Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


EQC reinsurance costs treble, leaving Crown vulnerable

EQC reinsurance costs treble, leaving Crown vulnerable in big event

By Paul McBeth

Dec. 5 (BusinessDesk) - The Earthquake Commission's reinsurance premiums have more than tripled since the Christchurch earthquakes, leaving the Crown vulnerable to a big bill if the country's hit by another major event.

The government-backed natural disaster insurer is paying annual reinsurance premiums of $140 million, up from about $39 million before the spate of Canterbury quakes. Premiums now have to be reviewed annually as opposed to every three years, chairman Michael Wintringham told Parliament's finance and expenditure committee.

The new deal lifted EQC's cover to $3.25 billion from $2.5 billion previously, and raised the excess to $1.75 billion from $1.5 billion.

"The price we are paying for our cover at the moment reflects the uncertainty of the Christchurch events, and the longer we go on without another one, the memory of the market fades," Wintringham said.

The government has opted for cover where it pays the first $1.75 billion and anything beyond $5 billion in a major earthquake, with Wellington still seen as the most likely candidate. The Crown's insurance liability for EQC property damage was $8.33 billion as at Oct. 31, and $1.96 billion for the former AMI it took on, according to Crown accounts published today.

"This is not a decision which the board and management of EQC decided to take alone," Wintringham said. "We took that decision after sounding out from the government and government advisers about the degree of fiscal risk the government was prepared to take. There is a significant cost in terms of our reinsurance."

The annual EQC levy was hiked to $207 from $69, while private insurance premiums had only doubled, based on anecdotal, chief executive Ian Simpson said.

Wintringham said affordability of private insurance depends on the ability of insurer to offset its risk with reinsurers.

"We're seeing a significant step up in pricing - maybe famous last words, but my judgement is that's peaked and we will start pulling back from that," he said.

Canterbury Earthquake Recovery Authority chief executive Roger Sutton, appearing at the same hearing, said New Zealand's level of insurance is very high, with 99 percent of people in the Canterbury's 'red zone' covered.

Because many policies meant cover was uncapped, that surprised many insurers with how much they had to pay out, he said.

When asked whether the changing market dynamics may lead to underinsurance, Sutton said "we as a society need to think carefully about what they want to be covered for - do they want to be covered for trivia or things that really matter."

EQC's Wintringham said these questions are a fundamental part of the government's review of the EQC Act, which was announced in September.

The Treasury-led review will cover what the EQC insures, including the layer of loss covered, which natural disasters are covered, how multiple events should be treated, which types of property should be covered, the coverage of land, building and contents, what caps should be on the scheme, and whether it should be voluntary or mandatory.

CERA's Sutton told politicians that being able to get reinsurance money has been "extraordinarily important" in getting the rebuild underway.

His focus for the coming year is to accelerate the residential reconstruction and the anchor projects in the central city, and to bring private investment into the city, he said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news