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Reinsurance vital for Christchurch and New Zealand

Reinsurance vital for Christchurch and New Zealand

Auckland, 16 August 2012 - The partnership between insurers and reinsurers was vital for Christchurch.

The head of the Vero Insurance earthquake response, Jimmy Higgins said the partnership was also vital for the growth of New Zealand’s economy and commerce.

Speaking to delegates at the New Zealand Insurance Law Association conference in Auckland today, he said a large amount of the $30 billion expected to be invested in the rebuilding of Christchurch would come from reinsurers and insurers.

The progress of insurers in managing and completing insurance claims in Christchurch was consistent with the scale and complexity of the disaster.

The progress was also similar to the pace of recent natural disasters in Australia where major floods, cyclones and bushfires had resulted in multi-year disaster recoveries, Jimmy Higgins said.

“The Christchurch recovery has had to contend with unique factors including scale, complexity and lack of recent experience in managing massive natural hazard disasters.

“Insurers, the EQC, CERA, Government and customers are all having an impact on the pace of the earthquake recovery in Christchurch and will continue to do so.

“Disaster recoveries rely on collective contributions. No individual participant such as an insurer or government agency can control the recovery pace nor can they justifiably be held responsible when that pace does not meet customer or community expectations.

“A unified disaster response is difficult to achieve – but is the only way real progress can be made.

“The way insurers manage claims and reinstatement in Christchurch today will have an impact on the cost, availability and use of insurance in the future – not only for Christchurch, but throughout New Zealand,” Jimmy Higgins said.

The considerable gap between customer expectations and what private insurers, the EQC, CERA and Government could deliver was a major concern to all. The priority was to bridge this gap and that could only be done by speeding up claims management and completion.

“It has taken more time than the community expected for insurers, the EQC, CERA and others to develop the skills, processes and systems to manage Christchurch,” Jimmy Higgins said.

“The perception for many in Christchurch is that there is no progress – but when you look at the facts – the recovery is progressing.

“Vero is managing around 19,000 commercial and domestic claims from five earthquakes in 2010 and 2011.

“We have completed over 30 per cent of our claims and paid out nearly $1.5 billion to customers.

“In the June quarter we closed 1,400 claims. That was more than the previous quarter.

“We are now paying out about $100 million a month in claims.

“We have 1,000 domestic properties in pre-construction; being constructed; or completed,” Jimmy Higgins said.

Discussing the importance of reinsurers, he said no individual insurance company could meet the claims cost of a disaster as massive as the Christchurch earthquakes.

“By sharing the risks with reinsurers we are able to provide cover for commercial and personal property at an affordable price.

“Insurance companies in New Zealand would not have the capital required to run their businesses and meet solvency standards without the backing of strong parent companies and their partnerships with global reinsurers,” he said.

Vero is New Zealand’s second largest general insurer. It is part of the Suncorp Group – Australia’s largest general insurer.

Suncorp had purchased nearly $6 billion in catastrophe reinsurance for the coming year. This was one of the largest catastrophe insurance programmes in the world.

“Vero’s access to such a large amount of catastrophe cover is very important for our brokers and customers in New Zealand.

“They know they are dealing with a company that has the financial strength and reinsurance cover needed to manage any crisis such as the Christchurch earthquakes.

“It is also important for the New Zealand Government. The insurance that brokers and their customers purchase through Vero saves the New Zealand Government and taxpayers literally billions of dollars when a disaster such as Christchurch occurs.

“To obtain such a large amount of reinsurance, insurance companies need to manage their current claims well and also meet conditions for future claims,” Jimmy Higgins said.

For a copy of the Jimmy Higgins speech, click here.

ENDS

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