Fred99:
The problem was that nobody anticipated such an event as the Chch quakes (including and especially government who faced an even much more massive shortfall in reinsurance through EQC).
It was known that Christchurch would have an significant earthquake event. It was only AMI who essentially had all its eggs in one basket - the christchurch market. That s is fine when all is well - but thats not what insurance is all about
And its the Alpien fault which has a higher risk than Wellington on the Christchurch area
Modelling was based on a M7.5 event in Wellington. The cost of that event has been vastly underestimated by EQC - and insurers. That's going to change - and we're all going to pay for it.
The sad part about the loss of AMI is that all profits from home insurance in NZ now head overseas.
The sad part was that AMI was a mutual so while "profits" stayed onshore through cheap premiums it did not have a shareholder base from which it could draw more capital when required
EQC have been overwhelmed with claims for relatively minor stuff (cracked plaster etc) that would inevitably be fixed at low cost when painting a room as part of routine maintenance - in the meantime, living with superficial cosmetic damage is hardly even inconvenient.If individuals have purchased a contract that requires another party to put good damage they are fully entitled to have that party meet their side of the bargain in a a timely manner.
EQC have also been paying out large sums of $$$ for "precious" home contents, collections of chinaware, crystal, etc etc. This is nuts (IMO) - as surely the purpose of a government isn't to insure luxury items, but to ensure that the basics can be reinstated so that people can rebuild and get on with their lives following such events.The government isn;t insuring precious trinkets. Individuals are paying a premium for a legislated right to have there trinkets covered
Excesses for EQ cover in California run at about 20% of home value - and it costs a fortune to have this reduced. EQ risk for NZ is about the same as California. EQ risk for Chch is about the same as for Tauranga - between Chch and Tauranga, risk is much higher.
The reason we have EQC is that insurers weren't prepared to cover the risk they would be exposed to in NZ. The away around it was for government to legislate through the EQC Act that insurers would be liable for the first $100k but the population could still get cover through a a separate premium
Trusted
