Desperate search for $4.7b cover

PAUL GORMAN
Last updated 05:00 28/06/2011

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The search for insurance for about $4.7 billion of critical Canterbury infrastructure is becoming increasingly desperate.

The Christchurch City Council and the Waimakariri District Council have only three days to find insurers for these assets.

However, if there are more major earthquakes, it is feared that the councils will not be able to afford to restore damaged services.

Local Government New Zealand-owned Civic Assurance will not take on the risk past Thursday because it says it cannot secure reinsurance to protect itself.

The Government said yesterday it remained committed to rebuilding the city and damaged parts of the Waimakariri district.

A spokesman for Finance Minister Bill English said if further damage did occur, the assets would be fixed regardless of being insured or not.

Details of whether taxpayers or ratepayers would pay would be worked out later.

City council general manager, corporate services, Paul Anderson said the council's insurance brokers were trying to find coverage with alternative insurers.

If insurance was not secured by Thursday morning, the city would have $2.26b of underground and $1.9b of above-ground infrastructure that was uninsured.

"We can't force them to give us cover," Anderson said.

"There's no change in our position. It's going to be very difficult to arrange some.

"It's certainly not a comfortable position for us.

"We are going to have to try every possible avenue we can. We are in discussions with central government."

Waimakariri District Council chief executive Jim Palmer said the situation was "grave".

The chances of finding insurance past Thursday were looking "remote".

The council had about $320 million of infrastructure underground and $180m above ground.

"We met with the Earthquake Recovery Minister [Gerry Brownlee] last week and he encouraged us to write to him and said there was an issue to work through," Palmer said.

"At this stage, it would seem a remote prospect that we would secure any form of insurance. Clearly, if anyone was prepared to offer us anything, we would be willing to hold discussions with them.

"As CEO (chief executive) of the council this is one of the most pressing issues that we face and is the highest issue on my agenda."

The spokesman for English said there would be challenges for councils in getting insurance at the same price and coverage as before the earthquakes.

Civic Assurance, which insures assets for 46 of 78 councils, said publicly most councils should be able to get some insurance cover, but at the cost of higher premiums.

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"In regard to Christchurch and Waimakariri, if there is further damage to essential infrastructure it will be repaired – it is just a question of where the balance of costs fall between ratepayers and taxpayers," the spokesman said.

"There is already provision for this kind of cost sharing in the Civil Defence and Emergency Management Act and the Government has said it will be mindful of Christchurch's reduced ability to pay.

"The Government is working with insurance companies, the Earthquake Commission and local government to find a way through these issues."

- The Press

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