By Amanda Morrall
New Zealand's insurance industry is bracing itself for a massive crush of new earthquake claims, but remains in the grips of a human tragedy that has claimed some of its own.
"From our point of view, it's foremost an emergency situation right now,'' said New Zealand Insurance Council chief executive Chris Ryan.
"We're still focused on the recovery of dead people and the rescue of trapped and injured individuals. We have insurance people still missing.''
Although commercial claims had already started to trickle in, Ryan said he had no idea of volumes or amounts at this stage given the unfolding crisis in Christchurch, where large parts of the city centre are buried in rubble.
"Communication is difficult,'' he said, noting that insurance companies were in the processing of setting up disaster recovering programmes.''
Ryan said commercial damage appeared heaviest in the CBD.
"There is some residential (insurance claims) coming in as well, but it'll be two or three days before we get any idea of level of claims because of the devastation to the community and the industry.''
Before yesterday's 6.3 earthquake, insurance costs had ballooned to more than US$3 billion.
Based on current indications, the risk modeling company Eqecat estimated additional costs could exceed US$1 billion in damages.
Insurance Australia Group, the ASX-listed insurer that owns State Insurance and NZI, predicts the latest earthquake in will cost it up to A$40 million (NZ$53.5m).
The insurer revised its insurance margin guidance down to 8%-10% from 9%-11%, reflecting an increased natural peril cost assumption of A$540 million.
Ryan said an upside of the situation was that there would likely be large inflows of capital from international insurers and reinsurers. While that was good for the economy, the implications for businesses and homeowners footing the bill were bleak.
An industry insider speculated that future insurance costs would "go through the roof" given the compounded effect of the Sept 4. earthquake, the floods and storms in Australia and now this latest natural disaster, already billed as one of the worst in the country' history.
Insurance broker John Sloan, in report on Business.Scoop, said the spectre of earthquake insurance premiums would become a reality.
He told Business Desk that many companies were unaware that excess "had changed to be a percentage of the total sum insured on the buildings, contents, loss-of-profits cover at the same time and the all-up deductible was very costly.''
Key role for brokers
Ryan said the issue was one that insurance brokers had an obligation to explain to their clients, not the insurers themselves.
Unlike residential insurance policies, commercial insurance was negotiated through a broker. Ryan said brokers therefore obliged to advise their clients on the terms and conditions of their policies.
"Commercial insurance is about the insured person and the broker.''
Given the pre-existing confusion caused by the Sept.4 earthquake and the more than 4,000 after-shocks that have dogged the community, the fall-out from this latest quake was likely to raise concerns anew.
Among them questions about whether pre-existing policies (particularly those where pay outs had been made already) would cover any new claims, and under less generous terms than before.
Ryan said that issue remained to be settled and admitted the double whammy would complicate the situation. He was nevertheless confident insurers would respond.
He said many were already arranging to have internationally qualified experts, including specialist adjustors, engineers, and surveyors, come to assess the damage, to speed up the process.
The Earthquake Commission, which covers up to the first $100,000 in residential damage has so far received more than 170,983 claims. That doesn't include the lastest earthquake.
Prime Minister John Key said estimates of the cost of the September 4 earthquake at NZ$6 billion to NZ$8 billion. He said it was too early to estimate the cost of the February 22 quake, but at least another 100,000 claims were expected.
28 Comments
FYI JP Morgan Chase reckons this earthquake could cost more than US$12 billion and be the biggest insurance disaster in the world since 2008, Bloomberg reported.
http://www.bloomberg.com/news/2011-02-22/new-zealand-s-earthquake-may-b…
As someone who was at ground zero - actually on level 11 of one of the high rises as buildings collapsed around me to be left in a massive plume of white dust - I can say the destruction is far far more significant than the Sep 4 quake. If the Sep. 4 quake has been 'valued' at 3 billion, this will certainly be a lot more. Yesterday the walk home after the quake really brought home the scale of the damage. This time there will be no minor patching of asphalt to correct bumpy roads; they will need new roads.
While I'm not a structural engineer (though I am an engineer) I'm wondering if building are these days built like modern cars; they're a lot safer if you're in an accident, but once the safety mechanisms have done their bit (crumple zones for example), the car is a write-off. I wonder if the high rise I was in, as well as a great many other still standing buildings will have to be demolished.
Boy, do I see some negativity at this site?! You guys have got to start looking at the silver lining right in front of you! The opportunities coming up are huge!
My neighbor's brother is in construction and he's already getting set to grab his share of the rebuilding bonanza set to hit Canterbury. These have been pretty lean times for him so now is his chance to get back on top. What's good for him and the company he works for is good for all the other guys who who work there too. There'll be a ton of jobs and money for the people of Canterbury as a result of this disaster.
One old friend from back home is CEO of a Kiwi govt owned electric utility that has been trying to break into South Island's market just recently. That has been hard, most of their business is in North Island, but today he told me in an email that this quake is a big thing for him and the Co. and they will be mercilessly exploiting it in any way they can to gain some business traction down here. For them the tremblor was a *great* thing, not a bad one. More money for NZ.
