New Zealand-based local government insurer Civic Assurance is working to get back into the property market and will approach its shareholders for a capital injection.

Civic was forced to withdraw from property insurance post-June 30 after failing to get reinsurance because of the Christchurch earthquakes.

AM Best has since downgraded Civic’s financial strength rating to B++ (good) from A (Excellent), and its issuer credit rating to bbb+ from a. Both ratings have been removed from being “under review with negative implications” and assigned a “negative” outlook.

AM Best says the downgrade reflects the accumulated impact of the earthquakes on Civic “whereby multiple event retentions have stressed the company’s risk-adjusted capitalisation”.

Civic’s retention for each event has been $NZ3.6 million ($2.8 million) and this has applied to three major events.

“Additionally, while Civic Assurance’s reinsurance program has helped it withstand the calamities of the past nine months, the credit risk associated with its reinsurance recoverables weighed significantly on AM Best’s rating decision,” a statement from the agency says.

Civic is currently capitalised at around $NZ10 million ($7.96 million) and has premium income of around $NZ800,000 ($637,500), so CEO Tim Sole says it is very well capitalised. He says the AM Best decision takes into account that Civic has large claims to pay and would be vulnerable if one of its nine reinsurers were to default.

About 90% of Civic’s 78 council members renew at June 30, so it has missed the market this year. But Mr Sole says the company aims to be back in the market for next June to fulfil its purpose of helping councils with their property covers. It is still providing motor cover.