Insurers look likely to foot 80 percent of the $20 billion price tag put on the Christchurch earthquakes, according to industry research.
Global reinsurer Swiss Re says the New Zealand insurance industry will cover about 80 percent of the overall cost of the Feb. 22 quake and 81 percent of the earlier September quake according to its internal database. That’s significantly higher than similar coverage for seismic events, and shows New Zealand has one of the highest rates of earthquake insurance penetration.
“The insurance industry is playing a key role in post-disaster financing of the countries affected,” said Lucia Bevere, Swiss Re senior catastrophe data analyst. “The low frequency of major earthquakes tends to create the perception that earthquake risk is low, even in places where there have been very deadly and damaging occurrence.”
In November, the Reserve Bank estimated the Canterbury quakes will result in claims worth some $30 billion as local firms seek to recover costs from interrupted business, temporary accommodation, inflation and other adjustments. Government officials have forecast the quakes caused more than $20 billion of damage to property in the region, though that predates the recent swarm of temblors since Christmas.
The Swiss Re research shows the insurance sector will only cover up to 17 percent of Japan’s March earthquake last year, while a February quake Chile will have about 27 percent of the US$30 billion in economic losses covered.
Worldwide seismic events between 2010 and 2011 caused economic losses of about US$276 billion and highly earthquake-prone countries remain underinsure, Swiss Re said.
The insurance industry will contribute just 1 percent to Haiti’s magnitude seven quake in 2010, which killed as estimated 316,000 people and caused economic losses of about $8 billion, while the 7.2 magnitude October quake in Turkey, which killed more than 600 people, will only receive a 4 percent contribution from insurers.
5 Comments
Well don't take the cover then Stephen. Personally, I reckon in the light of the fact that private insurance companies are going to be paying 80% of the Chch rebuild, then a measely extra $193 per annum to cover the replacement of your entire house is a hell of a deal.
Why shouldn't 'our local operators' both increase the premium to cover their assessed risk, that's what the premium is about, as well as invest the float to increase profits and strengthen their balance sheets? (Which I'm sure they do anyway).
You've still got a great deal.
I don't know what your 'end point' is here, but if it to say we need a government insurer because that would be cheaper (?), then every ACC invoice I get says differently.
Give me a break - I am certainly not advocating socialising the insurance industry beyond the Government underwriting AMI.
The insurance industry is littered with investment incompetence and thus an inability to pay not just general catastrophe payouts but pension liabilities as well due to uptopian beliefs that stockmarkets etc go up forever. Witness AIG and as you say ACC.
And that is accepted, but managerial demands to collect million dollar salaries is just not acceptable for a simple and pure bookie operation. They are just writing 'puts' and should run at a cost structure consistent with the risks of doing so. Not very demanding stuff unless one gets illusions of grandeur. And that is my point.
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