The insurance company and finance houses know darn well that there will be a flood of cash into the coffers. Some will be from the Kiwi govt and some from overseas aid. They will come out richer, not poorer. The big businesses in New Zealand keep the small businesses going, in fact they keep the whole country going. It's Capitalism at its finest and it's a crying shame that Kiwis can't get their heads out of the think small bag.
Wise up Kiwis. It's time for you to start snatching victory from the jaws of defeat and not the other way round.
Its all debt + interest. Capitalism? We havn't practiced any capitalism, a part from the ordinary unconnected pleb on the street who takes on the risk bit.
If OECD group of countries really did practice capitalism the likes of JPMorgan and Goldman Sacks and banks in general would be history a foot note in finance, rather than a tax payer funded bunch of bludgers, along with many other propped up corporates like GM.
The only free market is the black market where goods and services go where there required and are not influenced by some dictate of the WTO or other type of know all not institution.
"There'll be a ton of jobs and money for the people of Canterbury as a result of this disaster."
Tell that to the small business owners and their workers who will not have employment. Tell it to the families of the deceased. On the other hand perhaps you had better keep your mouth shut.
Mate that is just disgusting.
Who is this 'Kiwi govt owned electric utility from the north island'?
If it is the same one I am with now then I am gonna swap power company in protest. That is the most filthy bit of greed I have heard in a long time.
Chin up Christchurch, THE REST OF US are here to help!
Sick, sick, sick! How can anyone think of making money out of this? Oh and no prizes for guessing who the electricity supplier is - They have been canvassing Chch and other southern parts for months in a bid to drum-up business. They are Mr Brownlee's mates. All of them can sod-off.
"tons of jobs"....illogical....it is different jobs, and the skill sets are different.
Some kiwis will indeed profit and sine there will be a shortage of builders they will earn a premium for a while until the boom fades....but all that is happening is really a transfer of wealth from one kiwi to another and at a premium price...........
So construction businesses will boom for 3 to 5 years....other businesses who cannot now operate will lay off staff and close... eg My brother's repair company has been having a hard time since the last one, he now thinks his job wont survive past the end of the month and he cant get his home repaired as this time its been wacked.........
Over the medium term the business eco-system in chch will be distorted...businesses that can move say software houses which are/were booming, work via the Internet, they can and will move and not come back....so will their employees....these are highly mobile well paid jobs.....construction workers are at best semi-skilled and often over paid IMHO....
Insurance costs will rise to meet the losses....so every non-construction affiliated worker, home owner and business will pay for the repairs via insurance hikes.........
"a big thing for him and the Co" illogical.....what are you trying to do destroy another companies rep? I'd love to look at Interest's logs to see where you posted from....might see an interesting result.
PApart from that such a thing makes no sense, the reticulation system is down, the retail power supplier makes no difference in this situation....what will happen is the dailiy rate will have to rise to cover costs and repairs plus of course insurance costs....all retailers will pass on those costs.
regards
CanukKiwi you need to understand the extent of this. CHC big high risers full of office workers have crumbled..up tp 15,000 workers will not be able to return to there offices for a long long time..small businesses are already struggling from September with little help from that one from Government (all guns blazing at the beginning of September and then no where to be seen by end October) the half of the city that come out of September is the hardest hit areas this time...the rebuilding had hardly began..what re building needs to be done will be by specialist and it wont be over night..many many people have lost there homes, their loved ones we are on edge and now the very real prospects of losing your income stream on top..it's not goign to be a rosey recovery
Too right. My husband finally managed to get in touch with people at the company he works for and they said they "wouldn't be back in their offices". Equipement, computers etc shattered, they're hoping to get authorisation to go retrieve what they can at some point. At least none of the employees there was injured but they need to relocate both a factory and an R&D centre. He's been told to keep working from home (which he does all week except 11am-1pm on Tuesdays when he's in what were the city centre offices) but the others are waiting for the company to find new offices and relocate. With so many other companies in the same situation and so many buildings destroyed, a lot of smaller businesses are at risk and same with jobs.
As for rebuilding, from what I read not long ago, only 7 rebuilding/repair projects had been completed since the September earthquake, out of thousands awaiting work. It's going to be years rather than months before things are back to normal.
Tasteless, insensitive and economically illiterate. There will be profits for some - I do not argue that builders, plumbers, electricians etc should be expected to work for free or on a no-profit basis. But they will be being paid with money that would otherwise have been spent on something that the spender would rather have spent it on, or saved and invested in something wealth-creating, so there will also be real and opportunity costs.
Or you could Google "broken window fallacy"
I dont see how they can work for free, they have to eat....and ditto no profit, they have to save for retirement etc.........and if someone is prepared to pay a premium to go to the head of the queue, well that's life.....do you think Lawyers, accountants or private doctors/surgeons etc are any different? uh no.....they charge like a wounded bull if they can (and they usually can)....so now a tradesman repairing a lawyer's house gets a comeback....
regards
Stop bickering! Like California and othet cities after their earth quake, CHCH will be amazing city after the rebuild - lessons will be learnt, new ides will come.
Interestingly, BH was on Radio NZ yesterday with Jim Mora (4-5PM). BH commented that NZ is financially in better condition than any other countries. Why can't he express same sort of enthusiasm here?
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