New Zealand local government insurer Civic Assurance is re-entering the property insurance market after securing reinsurance for the coming year.

Civic’s reinsurers declined to renew cover after July 1 last year after incurring most of the insurer’s Christchurch earthquakes losses, costing reinsurers well over $NZ600 million ($465 million) and leaving Civic with a retention of only $NZ10.8 million ($8.4 million) in 2011.

Local government authorities had to make their own arrangements after the withdrawal but Civic CEO Tim Sole is hoping they will place some cover now Civic has reinsurance again.

He declined to state how much cover Civic has obtained but told insuranceNEWS.com.au it is a small amount and it could take some years for Civic to re-establish itself with the reinsurance market.

Mr Sole says a capital-raising at the beginning of this year attracted new capital of $NZ4.2 million ($3.3 million) from 42 of the 68 member councils – enough for the company to get back into the market.

Civic is holding another raising primarily to allow councils who aren’t members to become shareholders in the scheme, and expects to raise around $NZ500,000 ($387,000).

The insurer’s annual report shows it incurred $NZ634 million ($491 million) of claims in 2011, which were offset by reinsurance of $NZ626.78 million ($485.6 million).

Civic made a loss of $NZ5.41 million ($4.2 million), earned premium of $NZ4.46 million ($3.5 million), paid reinsurance of $NZ2.83 million ($2.2 million) and received net claims of $NZ7.4 million ($5.7 million).

Chairman Bryan Taylor says in the annual report that the loss of reinsurance partners in June last year was a big blow but Civic’s losses were 10 times the amount reinsurers expected. Its property program for the year to June 30 2011 was uncapped.

Mr Sole told insuranceNEWS.com.au that some of the reinsurers have stopped covering New Zealand following their losses.

Civic’s program had been uncapped with free reinstatement. “You just cannot get that any more, probably anywhere in the world, let alone New Zealand,” he said.

New Zealand councils have also approved restoring the Local Authority Protection Program (LAPP), which covers assets such as reticulation and flood protection infrastructure valued around $NZ18 billion ($13.9 billion). 

The New Zealand Government covers 60% of such loss and the LAPP is a mutual that enables councils to meet the remaining 40%.

The fund is managed by Civic but is a separate entity and will adopt a model that is a mixture of reinsurance and mutual self-insurance, to rebuild the fund and reduce the cost of reinsurance, which rose five-fold last year.

They will contribute $NZ9 million ($7 million) a year, the fund will meet the first $NZ5 million ($3.87 million) of claims and members will have a collective exposure to meeting claims from $NZ5 million to $NZ50 million ($38.7 million).

Reinsurance will be bought for claims from $NZ50 million to $NZ100 million ($77.4 million).