney L Jefferies, published by NlIV, PO
Box 27 146,Wellington, N.l.
Sub-Soil Type (if known)
information is required by Underwriters as a broad indicator of
seismic stability. The perception gained from the definition can have
a significant impact on insurance cost particularly in earthquake
prone areas throughout New Zealand. It is important to discuss this
aspect with your client and where potential penalties could arise,
should be encouraged to seek more detailed information from the Local
and Regional Authority or engineering specialists. An entry should
only be made in this portion of the report when the valuer has
accurate knowledge as to the sub-soil type.
Other Known Characteristics
will include any items not otherwise covered within the report, which
will be of assistance to the client and/or insurers and should only
be detailed when information is known on the particular
characteristics e.g. locational factors, surrounding property uses
should include a short description of the main site use, but where
mixed use occurs e.g. commercial /residential, this should be
definition on the reverse of the report will apply but valuers should
note that no specific identification is made in the Reinstatement
Estimate of the cost of different materials and additional services.
Should separate identification and calculation of costs be required,
then this should be supplied on request as with details on partial
losses (refer reverse of report, and 4.3 of guidance notes). However
items required as per 4.3. of the guidance notes must be shown under
should be noted that no allowance is to be made for any delay due to
the need to comply with the provisions of the Resource Management Act
including possibly the requirement to reinstate on an alternative
relation to the reinstatement, is as at a particular date (date of
report) unless stated otherwise.
Market Related Value
this value is required by the client, it is the value of the asset,
excluding any land (Note b) on the front of the report, assuming that
if appropriate, it is leased at a market rental. This would provide a
similar value of the asset, as if it had been assessed in terms of
Land Act 1951, being the added value which the asset gives to the
land. As the property could be owner occupied, vacant or subject to
rent review, it is considered appropriate to adopt this “market
related value” basis, and a market rental for the calculation of
the value of the asset.
the insured wish to have Indemnity Value based on actual income then
this must be stated by the valuer.
situation may arise in properties which are over or under rented, and
when the client specifically requires rent recognition.
Depreciated Replacement Cost
that this approach recognises physical depreciation only.
detailed on the report, this would be calculated for the higher of
“A” or “B” above. When only one of the two indemnification
figures are being requested by the client, inflationary provision
will apply to that only.
would apply to assets unlikely to be reinstated to the same extent,
or to the same design or construction material as existing. This
would be required when demand necessitates a smaller or different
asset due to changes in technology/ economics and other factors.
a freezing works through to a two storey retail/office building in a
district where there is no demand for first floor space and would
never be rebuilt. Any functional replacement assessment must be
supported by a brief specification either provided by, or created in
conjunction with, the client.
brief specification only is required, but if more detail is necessary
this should be obtained from the client.
is also the requirement to complete the Inflationary Provision during
the reconstruction period on the same basis as the Reinstatement
this basis is used, then item 1.0 on the valuation form,
REINSTATEMENT, must also be shown so the difference between the two
methods is shown.
normally assumes that the total asset to be demolished has been
damaged beyond repair. A Demolition Estimate covers the cost of
demolition and removal as debris of the asset, excluding the cost of
removal of any noxious materials or removal of debris on adjoining
allowance is required to be made for the salvage or removal of
fixtures, fittings and contents, then this should be specified and
referred to in an attached letter. This could also apply to undamaged
plant which must be removed from the property if considered
Reinstatement Estimate. Indemnification and Functional Replacement
figures if required should relate to the assets together with other
assets within 8 metres of the external walls of the main structure or
such other additional areas of the site likely to be damaged during
reinstatement of the asset. If further infrastructural assets are
required to be estimated they should be clearly identified.
Valuer’s Signature, Qualifications and Name
are as stated. If the letterhead of the NZIV or IPMV is used, the
name of the valuer’s firm/organisation should also be incorporated
at the bottom of the report. This would not be required if the
company’s letterhead is used.
is the date of the report. If the effective date of the valuation is
different, or the valuation date is to cover a particular period
other than a normal 12 months period of policy, then this information
needs to be provided.
valuation figures should exclude items installed and paid for by a
lessee, unless requested by the client and detailed in the asset
description. The asset description should also state whether the
valuation report includes any plant or machinery.
following definitions pertain to and form an integral part of the
Valuation on the reverse hereof.
location, including street address at which the assets are situated.
description giving sufficient detail 1.0 identify the range of assets
encompassed in the valuation including details of principal structure
showing main construction materials. Any exclusions should be noted.
the reinstatement estimate is based upon the use of different
materials and/or additional services from those existing briefly
describe the major item.
year of completion and dates of any major additions and upgrades.
of main activity carried out at location.
classification of the land contour containing
and immediate yard areas:
other - as specified
classification of land supporting building and immediate yard areas:
finn natural ground
other - as specified
a geotechnical survey has not been undertaken the description is
the estimated cost at date of valuation (including relevant fees) of
reinstating the asset to an as new condition, including, where
appropriate, the use of current equivalent technology, material and
services. In the case of partial destruction no specific allowance
has been made for any additional requirements that any Council,
Government or other Authority may as additional expenditure to
upgrade, alter or amend the undamaged portion of the asset.
amount has been estimated on the basis of a loss occurring on the
last day of a 12 month insurance period, if appropriate.
inflation provision under 5.0 and 7.0 incorporates an allowance for
the additional time required for damage inspections, demolition,
preparation of new preliminary proposals and their approval by the
Territorial Authority, preparation of working drawings and
specifications, schedules of quantities, in addition to an estimated
period of construction contract. No allowance is made for any delay
due to the need to comply with the provisions of the Resource
inflationary provisions are given without prejudice.
Basis of Valuation
Market Related Value
Related Value is the estimated amount for which an asset leased at a
market rent, if appropriate, should exchange on the date of valuation
between a willing buyer and a willing seller in an arms length
after proper marketing, wherein the parties had each acted
knowledgeably, prudently and without compulsion.
Depreciated Replacement Cost
the Replacement Cost at the beginning of the insurance period,
reduced by factors providing for age and physical depreciation.
the estimated cost required to reinstate all assets to perform
similar tasks but under optimum current design and lay-out conditions
with capacity requirements not greater than currently available. The
value of any partial loss has been disregarded in this context.
the purpose of valuation, it is assumed that 100% of the assets have
been damaged beyond repair and have no salvage value.
otherwise noted in the valuation covering letter, Demolition Estimate
covers the cost of demolition and removal as debris of the assets
valued only excluding the cost of removal of any noxious materials,
or removal of debris on adjoining premises.
for Insurance Purposes
Contour: Subsoil Type:
Market Related Value
Depreciated Replacement Cost
C. Inflationary Provision
(For the higher of ‘A’ or ‘B’ above during a 12 month insurance period
to valuation report/letter for the specification of the functional
Functional Replacement Cost
All figures quoted are exclusive of Goods & Service Tax, Finance
costs and other indirect costs.
All figures are exclusive of any allowance for land value.
This form must be read in conjunction with the definitions of terms
on the reverse hereof.
The information in this report has been prepared to establish
insurance values and may not be used for other purposes without the
written consent of the Valuer.
All figures assume compliance with building regulations and bylaws.