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


Crown to manage AMI's earthquake claims

Hon Bill English
Minister of Finance

16 December 2011

Media Statement

Crown to manage AMI's earthquake claims

IAG's agreement to purchase AMI Insurance, announced today, will strengthen the Canterbury insurance market and reduce the Crown's liability, Finance Minister Bill English says.

As part of the deal, the Crown will take over ownership of AMI Insurance’s Canterbury earthquake related claims.

"The part of AMI dealing with earthquake claims – along with its reinsurance for those events - will be retained as a new Crown company and will continue to manage AMI's customers' earthquake claims," Mr English says.

"This will ensure those claims are managed effectively and with the minimum of disruption.

"IAG has also agreed that it will continue to offer insurance to AMI’s customers, as well as all of its existing customers, on renewal and transfers in Canterbury and throughout New Zealand. We welcome this assurance, which will ensure ongoing insurance cover for 60 per cent of the Canterbury market.

"For earthquake affected AMI policyholders, this means their existing earthquake claims will be managed by the new Crown company, while the IAG group will manage their ongoing insurance cover. For AMI policyholders around New Zealand, the IAG group will manage their insurance cover."

The agreement is subject to regulatory approval, including from the Commerce Commission.

"In April the Government said it would provide back up financial support for AMI to give policyholders certainty and to ensure an orderly rebuild of Christchurch while AMI sought a market solution to its challenges," Mr English says.

“Now that AMI Insurance has found a new source of long-term capital, the Government will take over ownership of AMI's estimated $1.8 billion of earthquake related claims, consistent with the AMI support deal."

This claims liability of $1.8 billion is offset by about $1.3 billion in reinsurance and further reduced by the $380 million purchase price agreed by IAG.

As a result Treasury estimates that the Crown's liability will drop from $335 million, in the last published set of full-year Crown accounts, to about $120 million.

The Government has appointed Nelson-based company director Ross Butler to chair the new Crown company. Mr Butler has a background in finance and insurance-related companies and is currently chairman of Nelson Marlborough Institute of Technology and deputy chairman of GNS Science.

"The Government has made it clear that helping to rebuild Christchurch is one of its most important priorities. Today's announcements will help meet that goal," Mr English says.

Questions and answers

1. How is the Government involved in this transaction?

The primary transaction is between AMI and IAG. The Government became involved when it agreed to support AMI policy holders to avoid possible significant disruption to rebuilding Christchurch. The support agreement and other relevant documents are available at:

2. What will it cost in the long term?

The Government has previously said in its financial statements for the year ended 30 June 2011 that the support arrangement that protects AMI Insurance’s customers would cost taxpayers $335 million.

The final cost to taxpayers is still uncertain, but Treasury's best estimate is the remaining liability will be about $120 million. This is figure is based on AMI's estimated $1.8 billion in earthquake liabilities, reduced by $1.3 billion reinsurance and the $380 million purchase price. When the transactions are paid for, an updated estimate of cost will be disclosed in the monthly Financial Statements of the Government.

3. Will AMI customers still be able to insure their houses after IAG takes over, or will they be insured by the Government?

IAG has also agreed that it will continue to offer insurance to AMI’s customers, as well as all of its existing customers, on renewal and transfers in Canterbury and throughout New Zealand. This undertaking will ensure ongoing insurance cover for 60 per cent of the Canterbury market.

The Government is acquiring only AMI's Canterbury earthquake claims and associated reinsurance. Its purpose will be to settle those claims and it won’t be offering new insurance policies.

4. Who will run the business that the Government is buying? Will it be part of CERA, the Treasury, or some other government department?

The business the Government is acquiring will be a Crown company listed in schedule 4 of the Public Finance Act. It will have its own board of directors and Nelson-based company director Ross Butler has agreed to chair the company.

Mr Butler has experience in finance and insurance-related companies. He was chief executive of GIO Building Society and GIO Finance in Australia. He managed GIO through its privatisation, and subsequent establishment of banks and insurance companies throughout Australia, Asia and New Zealand. Mr Butler has extensive governance experience across multiple sectors. He is currently chairman of Nelson Marlborough Institute of Technology and deputy chairman of GNS Science.

5. How can the Government be sure that this is the best deal?

The Government’s role in this has been to provide support so that AMI’s customers in Canterbury are properly looked after and the rebuild process can continue.

The AMI Insurance board appointed investment bank Goldman Sachs to help it find more capital. The process of finding a long term investor has led to the offer by IAG. The offer has been recommended by Goldman Sachs and considered and approved by AMI Insurance’s directors.

