As the anniversary of the first Christchurch earthquake approaches, the ground is still shaking and there is no end in sight to the embargo on writing new business in the Canterbury area.

Insurers deny they are withdrawing from the market, but the delays in providing new cover to the region are obstructing the rebuilding of Canterbury province and causing a continuous stream of complaints from consumers and businesses.

IAG New Zealand CEO Jacki Johnson says that with aftershocks continuing a year after the first earthquake, writing cover now is like insuring a house while a fire is racing through it.

The area has suffered around 8000 aftershocks since the first earthquake on September 4 last year. In the past week there have been 12, ranging between 2.7 and 4.3-magnitude.

Nevertheless, Ms Johnson says the embargoes on cover are shrinking as insurers gain more knowledge about land damage and can price risk.

She told insuranceNEWS.com.au reinsurers have kept capacity in the market, but “the question is about price”.

Suncorp CEO Patrick Snowball says the market is at a tipping point, and he is not sure whether the company will return to Canterbury to offer reinstatement cover.

“We are working closely with the Government in deciding what we do going forward,” he told last week’s Suncorp profit announcement.

“It wouldn’t surprise me if the earthquake market in New Zealand sees a complete change in the way risk is covered, which would then impact on the cost of reinsurance.

“We are working closely with the Government in deciding what we do going forward.”

Ms Johnson says IAG has worked to keep capacity in Christchurch by changing its products so it can offer at least some cover and share the risk.

“We are offering renewals, but with high-end deductibles,” she said.

The Government has rejected calls to provide some form of temporary cover until the private sector re-enters the market fully.

A spokesman for Earthquake Recovery Minister Gerry Brownlee says both the Government and geoscience agency GNS Science are working with insurers and reinsurers to keep them informed so they can make decisions on coverage as the earthquake event starts to wind down.

Government intervention was suggested by Canterbury Employers’ Chamber of Commerce CEO Peter Townsend, who says the problem is becoming increasingly complex as time passes.

“The interdependency between aftershocks, land stability issues and insurance is causing huge delays and huge frustration in our community,” he told insuranceNEWS.com.au.

Business owners are unable to insure new premises or new stock, and Mr Townsend says there have been many issues around business interruption insurance, such as when stock is undamaged but business owners cannot access their premises.

He says lack of insurance or its prohibitive cost is holding up the rebuild and confidence in the recovery.

Business owners are complaining about being priced out of the market when their policies are up for renewal.

He cites the example of the owner of a $4 million factory who found his excess had risen from $1000 to $400,000.

“If he made another claim he doesn’t have $400,000 in the bank, so the company would probably fold.”

Insurance industry representatives arranged to meet earlier this month with business representatives in Christchurch to discuss earthquake issues, but the meeting was postponed after heavy snowfalls closed roads and airports.

It is now expected to take place in September.

Ms Johnson says there is a huge amount of collaboration “behind the scenes” between private industry, the Government and agencies such as the geoscience agency.

A forum of CEOs from the insurance, banking and building sectors meets regularly to work on earthquake recovery issues, and Ms Johnson says much of the discussion is about the longer-term availability of insurance rather than criticising companies.

The problem for insurers is that the event that started nearly a year ago is still happening, with continuing earth movement in the Canterbury region. Although it is coming up to three months since the last major quake on June 13, the region is still having aftershocks sizeable enough to cause damage. 

The geoscience agency says this is typical following a major event, but no one is sure when the tremors will end. This means insurers can’t forecast when they will return to business as usual. 

Insurance Council of New Zealand CEO Chris Ryan says insurers still do not know when the market will return to normal.

But he says 98% of Christchurch is covered and the lack of new cover “is a real issue but it is not a major issue”.

New Zealanders have been warned for months that the cost of insurance will rise, as they have paid inadequate earthquake premiums for years.

Mr Ryan says consumers are now realising that insurers have to make a profit, just like any other business.