The New Zealand Government will put $NZ500 million ($452.35 million) extra capital into Southern Response Earthquake Services (SRES) – the entity set up to pay AMI Insurance’s quake liabilities.

“SRES insurance liabilities have risen to a level where it is now probable [it] will need to make a call on additional capital,” Treasury says in budget documents released last week.

Independent actuary Finity Consulting increased its estimate for SRES insurance liabilities by $NZ328 million ($296.81 million) to $NZ2.69 billion ($2.42 billion), almost half of which came in the first three months of this year, Treasury says.

This is due to higher-than-expected volumes of claims being transferred from the Earthquake Commission.

It left SRES with a shareholders’ fund deficit of $NZ399 million ($360.99 million) before calls on the uncalled capital, compared with a shortfall of $NZ112 million ($101.34 million) at June 30 last year.

“In light of recent developments, Treasury considers the probability that SRES will need to make substantial calls on the uncalled capital is higher than 50%,” Treasury says.

The immediate impact on net debt is currently estimated at $NZ305 million ($275.99 million).

The Government took on AMI’s liabilities in a bailout of the insurer that saw IAG buy the better-performing parts of the business for $NZ380 million ($343.85 million) in 2012.

It also committed to providing further support if needed.