Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


$320m HNZ insurance settlement welcomed

Hon Dr Nick Smith
Minister of Housing

12 April 2013

$320m HNZ insurance settlement welcomed

The settlement of Housing New Zealand’s insurance claim over 5559 damaged homes is a significant and welcome step in Canterbury’s recovery from the devastating earthquakes in 2010 and 2011, says Minister of Housing Dr Nick Smith.

“This $320 million settlement is the largest single insurance pay-out in New Zealand’s history. This is great news for thousands of Housing New Zealand’s tenants, for Canterbury’s economy and New Zealand taxpayers,” Dr Smith says.

“The negotiations were complex and challenging. They took several months to complete and involved not only our lead New Zealand insurer VERO, but other New Zealand co-insurers, London insurers and Lloyds of London and Insurance Broker Aon. I was concerned, given the huge sums involved, that this claim could have resulted in years of litigation. I congratulate all parties involved for working to achieve this pragmatic and fair settlement.

“The greatest benefit from this settlement is that it enables Housing New Zealand to proceed with its repairs and redevelopment at pace. It can now get on and demolish, repair or redevelop its housing without the slow and bureaucratic process of having to individually check off each property with the insurer. This settlement enables the repair programme to be shortened from five to three years.

“Housing New Zealand can now move forward and reconfigure its stock for the future social housing needs in Christchurch. The new housing will have a lot more one and two bedroom units and less three bedroom homes. We are also moving from concentrated state housing estates to mixed communities, as research shows we can get better social outcomes.

“This significant settlement gives us the opportunity to rebuild Christchurch’s social housing so it is safer, better aligned to the need and of better quality than prior to the earthquakes.”

Questions and Answers

What was Housing New Zealand’s total claim and what was it based on?
The original total claim was for $430 million ($460m less $30m excess). It was based on what we could claim under our insurance policies to repair the damage to our houses plus business interruption costs.

The repair/damage portion of the claim comprised of costs across all technical categories: 17% Red Zone, 3% TC1, 36% TC2 and 43% TC3.

The number of properties under each classification is:

Damage categoryTC1TC2TC3No TCTotal
No damage2682630144

Why is the final settlement less than the original claim?
The submitted claim was based on a five-year repair timeframe, which has now been reduced to three years. This has reduced the escalation component of the claim and due to early settlement Housing NZ will also earn interest on settlement monies prior to paying for repairs. In addition, we have a better understanding of the extent of damage and the appropriate repair methodologies.

Will HNZ be able to complete all the rebuilds and upgrades it needs to from this settlement?
The settlement covers the repair programme. Housing NZ has a 10-year rejuvenation and rebuild investment plan of $1.1 billion that will contribute to increasing and improving our housing stock. This involves ongoing negotiations with CERA and the Christchurch City Council.

How is the repair programme progressing?
We will shortly be starting the large scale repair programme following detailed scoping and trials to confirm that we can undertake the repair work with tenants remaining in situ. Already, 221 badly damaged vacant houses have been repaired prior to this settlement. Repair works on 180 houses are about to start in the Bishopdale area and a further 200 houses in the northern suburbs, including Kaiapoi and Rangiora, are about to be scoped for repairs.

How will today’s settlement impact this programme?
The settlement gives us the certainty and flexibility to make smarter decisions about our properties, particularly in relation to the longer term investment plan. It also enables us to move ahead with the repairs in the short term without needing to discuss each property with the loss adjustors. This is also a time saving advantage as we have shortened the original five year repair and rebuild programme to three years. In addition it enables us to accelerate work in the red zone to remove and repair suitable houses and then relocate them to provide tenants with accommodation.

How have repairs been funded prior to this settlement?
Repairs have been funded from reprioritising working capital that is available to manage a large housing portfolio. If this settlement had not been reached we would get to a stage whereby we would have required part payment from insurers to continue with repairs.

