Insurer 'swamped' after quake

Western Pacific says it will be able to meet commitments for business interrupted by the Christchurch earthquake. Photo / Getty Images

A small Kiwi-owned insurance company has stopped accepting any business after the Christchurch earthquake.

Western Pacific Insurance chief executive Jeffrey McNally said the February 22 quake "swamped us".

The Queenstown-based commercial insurer has written to brokers saying it had temporarily ceased to write any new business or renew existing policies nationwide while it conducts a review of its risk portfolio.

Most insurance companies have stopped providing new policies in Canterbury for the meantime, but they are continuing to look after their existing clients and business in other parts of the country that is unaffected.

McNally denied the halt had anything to do with Western Pacific's ability to meet its commitments. "I don't think so. We're intending to get back into business, hopefully next week."

Western Pacific is owned by McNally, Queenstown businessman Graham Smolenski and a handful of other shareholders. McNally and Smolenski are the directors of the company.

It provides business interruption and material damage insurance to a number of small and medium Canterbury firms.

On an accumulation of risk business, Christchurch was Western Pacific's second largest market after Auckland, McNally said.

In the September 4 earthquake, only about 6 per cent of its clients were affected but, this time, it was facing a lot of business interruption claims.

It was well reinsured for the size of the claims but the overall number were pushing its internal resources.

"We're looking at our total catastrophe exposure throughout the country and we really needed to stop for a period, assess all that, and then work out do we have adequate reinsurance in place for this exposure we've got?"

It had about 15 reinsurance carriers, including seven or eight Lloyds syndicates which had large exposure to Japan.

Western Pacific's reinsurance broker was able to secure it an automatic reinstatement of reinsurance after the Christchurch disaster with no extra premium. "We're fine for the rest of this year but we suspect on renewal our catastrophe reinsurance premiums will be significantly increased, and also I don't think we'll be able to buy as much cover as we did before," McNally said.

Insurance industry sources said Western Pacific was known for providing cheaper insurance.

The company's Standard & Poor's "B" rating means some insurance broking firms do not sell its policies because their rules dictate that they only deal with insurers with a higher credit rating.

NEW COVER YET TO BE ORGANISED

It could be another month before insurance companies start writing new policies in Christchurch.

Canterbury Employers Chamber of Commerce chief executive Peter Townsend said businesses understood insurers were under pressure.

Insurance Council chief executive Chris Ryan said insurers stopped writing policies for about four weeks after the September 4 event and, given the size of the latest catastrophe, the gap in cover was likely to go on for at least two months.

PAYOUTS IN DISPUTE

Some homeowners entitled to the maximum $100,000 Earthquake Commission payout after the September tremors may not be entitled to anything more.

The Insurance Council and the EQC were yesterday disputing who will pay what. EQC chief executive Ian Simpson said that the February 22 quake would be counted as a new event for some but not for others.