Insurance firm stocks down

Investors marked insurance stocks down yesterday, despite insurers saying they are well prepared for expected claims of hundreds of millions from New Zealand's biggest insured event.

Tower managing director Rob Flannagan said many insurance providers were adequately reinsured and would not feel the financial impact of the 7.1 intensity earthquake that hit Christchurch early on Saturday.

He expected that claims arising from the earthquake will cost Tower $5 million before tax or around $3.5m after tax.

"The total of possible claims is not yet known, with customers continuing to notify Tower of damage. But we expect that once all claims are received and assessed, the total payable will trigger Tower's re-insurance arrangements," Mr Flannagan said.

Investors implied a higher cost to Tower as its shares ended the day down 6c, or 3 per cent, at $1.85, wiping about $15m off the company's market value.

Roger Bell, chief executive of Australian-owned Vero, said many clients had not been allowed into their properties yet. Although claims are starting to be advised, he said it could be late this week before it could get an accurate feel on the number and scale of claims. He is expecting a significant claim for business interruption.

"A lot of the buildings that we insured are in the CBD and the owners are barred from their properties until the authorities decide that they are safe.

"Water, sewerage, power and infrastructure need to be connected before clients can make a claim," Mr Bell said.

Vero's parent company, Suncorp Metway, told the Australian Stock Exchange extra personnel had been deployed to handle the claims volume.

It said its financial exposure was limited because of the Earthquake Commission's support and its own re-insurance which capped New Zealand earthquake exposures at $60m.

Insurance Council of New Zealand chief executive Chris Ryan estimated the claims tally will be in the "hundreds of million dollars" – maybe less than a quarter of the $2 billion total economic loss estimated by the Government.

Members of the council are expected to shoulder the liability after the Earthquake Commission has paid off its exposure, which is the first $100,000 on damages to homes, and the first $20,000 for contents – as long as there is current insurance cover on these.

Whatever exceeds the cover provided by the commission becomes the responsibility of the insurance company.

Insurance Australia Group said it expected claims from the earthquake to be "entirely covered" by re-insurance arrangements and reaffirmed earnings guidance for the current year, although it was too early to tell how much damage had been caused.

Christchurch-based AMI said about 10,000 calls had come through its call centres since Saturday morning.

- © Fairfax NZ News