$1.7b likely to come here by re-insurance

The earthquake appeared to have caused around $5 billion of damage to infrastructure and property. Photo / Sarah Ivey

Risk spreading by New Zealand insurance companies related to the Canterbury earthquakes will bring an estimated $1.7 billion into the current account from overseas.

Statistics New Zealand said the $1.7 billion was an estimate of the total re-insurance claims expected to be lodged against overseas re-insurers by New Zealand resident insurers.

It was not an estimate of the total insurance cost to the country from the earthquakes.

John Morris, balance of payments unit manager at Statistics New Zealand said: "What it's saying is that New Zealand insurers have undertaken ways to reduce their risk and so instead of the New Zealand insurers having to bear the full cost of the earthquake damage they have undertaken contracts with overseas insurers."

Insurers would have to find the money for the part of their claims not covered by re-insurance.

"They may have reserves in New Zealand they can draw upon," Morris said.

"If they need additional money they will have to look to fund it somehow and options include taking out loans or selling overseas assets," he said.

"Either of those two things will flow through somehow into these balance of payments statistics."

The estimated inflow will be recorded in the September quarter.

Reserve Bank Governor Alan Bollard this month said the earthquake appeared to have caused about $5 billion of damage to infrastructure, and residential and commercial property.

The Half Year Economic and Fiscal Update released last week said the Earthquake Commission had re-insurance for its costs above $1.5 billion up to $4 billion - below the level of damage assumed for residential property.

Real gross domestic product growth is expected to rise marginally.