How much has HNZ spent on repairs to date?
Approximately 27,000 urgent health and safety and asset protection jobs have been completed to date costing $8.3 million. The 221 vacant damaged properties and other related repairs have cost $16 million.

Will HNZ focus on repairing all its stock or will it also demolish and rebuild?
Our focus is three-fold. The first priority is to complete the 5000 repairs at minimal disruption to our tenants. At the same time we to build up to 700 new houses. Our 10 year investment plan details an extensive work programme to demolish older stock and build in a way that contributes to the revitalisation and rejuvenation of some of the worst affected suburbs.

Will the make-up of state housing change as a result of this settlement?
The longer term investment plan for Canterbury identifies a different approach to social housing so that we are in line with international best practice for mixed communities. This means developing medium density housing and building new houses which will reduce the average age of Housing New Zealand’s properties. The settlement gives certainty to our ability to get on with this work now rather than later.

Will there be the same, more or less state houses available in Christchurch as compared to pre-earthquake?
Our commitment is to return the level of social housing stock in Canterbury to the same as it was prior to 4 September, but in a better state, by December 2015.

Over the next 10 years the average age of the Housing NZ properties will be halved to 23 years. This will occur through planned intensification on existing land by demolishing 1300-1400 current homes and replacing them with the same number of new homes and releasing new sections/houses for sale to the market. HNZC is looking to raise $439 million from the sale of up to 2700 houses and $122 million from the sale of land.

How many insurers are involved in this settlement?
Four in New Zealand, led by VERO, and 23 in London/Europe.

Why did HNZ have EQC cover for just the December 2011 claim?
HNZC was unable to obtain private insurance for its properties in Christchurch for the insurance renewal period 31/10/11 to 31/10/12 so EQC cover was put in place.

What is the size of the EQC claim?
EQC is still assessing our properties and we are working closely with them. Our initial estimate is in the range of $5m to $10m.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines



Relevant Consents Gained: Government Unveils RMA Reform Package

The government has formally hauled down the flag on its attempts to alter the balance of environmental and economic priorities in the Resource Management Act, unveiling a 180-page Resource Legislation Amendment Bill containing reforms that have been largely endorsed by most political parties. More>>


Closing Schools And Such: Interim Redcliffs Decision Announced

“While the school’s board has argued that circumstances that could give rise to potential disruption are extremely unlikely, advice from technical experts has shown these concerns cannot be ruled out." More>>


Jane Kelsey: High Court Can’t Make Groser Provide TPPA Information Faster

‘This week we went back to court to challenge Trade Minister Groser’s stalling tactics over the release of information on the Trans-Pacific Partnership Agreement negotiations, following a High Court order that he reconsider the Official Information Act request I made last January’, said University of Auckland law professor Jane Kelsey, first applicant in the case. More>>

Werewolf 58: No Climate For Change

The last time the global community tried to take collective action on climate change the world’s leaders finally came to agree that every not-too-onerous effort should be made to hold global warming to 2°C above the pre-industrial average. At Paris, all 150 participant countries nations will have put forward their pledges... On the information available, New Zealand's is the second weakest contribution of any nation in the developed world. More>>


Lambton Quay Shutdown: Object Was Made To Look Like Bomb

Police cordoned off part of Lambton Quay Wednesday afternoon, saying that a suspicious package had been found. Buildings were evacuated and buses were detoured. The army’s explosive ordnance disposal unit was brought to the Quay. More>>


Public Sector Still Shrinking: Record Low Number Of 'Backroom Bureaucrats'

Ongoing restraint in the public sector and a focus on better frontline services has seen a further reduction in the number of core Government employees, State Services Minister Paula Bennett says. More>>


Disobeying The Law: Police Censorship Of Crime Research “An Outrage”

The Green Party is calling on Police Minister Michael Woodhouse to ensure Police scrap controversial contracts that place onerous restrictions on academic researchers’ access to Police data, the Green Party says. More>>


Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news