Commission dollars drained by Christchurch earthquakes
The Earthquake Commission has less than $1 billion in reinsurance cover in place, leaving the EQC and the Government exposed to a huge bill if there was another earthquake soon on the scale of the February 22 Christchurch shake.
Asked how much reinsurance the commission had left, Prime Minister John Key yesterday said: "Not a hell of a lot."
It was more than a few hundreds of million dollars and "less than $1 billion".
That compared with $2.5b before the September 4 quake – a figure that was replenished before the February 22 shake.
It was negotiating now to top that up, but premiums would rise, Key said.
EQC picks up the first $1.5b of the cost of rebuilding homes after a natural disaster. Overseas reinsurers cover the next $2.5b. After that, any extra costs revert to the EQC, which is backed by a Government guarantee if it runs out of funds.
Before the September quake the EQC had about $6b in funds but that is expected to fall to about $3b once it covers the cost of the Christchurch earthquakes.
Key said higher premiums for reinsurance cover by international insurers seemed inevitable.
"The reinsurers are taking a hammering at the moment."
The earthquake and resulting tsunami would have a substantial cost in Japan, he said.
"What impact that has on reinsurers I don't know, but just the earthquake in New Zealand would unquestionably mean that reinsurance will be more expensive for New Zealand. That is a statement of fact."
A spokesman for EQC said there was reinsurance in place, but he did not say how much. The commission is currently undertaking a rapid assessment of all houses in Christchurch.
These would take 15-30 minutes to categorise houses into levels of damage.
But if households had suffered damage they would need to lodge a claim, because the assessors would not fill out a claim form on site.
Early estimates suggest up to 10,000 homes in Canterbury may have to be demolished and another 100,000 have suffered damage.
The EQC is liable for up to $100,000 plus GST on damage to residential homes and $20,000 plus GST on contents.