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NZ Minister takes his case to Monte Carlo

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New Zealand Earthquake Recovery Minister Gerry Brownlee will lead a delegation to the annual Reinsurance Rendezvous in Monaco this month to argue his country’s case for insurance.

The visit follows the announcement that the Earthquake Commission’s (EQC) liability to claims has increased to an estimated $NZ7.1 billion ($5.6 billion) from $NZ4 billion ($3.1 billion) and the Government will have to top up the National Disaster Fund.

Mr Brownlee will also visit senior Lloyds’ underwriters and syndicate heads in London.

He says that as premiums escalate across New Zealand he needs to engage with the insurance market, and the best way to present an informed and accurate view of risk is by meeting the people who make the decisions.

“We fully understand insurers’ reticence to write new cover during what is an ongoing, albeit decreasing, seismic event,” he said.

“But we also believe the manner and pace of the recovery makes a strong case for insurers to confidently re-enter the Canterbury market while continuing to offer comprehensive coverage to the rest of New Zealand.”

Mr Brownlee will take officials from the Treasury, the Canterbury Earthquake Recovery Authority, GNS Science and the Department of Building and Housing.

This year’s rendezvous theme is “Japan, Australia and New Zealand – Implications for the insurance market. Time to change the way we look at risks?”. Mr Brownlee will give a presentation on Christchurch.

He has also had to reassure New Zealanders that the Earthquake Commission can fully meet claims after the Government announced the EQC’s liability to the earthquakes has increased, as the scale of residential damage is worse than originally thought.

Finance Minister Bill English says it was previously believed 12,000 houses would have more than $NZ100,000 ($79,626) damage – the amount covered by the EQC. But the estimate now is 30,000 houses.

“Damage to land was initially estimated at up to $NZ600 million ($477.7 million). This has increased to $NZ1.8 billion ($1.43 billion).”

Mr English says residential damage has increased from $NZ3.98 billion ($3.16 billion) to $NZ6.15 billion ($4.89 billion).

“Because this increase is above the EQC’s level of reinsurance for the earthquake, which covers the cost of claims between $NZ1.5 billion ($1.19 billion) and $NZ4 billion ($3.1 billion), the EQC bears all of the increase on its own books.”

The two quakes on June 13 have added another $NZ1.42 billion ($1.13 billion) to the EQC’s liability, and Mr English says the Government’s total estimated share of earthquake costs will be $NZ12.9 billion ($10.27 billion).

But he told local media he is not considering an earthquake levy.