EQC negotiates $3.25b in reinsurance cover
The Earthquake Commission will pay an unprecedented $160 million for increased reinsurance cover for the 2013-14 year.
That is about four times what it was paying before the Canterbury earthquakes.
Following northern hemisphere negotiations undertaken by EQC's Hugh Cowan, the commission has reinsurance cover of $3.25 billion, up from the $2.5b of reinsurance cover for single events held prior to the September 2010 earthquake.
In the event of a future disaster, EQC, backed by a Crown guarantee, would pay out the first $1.75b, followed by the $3.25b of reinsurance money. The EQC and Crown would be required to cover any costs above $5b.
Chief executive Ian Simpson said the $3.25b reinsurance cover would kick in again if there were two separate earthquake insurance events in a row, such as there had been with the Canterbury earthquakes.
"So, if we had a similar sequence to the Canterbury earthquakes, we'd have up to $6.5b of [reinsurance] cover in any one year."
The ongoing support of international reinsurers was an essential underpinning of the New Zealand insurance market, particularly given the pressures on EQC's natural disaster fund as a result of the Canterbury earthquakes.
"We have ongoing cover sufficient to meet the costs of a significant disaster, although perhaps not at the levels experienced in Canterbury," Simpson said.
The disaster fund held about $6b before the September 4, 2010, earthquake, but that fund was now fully committed to Cantabrians.
EQC has received 467,000 claims.
It was about 37 per cent through the land settlements, but most of those settled so far were in the hill suburbs, Simpson said.
The insurer was also 37 per cent through its building claims, although that figure would climb substantially as the commission settled claims of under $15,000 by October.
In terms of the Canterbury Home Repair Programme, run by Fletcher EQR, about 40,000 or half of the 81,000 house repairs had been done.
About 91 per cent of contents claims had been resolved.
Simpson said reinsurer confidence had been bolstered by transparency, including the fact the total EQC loss estimate had not moved up from the $12b estimate. Reinsurers were providing around $4.8b of that.