Insurers: Backers likely to think twice about NZ

Photo / Greg Bowker

Insurers are warning that big overseas backers will reconsider covering events such as earthquakes in New Zealand after the devastation in Christchurch.

US catastrophe risk analyst Eqecat estimated that Monday's 6.3 magnitude quake, which came soon after a 5.7 magnitude jolt, could add $3.7 billion to $6.1 billion to the region's insurance losses.

But the estimate has been disputed by Prime Minister John Key. "We don't think it has any particular foundation; that's not the indication that we have."

He said the quake would add to the overall cost, but Government was "well and truly provisioned". "There's a lot of reinsurance and insurance cover, and we think it's overstated."

The Eqecat estimate is on top of the $15 billion to $20 billion costs already estimated for the other quakes since September.

The Insurance Council says re-insurers and international insurers are viewing the continuing quakes with increasing concern.

"There are likely to be long-term and significant changes to insurance in New Zealand when it comes to the writing of policies and covering of risks like earthquake," the council says.

These could include increases in premiums and excesses, "or even a questioning of the level of insurability for earthquakes that New Zealand receives".

Christchurch's largest single insurer, AMI Insurance, says it has received claims worth about $6 million from Monday's quakes.

Chief executive John Balmforth said the company was in a strong position to handle the new claims despite the funding fears that followed the devastating February 22 quake.

That led the Government to make available to the company a $500 million support package, to be used only if it was unable to cover its own costs.

"The level of claims received so far have been relatively small ... so we don't believe there is any problem with us responding to the raised cost for that [Monday] event," Mr Balmforth said.

"Our re-insurance coverage is $1 billion for that event, and I don't anticipate we will get anywhere near that."

AMI and other New Zealand insurance companies recently announced increases in premiums in response to the quakes.

AMI said its increases would be up to 20 per cent for dwellings.

The Insurance Council and the Earthquake Commission have agreed to ask the High Court to make a ruling on who pays what in costs arising from the Canterbury earthquakes.