New Zealand’s Earthquake Commission (EQC) has renegotiated its $NZ4.5 billion ($4.07 billion) reinsurance program.

The arrangement – one of the world’s largest – was placed with traditional reinsurers and took effect on June 1.

The EQC achieved a 10% risk-adjusted rate reduction, with the savings put back into extra cover.

“There is an element of co-insurance on the top $NZ1.25 billion ($1.13 billion) layer of the program,” CEO Ian Simpson told insuranceNEWS.com.au.

“Last year the EQC placed 50% of the top layer, due to premium budget constraints. This year we used the premium rate savings to increase the top layer placement to about 80%.”

The New Zealand Government is consulting on EQC reform, including opening up catastrophe bonds as an additional risk-transfer option.

“We have been exploring and taking an interest in alternative capital for a couple of years now,” Mr Simpson said.

“Traditional reinsurers have really shown they can deliver and will always be at the core of the program.

“However, the program is quite big now, and it does make sense for us to have a look at other possibilities.”

Other suggestions arising from the review include the EQC exiting contents insurance, with private insurers willing to take on the business.

Building cover would be extended to include site works and access ways, with the EQC cap doubled to $NZ200,000 ($180,682) as a result.

Claimants would need to lodge EQC claims with their private insurers, with insurers expected to take an even greater claims management role.

Submissions on the proposals can be made until September 11, and Parliament should see a bill by early next year.