Quake shakes capital insurance market

DAVE BURGESS AND HANK SCHOUTEN
Last updated 05:00 01/10/2011

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Financial shockwaves from the Christchurch earthquake are hitting Wellington apartment dwellers living in heritage buildings, with massive insurance hikes leaving some facing bills of more than $5000 a year.

Inner-City Residents Association spokesman Gus Charteris said insurance on a block of 17 apartments in what had been an old industrial building in the centre of the city was going up from $14,000 to about $90,000 a year in November.

That equates to insurance on each apartment going from about $820 to a whopping $5300 a year.

"It is sending shockwaves to bodies corporate around the city," said Mr Charteris, who lives in the block. "It is the most significant thing people are talking about at the moment.

"It is just going to be a rolling game around the city as the heritage buildings renew their insurance."

The body corporate at his apartment block could get only one insurance quote and that was through Lloyd's of London.

The spike owes less to Wellington's earthquake risk and more to reinsurers becoming jittery at holding risk after the destructive quakes in Christchurch and Japan, he said.

"It's a re-evaluation by the insurers about the risk they want to hold on old buildings in Wellington."

Residents in some of the city's newest apartment blocks also face steep increases in their insurance costs, caught by the withdrawal of cover by Ansvar – a company that has stopped offering policies in New Zealand because of losses in Christchurch where it handled $700 million in claims.

Ansvar specialises in insuring churches but it also covered other commercial properties including Wellington's Chews Lane.

Peter Clark, body corporate chairman for the 95-apartment Chews Lane complex, said they had to had to find another insurer after Ansvar advised it would no longer provide cover even though it was a new building that was built to 130 per cent of the code.

As a result premiums were rising from $90,000 a year to $229,000 and they had to raise a special levy on every apartment to cover the extra cost. The levy varied depending on the value of each apartment, but it was $1600 on his three-bedroom 145-square-metre unit.

Mr Clark said hefty insurance rises were bound to affect the resale value of many city apartments.

Geoff Holgate, general manager of Your Property Matters, a company that handles affairs for 70 Wellington body corporates, said some insurers wanted to reduce their exposure or lacked capacity.

But insurers were also taking a lot more interest in soil conditions. There was concern about the potential for liquefaction of reclaimed land on the waterfront or former swamp and streambed land in Te Aro. He said insurance costs ranged widely – in some cases they had gone down 10 per cent but at the other extreme they had gone up 500 per cent.

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Councillor Helene Ritchie, herself an apartment dweller, told a Wellington City Council meeting last week that strengthening costs, and hefty insurance hikes, could lead to residents moving out of the inner city. "Or we may have only rich people in the inner city."

Retired Wellington businessman John Feast said premiums in the Kate Sheppard apartments in Molesworth St, where he lives, had gone up 40 per cent. It was a modern building built on rock.

Property council president Ian Cassels said there were widespread insurance cost increases across Wellington and, in many cases, earthquake premiums had doubled or trebled.

Churches dumped

The Catholic Church has been hit by insurance provider Ansvar NZ's decision to stop providing earthquake cover for churches.

The insurer pulled the plug after it took the biggest financial battering in its history after the first big quake in Christchurch in September last year. Ansvar handled $700 million of quake-related claims while collecting just $35m in premiums in the same period.

Catholic Church spokeswoman Angela Pyke said the Christchurch and Dunedin dioceses used Ansvar to insure churches. She could not provide the exact number of churches affected. Both dioceses would consider their situation at the weekend before issuing a statement on Monday, she said.

The Dominion Post revealed yesterday that more than 600 churches from nine different faiths, including Anglican, Presbyterian and Methodist, would be hit by Ansvar's decision to cut quake cover.

It could lead to some churches being sold off to developers. Others could face demolition.

- The Dominion Post

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