New Zealand’s local authority insurer is having difficulty getting enough reinsurance for damage to underground infrastructure in the country following the Christchurch earthquakes.

The Local Authority Protection Program Disaster Fund (LAPP), a mutual owned by municipal authorities around the country, paid a premium of $NZ1.9 million ($1.45 million) last year, but its claims will be 100 times that, Civic Assurance CEO Tim Sole told insuranceNEWS.com.au.

Civic administers the fund for 59 local governments, who are paying higher premiums this year to keep the fund viable.

Mr Sole says although the fund can obtain reinsurance post-July 1, it cannot get as much as it wants. The program primarily insures underground infrastructure, and the main peril for such works in New Zealand is from earthquake damage, which has been significant in the Christchurch events.

The New Zealand Government covers 60% of damage and local authorities 40% of the restoration cost, and there is speculation that the Government will have to pick up a bigger share in future.

The Government is already considering covering the cost of the June 13 quake. The LAPP fund was only set up to cover two major catastrophe events, and the September and February Christchurch events exhausted its reinsurance for reticulation and flood protection assets, and also used up the $NZ40 million ($30.6 million) held in the fund.

Christchurch City Council has estimated it will incur earthquake losses of $NZ2.5 billion ($1.9 billion), not counting losses from the June 13 quakes. 

Mayor Bob Parker says most of the losses will be covered by insurance and government subsidies, but the council will run into deficit this year and suffer lost income from parking fees and the hire of sports facilities.