EQC quake insurance shortfall doubles
The Earthquake Commission will be about $1.6 billion short for Canterbury earthquake claims, which the Government will stump up for.
That is the latest firm figure in EQC's annual report released yesterday, and a lot more than the Government estimated more than a year ago when it said EQC could be short by $800 million. But Finance Minister Bill English said in April the Government's guarantee to EQC could be "a few billion".
In EQC's annual report to June it confirms EQC's total liabilities are about $12.5b.
About $2.8b was paid out in the year to June 2012, and $1.2b the year before, so about $8.6b of claims remain to be settled.
The $8.6b was covered by reinsurance, cash and investments but EQC would be short by $1.6b which would be covered by the Government guarantee, the report said.
The total cost of insurance claims for the Canterbury earthquakes was estimated at $30b, the report said, quoting the Reserve Bank.
EQC chairman Michael Wintringham suggests in the report that insurers are shifting costs to the Crown.
Wintringham says that because of the huge scale of the earthquakes disaster and the costs to the Government and private insurers "there is an incentive for insurers to reduce their own liabilities by shifting costs to the Crown or to other parties".
Wintringham says the EQC Act needs review. At present the Government is considering the terms of reference of the review.
The Canterbury earthquakes had provided "a reality check" on the workability of the 20-year-old law.
The EQC Act did not have provisions that assumed cover for a series of earthquakes. The provisions assumed a single big event.
Nor did the act have provisions that covered the increased susceptibility of land to liquefaction.
A big part of EQC's efforts in settling claims had been in apportioning the amount of damage between earthquakes and aftershocks and in geotechnical assessments of land.
By the end of June EQC had repaired about 18,000 properties with about 80,000 to go.
That included: $69 million claims assessment fees.
$37.5m for call centres and claims management by a third party.
$21.3m for claims administrators and contractors.
$23.2 for employee pay and benefits.
$41m for engineers and consultants.
$64m for project managers and infrastructure.
$23m for travel and accommodation.