Govt doubles Southern Response guarantee
The Government will double its effective guarantee of Southern Response to $1 billion.
Southern Response is the Government-owned claims manager of failed insurer AMI following its sale to IAG in April.
Under the Crown Support Deed, which was written up in April 2011 after AMI's fiscal situation was severely strained by earthquake claims, the Government agreed to offer the company $500 million of back up capital, to be paid if needed.
Southern Response's annual report for the year ended June 30 says the Government pledged another $500m in October.
The agreement was yet to be cemented, but Cabinet had approved the request and Treasury was writing up the agreement.
The money would be paid if Southern Response exhausts its own assets, reinsurance and the original agreement without settling all claims.
Only $100m has so far been paid under the original deed, leaving an effective backstop of $900m in unpaid capital.
Southern Response had $2.2b worth of claims to settle and has paid out $387m in the year to June, compared with $48m in the previous year.
It was owed $937m in reinsurance, the report said. It received $380m from the sale of the AMI business to IAG.
The company made a loss of $186.6m for the year, compared with $704.5m the year before.