Management Consulting

The Welsh government has proposed significant mergers and reorganizations across local authorities in Wales, potentially reducing the number of councils from 22 to as few as 10. This restructuring aims to align council boundaries with health board areas, which presents both risks and opportunities for the merging authorities. Aon’s Public Sector expert, Bill Sulman, highlights the need for local authorities to carefully assess the strategic and operational risks associated with such mergers. Strategically, authorities must consider the implications of shared services, the potential loss of corporate knowledge, and changes in policy or corporate strategy that could introduce new risks. Operationally, issues such as differing protocols for highways maintenance, child protection interventions in social care, and the management of school risks need to be addressed to ensure best practices are maintained. The merger will also have significant insurance implications. The new authority will need to evaluate its insurance program, including limits of indemnity and historic liabilities. Aon emphasizes the importance of understanding how previous long-tail liabilities will be managed and whether the new authority will take on the responsibility for these claims. Additionally, claims handling processes may need to be revised, particularly if services are transitioned from outsourced to in-house management. Long-term agreements (LTAs) will also be impacted by the merger, as the changing risk profile may render existing agreements obsolete. Aon advises that this presents an opportunity for a comprehensive tender exercise to align insurance coverage with the new risk landscape. Engaging in early discussions with current insurers can facilitate a smooth transition away from existing LTAs, ensuring that the merging authorities are adequately protected during and after the restructuring process.