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.
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