The Government’s interests have been protected by getting independent advice from investment bank Deutsche Bank and law firm Chapman Tripp, and having Treasury observers at AMI Insurance Board meetings.

6. If someone has an AMI house policy today, and their house is either a substantial repair or a rebuild, who will they be dealing with once the purchase is completed?

The new Crown company, which will be taking over the management and settlement of earthquake claims.

7. Will today's decision slow the process of getting post-quake results for AMI customers?

No, the claims department established by AMI following the earthquakes will transfer to the new Crown company.

© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Covid-19: Dissolution Of Parliament Delayed As Govt Hunts Source Of New infections

The dissolution of Parliament has been deferred by at a least a few days due to the new covid-19 cases, Prime Minister Jacinda Ardern said.
This was in case Parliament had to be reconvened as more information came to light, Ardern said at a briefing on the three-day level 3 lockdown in Auckland and level 2 alert for the rest of the country.
A decision about the dissolution of Parliament and any flow on effects for the timing of the election would be considered on Monday, Ardern said... More>>


Government: Plan To Tackle Problem Plastics

Following the success of the phase out of single-use plastic shopping bags, the Government now has plans to phase out more single-use and problem plastics to reduce waste and protect the environment announced Associate Minister for the Environment ... More>>


Gordon Campbell: On The New Lockdowns, Leadership And Lebanon

As Melbourne has shown, the webs of urban life overlap so extensively that community transmission can be very hard to trace, let alone control. Each of the family members in the South Auckland family at the centre of the current outbreak will have had ... More>>


National: Emma Mellow As Auckland Central Candidate

Tonight the National Party has selected Emma Mellow to stand in the Auckland Central electorate for the 2020 General Election. Emma Mellow replaces retiring MP Nikki Kaye who first won the seat from Labour in 2008. Emma leads a team of communications ... More>>


Travel: Update On New Zealand And The Cook Islands Bubble

The Prime Minister of New Zealand Jacinda Ardern and the Prime Minister of the Cook Islands Henry Puna have welcomed the completion of phase one in the establishment of a travel bubble between New Zealand and the Cook Island. More>>

Election 2020: Labour Launch

E ngā mana e ngā reo Ngāti whātua ngā mana whenua o Tāmaki Makaurau, e tika te kōrero Ehara taku toa he toa (taki tahi) he toa (taki tini) No rēira tātou e huihui mai nei, ka ‘Hoake tonu tātou’ Thank you for that welcome. And thank ... More>>

Gordon Campbell: On Political Twins, And On Labour Extending Its Wage Subsidy Scheme

A quick quiz for the weekend. Which political party currently represented in Parliament issued a press release yesterday that contained these stirring passages: “[We have] long supported a free trade and free movement area between Canada, Australia, New ... More>>


Covid-19: Poll On Management Approval

New Zealanders’ overall trust in the Ministry of Health and Government to manage the COVID-19 pandemic is at 82%, down from 91% during April. Overall distrust that the Ministry and Government will manage it in ways which best protect themselves More>>

Election 2020: National Releases 2020 Party List

National’s 2020 Party List is a strong mix of experience coming up through our Caucus, and new and exciting talent joining our team from communities across New Zealand, Party President Peter Goodfellow says. “The National Party is incredibly ... More>>

Horizon Research Limited: How Judith Collins Stopped The Bleeding

Horizon Research includes questions on voting from time to time in its surveys – for both forthcoming referenda and general elections. More>>

Your Vote 2020: Bringing Election Coverage To Viewers Across TVNZ Channels And Platforms

As New Zealand gets ready to head to the ballot box this September, 1 NEWS is bringing voters comprehensive coverage and analysis of this year’s General Election. TVNZ’s coverage will draw on the depth of experience held across the 1 NEWS team, says Graeme ... More>>

Economy: 30% Believe Households Worse Off, 298,000 Expect To Lose Jobs

64% of New Zealanders feel the economic position of their households is the same or better than a year ago – and 30% think it is worse or much worse, while 298,000 think they will lose their jobs in the next 12 months. Households’ perceptions ... More>>

State Services Commission: Findings Of Investigation Into COVID-19 Active Cases Privacy Breach

Deputy State Services Commissioner Helene Quilter has today announced the findings of an investigation into a breach of privacy regarding sensitive personal information. The investigation looked into who or what caused the disclosure of the information, ... More>>

International Security: New Zealand Suspends Extradition Treaty With Hong Kong

The New Zealand Government has suspended its extradition treaty with Hong Kong and made a number of other changes in light of China’s decision to pass a national security law for Hong Kong, Foreign Affairs Minister Winston Peters says. More>>






InfoPages News Channels