Christchurch earthquake: Nerves as insurer predicts claims of $16b

Photo / Simon Baker

One of the first international insurers to put firm figures on last month's Christchurch earthquake has issued an initial top claims estimate of $16 billion.

That is five times greater than claims from the September 4 earthquake.

Swiss Re, a Zurich-founded business which operates in 20 countries, said claims from the February 22 quake would range from US$6 billion to US$12 billion ($8 billion to $16 billion).

The New Zealand's Insurance Council's chief executive Chris Ryan said the council made a $1.5 billion estimate last year for post-September 4 losses and that number did not include any estimates of the February 22 earthquake.

Ryan said insurers were now writing cheques to Canterbury businesses ranging from $5000 to tens of millions of dollars.

Other global insurance giants are cautious. International media are reporting that Britain's Amlin and Germany's Munich Re and Hannover Re are saying it is too early to estimate claims. Bermuda's PartnerRe said it expected to pay out up to US$240 million.

Stefan Lippe, Swiss Re chief executive, said his company's numbers were the provisional preliminary estimates for the total insured loss for the entire global insurance industry from Christchurch.

Swiss Re said its own share of the loss might amount to US$800 million.

Dow Jones said this was much larger than previously expected by analysts, citing Stefan Schuermann of Swiss private bank Vontobel expecting losses of only US$500 million ($679.8 million)

- REUTERS said Swiss Re's estimates would push it over its 2011 budget for natural catastrophes and eat into profits.

Dow Jones Newswires reported that if the top end of Swiss Re's estimates emerged as the final figure, this would already amount to a third of the insured loss from catastrophes in all of last year, about US$36 billion.

Swiss Re said the US$6-US$12 billion figure meant the Christchurch earthquake was a significant global event.

New Zealand insurance experts said the cost of premiums for consumers and businesses based here would rise to cover the higher cost of reinsurance bought by the locally operated businesses.

All insurance customers in New Zealand will ultimately pay a high price for Christchurch.

Ryan said premium rises were likely to impact on New Zealand as a whole, not just the Canterbury region.

Swiss Re's estimates come after Munich Re raised its loss estimate last month from the September 4 earthquake from €230 million to €340 million ($434 million to $642 million).

Lippe said his business had a crucial role to play. "The purpose of insurance and reinsurance is to help individuals and communities cope with the devastating impact of such events. Our role is to enable the people of Christchurch to recover swiftly from this catastrophe."

The uncertainties in estimating losses from such an event are significant and Swiss Re said its preliminary estimate may change as new information becomes available.

Swiss Re's statement said take-up rates for earthquake insurance in New Zealand were high. Houses are insured by the Government-run Earthquake Commission scheme - up to $100,000 per building policy and $20,000 per contents policy.

Householders can purchase private insurance above the $120,000 cover provided by the Earthquake Commission.

Commercial and industrial risks are insured by local and global insurance companies, Swiss Re said.

New Zealand insurance experts were yesterday citing the Insurance Insider of London and New York, and its pay-to-read online home page which reflected international fears after February 22.

"The market is looking anxiously to the world's largest reinsurer, Munich Re, to ease nerves, after Swiss Re turned heads with a second earthquake estimate that was five times greater than its initial estimate of the first Christchurch quake loss in 2010.

"Unveiling its results last month, Munich Re, which is also the Antipodean market leader, reported that its loss reserves for September's New Zealand earthquake were €339 million," the publication said.

- Additional reporting: Agencies