English calls media conference amid speculation over AMI

English calls media conference amid speculation over AMI Insurance

April 7 (BusinessDesk) – Finance Minister Bill English has called a media conference for 10 a.m. today to make a Canterbury earthquake-related announcement amid speculation that AMI Insurance Ltd. has come close to draining its claims paying potential.

The Dominion Post reported today AMI has had its $1 billion of capital and reinsurance cover wiped out by the two Canterbury earthquakes and may not be able to pay out on new insurance claims unless it can raise more funds. The insurer has 30% of the house, content and car insurance market in Christchurch and the biggest exposure to residential claims, which total about $9 billion.

“We’re aware of the speculation in the market,” said Grant Fleming, a spokesman for English. “The Reserve Bank and Treasury are taking an interest in the matter.”

Reserve Bank spokesman Mike Hannah declined to comment on specific companies but said a licensed regime for insurers was being put in place over the next year or two and the overall sector is “sound.”

In March, AMI chief executive John Balmforth told BusinessDesk that the firm was “strongly reinsured and has received excellent support from its reinsurers.” AMI had $600 million of cover in place for the first earthquake “with an automatic backup for a similar amount.” It also held cover in the event of a third or fourth quake, he said on March 10.

Balmforth also said his company was “conservatively managed” and had a strong balance sheet, with assets of $540 million, of which 85% were liquid and made up of cash, bonds and term deposits.

On March 24, ratings company A.M. Best lowered its ratings on AMI. Its financial strength rating was cut two notches to A- from A+ and its issuer credit rating to a- from aa-.

The ratings were put under review with negative implications pending the company’s efforts to arrange back-up capital.

(BusinessDesk)

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