The Earthquake Commission (EQC) is paying 50% more for reinsurance this year, but the higher cost of cover is drawing reinsurers to the New Zealand market.

EQC CEO Ian Simpson has told Radio New Zealand there was no difficulty in obtaining cover for the commission’s June 1 renewal and it was only restricted by the amount it wanted to pay.

The EQC paid $NZ40 million ($31.2 million) for reinsurance in 2010, but that doubled to $NZ80 million ($62.4 million) in June last year after the devastating earthquakes of September 2010 and February 2011.

This year’s reinsurance has cost $NZ120 million ($93.7 million) and the EQC has taken a higher deductible and increased its amount of cover.

It has bought $NZ500,000 ($390,500) extra cover to take its reinsurance to $NZ5 billion ($3.9 billion) and raised the deductible to $NZ1.75 billion ($1.37 billion) from $NZ1.5 billion ($1.2 billion).

It will also retain an undisclosed layer of risk between $NZ4 billion ($3.1 billion) and $NZ5 billion.

“The great news is that New Zealand is still a very attractive place to do business for the reinsurers,” Mr Simpson said, referring to speculation that reinsurers would decline risk from the country.

He expects the cost of reinsurance to private insurers will mirror that of the EQC in rising by 50%.

“The commercial insurers buy lower down with smaller deductibles and the prices on these lower levels of insurance have gone up more,” he says.

The Canterbury earthquakes will cost the EQC about $NZ12.5 billion ($9.76 billion), exhausting its $NZ6 billion ($4.69 billion) fund.

Mr Simpson anticipates the commission will call on $NZ1 billion-$NZ1.5 billion ($780 million-$1.17 billion) of its government guarantee.

The EQC sent a representative of engineering firm Tonkin & Taylor to visit reinsurers ahead of its renewal delegation, to explain the Canterbury events and how government support had lowered insurance risk.

Mr Simpson says the Government’s support, particularly the buy-out offer for the worst-affected properties in the red zones, has been very important in convincing reinsurers that New Zealand is still a good place to do business.

The NZ Treasury is scoping a review of the EQC, and Mr Simpson believes the commission should no longer provide contents cover.

He says of $NZ3.1 billion ($2.4 billion) in claims, about $NZ400 million ($312 million) has been paid out in 100,000 contents claims.

“There were a lot of very small claims that take time and effort,” he said. “They are a drag on our resources and the insurance industry does these day in and day out and they do it a lot better than we do.”