New Zealanders will have to pay more for reinsurance cover and the Government cannot give them any indication as to when the market will ease, Earthquake Recovery Minister Gerry Brownlee has announced after a visit to Reinsurance Rendezvous in Monte Carlo.

He told a television interviewer that cover has been “underpriced for a fair period of time, and we would expect to see some price rise”.

Mr Brownlee says the insurance market is waiting for the seismic activity to stop.

He says the Government is considering its options, including acting as an insurer of last resort to enable a faster rebuild. The insurance deadlock has forced the Government to consider some form of taxpayer-backed earthquake insurance, a move it has resisted previously.

The Reserve Bank of New Zealand (RBNZ) has raised its estimated cost of the Canterbury reconstruction from $NZ15 billion ($12 billion) to $NZ20 billion ($16 billion).

In its latest monetary policy statement, the RBNZ notes that only limited rebuilding has occurred because continuing aftershocks have hindered planning and building, and made it difficult to secure insurance for new buildings.

It says aftershocks and lack of insurance make it unlikely that construction sector activity will pick up as quickly as it has estimated previously, but repairs and rebuilding in Canterbury will have a substantial influence on the economy in time.

“Construction sector activity will be boosted for several years, creating resource shortages in the building industry and other parts of the economy more generally.”

It says there is significant uncertainty around the $NZ20 billion estimate, which it has revised because “recent assessments from the Earthquake Commission (EQC) and additional damage from aftershocks have highlighted upside risk to this working assumption”.

The projection assumes major aftershocks will cease soon so that EQC contractors can step up repairs on moderately damaged properties from early next year.

“Seismic stability would be expected to help free up the private insurance market,” the RBNZ statement says. “It is assumed that rebuilding of severely damaged properties will get under way from the middle of next year.”