The New Zealand insurance landscape has changed permanently following the latest Christchurch earthquake, according to Insurance Council of New Zealand CEO Chris Ryan.

He says the series of earthquakes will have a long-term effect on the way insurance professionals calculate and price risk, and how it is applied, and that New Zealanders will need to be prepared when calculating the cost of personal decisions, going into business and in dealings at government level.

Mr Ryan told insuranceNEWS.com.au that reinsurers are reassessing risk in Australia and New Zealand following events this year. In New Zealand, assumptions about risk are being re-examined and catastrophe models will be reassessed, along with coverage and pricing.

New Zealanders have expressed fear that reinsurers will refuse to accept risk, but Berkley Re Australia President and CEO Grant Robson says the larger reinsurers are long-term players who take a global rather than a country-specific view.

“The issue with writing volatility is that you need to be paid for that volatility,” he said.

Mr Ryan says while reinsurers will not walk away from the market, there will be increased premiums for reinsurance, increases in excesses, redefinition of coverage and possible limitation of coverage for earthquake.

“Traditionally we have had 100% cover at very reasonable rates,” he said, adding that the size of the Christchurch events “changes the whole nature” of the insurance coverage.

Yesterday’s earthquakes have been rated at 5.7 and 6.3 on the Richter scale, and come when insurers are in the middle of renegotiating reinsurance to take effect from July 1.

Japanese insurers faced the same issue when the Tohoku earthquake and tsunami struck on March 11 and they were negotiating renewals for April 1. 

Mr Robson says some Japanese companies decided to renew for another three months from April 1, while others renewed as usual.

He says reinsurers have a better understanding of New Zealand’s risk because of previous earthquakes. Monday’s quakes have caused at least one death but much less property damage than the September 2010 and February quakes.

IAG CEO Mike Wilkins told a market strategy briefing in Sydney this morning that it’s too early to assess the financial impact of Monday’s events.

The NZ Earthquake Commission (EQC) has rated the two earthquakes and the aftershock that struck Christchurch on June 6 as new events for claims purposes.

The June 6 quake rated 5.5 and caused some property damage, but geologists describe it as a typical aftershock and not a warning of a bigger event.

Residents have been told it is possible there will be more earthquakes rated 6-7 in the coming year, and possibly beyond. The February 22 earthquake was 6.3 and the September 2010 event was 7.1. 

A group of scientists working on the government-appointed Natural Hazards Research Platform are studying the pattern of aftershocks to understand where future quakes might occur.

They had warned there is a 23% probability that another 6-7 earthquake will occur in the Canterbury region this year, and a 6% chance of one occurring in the Christchurch City area.

Seismic testing has found new fault lines in Canterbury province, but Natural Hazards Research Platform Manager Kelvin Berryman says even before the work began it was known there were several dozen active faults within an 80km radius of Christchurch and many were capable of producing a damaging earthquake. 

The EQC has allowed householders three months to lodge claims for the most recent events.

The commission says it has completed nearly 19,000 full assessments and made good progress from the February quake.

There has been criticism of the time taken to complete assessments but EQC CEO Ian Simpson says with the volume of claims received and the complexities around determining for insurance purposes which event caused the damage, resolving claims is a time-consuming exercise.

“We at EQC fully understand people in Christchurch want their claims resolved quickly,” he said. “However, EQC must ensure payments are correct and there is a rigorous process in place,  including determining cause of damage, the event it relates to, clarifying insurance status of the  claimant and verifying all the particulars are correct, before a payment can be released.”