Reserve Bank queries insurer's move
The Reserve Bank has queried "whether it was right" that the British parent company of ACS (NZ) Ltd "shut the door" on providing further capital to help meet hundreds of millions of dollars of Canterbury earthquake claims.
The Reserve Bank's reservations were submitted to the High Court in Auckland yesterday at an application by ACS, formerly Ansvar, for approval of a scheme of arrangement - a plan for paying claims if the company goes under.
The court yesterday approved an amended scheme.
Ansvar Insurance is an insurer of churches and heritage buildings and became part of the Ecclesiastical Insurance Office (EIO) group in 1998.
The company changed its name to ACS in February after it was inundated with claims after the Canterbury earthquakes, and it decided late last year to withdraw from the New Zealand insurance market.
The Reserve Bank, in its role as regulator of the insurance industry, voiced concerns in court yesterday over parent company EIO not committing to any further support other than that in the scheme of arrangement.
The central bank in its court submission said EIO, which was ACS's ultimate parent before recently changing the ownership structure, had not committed to providing further capital if it turned out that ACS was unikely to be able to settle claims in full.
The bank questioned "whether it is right that Ecclesiastical Insurance should shut the door now or whether it can review the need for, and its ability to, contribute further capital as events unfold over the coming months and years".
In an earlier report on the scheme, the bank had said the scheme was based on an "inadequate" injection of capital and was being promoted by a parent company that was "distancing itself from ACS" before the planned implementation of the scheme.
At the meeting of policyholders to vote on the scheme in Christchurch last week, policyholders queried whether there would be further support from the parent company.
Most policyholders voting voted in favour of the scheme.
In terms of the scheme, EIO would provide an additional capital injection of $24 million to be provided over stages, adverse development reinsurance cover for the February 2011 quake extending ACS's reinsurance cover up to $570m, and additional share capital of $4.6m on the scheme becoming effective, to fund the payment of the adverse development reinsurance cover.
In his judgment approving the scheme yesterday, Justice Venning said ACS had said that with the additional support from EIO there should be sufficient assets and reinsurance to enable ACS to pay all claims of policyholders in full, although it accepted that that may not be the case.
He noted EIO would provide additional support of about $22m, on approval of the scheme, and he said that was a "significant factor" in favour of the approval of the scheme.