New Zealand’s principal local government insurer has told its clients it cannot provide property cover after June 30 because it has failed to obtain reinsurance.

The announcement by Civic Assurance, which covers 59 of New Zealand’s 84 local authorities, has sent council executives and their brokers scrambling to get cover.

It is widely expected that the New Zealand Government will have to stand behind the Christchurch City and adjoining Waimakariri District councils because they will not be able to get any insurance.

Civic Assurance CEO Tim Sole told insuranceNEWS.com.au today the company has held unlimited cover for unlimited reinstatements at no extra cost. The cover has cost the insurer $NZ7.5 million ($5.8 million), but after claims of $NZ750 million ($576.7 million) “reinsurers are not signing up to do that again post-June 30”.

Mr Sole says there are issues of risk, capacity and how insurers can differentiate damage from each earthquake and aftershock if there are further events. There is increased fire risk because of damaged wiring in buildings as well as the consequences of land dropping by up to half a metre.

“While in theory there is a premium for everything, that is not necessarily the case in practice,” he said.

While Civic’s difficulties are magnified because it is a specialist insurer, Mr Sole says that other insurers are also having difficulty in getting capacity. He expects councils in other parts of the country unaffected by the quakes will be able to obtain insurance.

Although some council executives have raised the possibility of taking out cover that excludes earthquake damage, Mr Sole says that in New Zealand property insurance would be pointless without earthquake cover.