New Zealand’s Earthquake Commission (EQC) has arranged nearly NZ$7 billion ($6.5 billion) in natural hazard reinsurance cover for the 2021/22 financial year, the largest program ever secured.

This year’s arrangement represents a 12.5% increase in cover and an 11% increase in total premiums.

“Insured New Zealand homeowners do not pay any more for coverage as a result of this,” CFO Fraser Gardiner told insuranceNEWS.com.au.

“The past two years EQC purchased $NZ6.2 billion ($5.8 billion) of cover, which was a record amount.”

He says the EQC periodically assesses the level of capacity in its program and tests with key reinsurance partners whether there are cost effective options to grow the program.

“Factors that we consider include the growing New Zealand housing portfolio (1.5-2% growth per annum) and assessments on the cost of rebuilding following a major natural hazard event,” Mr Gardiner said.

“We are very pleased that we have been able to increase the program this year.”

About two-thirds of the cover is provided by the same reinsurers who covered the damage from the Canterbury earthquakes, CEO Sid Miller says.

He says this “shows the reinsurers continue to trust our ability to manage the impact of natural hazards in New Zealand”.

“Creating trust at a personal level with the key people in the reinsurance market is vitally important,” Mr Miller said. “But due to travel restrictions, the negotiations had to be done through countless late-night video calls, so to end up with such a good outcome speaks volumes to the reputation EQC has built over many years and the outstanding support provided by our reinsurance broker, Aon.”

EQC invests more than $NZ17 million ($15.9 million) each year into natural hazard research and modelling, as well as mitigation strategies like better engineering solutions.

“All of that research feeds into loss modelling that EQC shares with its reinsurers to provide a New Zealand view of the natural hazard risks the scheme covers,” Mr Miller said.

“This modelling enables New Zealand and the international insurance market to understand and quantify the risk underwritten by the scheme and provide confidence in underwriting any potential damages after an event.”