Prime Minister John Key says he is aware of the issues surrounding the deficiency of funds at a local government infrastructure insurer due to the Christchurch earthquakes, and that Finance Minister Bill English is considering the issue.
The Local Authority Protection Programme (LAPP) has told English it may need government support after the Christchurch earthquakes drained its NZ$40 million cash fund. The NZ$40 million fund was backed by NZ$140 million in reinsurance to cover damage to cover damage to water and sewerage systems, stormwater drains and flood protection banks, Patrick Smellie reported in Stuff.
The LAPP fund would normally cover 40% of disasters, with central government picking up the other 60%.
Government may now have to pick up 100% of costs from another disaster if one were to strike before June while the LAPP put reinsurance back in place. Government may then still have to cover 90% of costs up to June 2012 or 13, Smellie reported.
“I haven’t seen any paperwork on that but I’m aware of the fact that the Christchurch earthquake is likely to have essentially depleted their funds and put them in a position where they may need support from the government,” Key said on Monday at his post-cabinet press conference.
“Now, I know that the Minister of Finance is considering that issue, so in due course we’ll be able to give you a more informed view, but I’m just aware of the issue as opposed to what the solutions might be,” Key said.
“It’s in a different position to say, for instance, an AMI, where it [AMI] has policy holders behind it. It essentially is a self insurance scheme for local government,” he said.
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