By John Grant

Cantabrian home buyers and their banks face weeks of frustration trying to settle purchases as insurers are withholding approval in the wake of the earthquake for up to three weeks or until new geotechnical reports are completed.

Amid the rush of claims on damaged property and interrupted sales processes, the property market in Canterbury looks set to be frozen for weeks to come. Sales in Christchurch represent about 10% of total sales nationally each month, REINZ figures show.

TVNZ's Close Up programme reported this week that AMI Insurance, the largest insurer for the region, isn't writing any new new policies until geotechnical reports are done. Close Up highlighted the case of two families who had agreed to buy and sell properties but could not complete because insurance had been refused.

Chris Ryan, Insurance Council CEO spoke on behalf of the Insurance industry and explained that following such a major event, AMI's decision to impose special requirements was not unrealistic. AMI is based in Christchurch.

However, the story as told on Close Up was of an existing AMI customer, who were selling a property in Christchurch and moving to a new location. AMI had said that they were not issuing new cover until a Geo Technical report could establish that the property was free of damage.

Ryan also said it was an issue that was not uncommon after a major event such as this. He did say that he would be endeavoring to get a industry wide approach to this clarified in the next few days.

The problem is a significant one. Banks are not going to lend on uninsured properties and will probably be reluctant to lend on property that has conditional insurance arrangements.

IAG, which is the largest insurer in New Zealand with State and NZI brands, has imposed a 21 day stand down clause. This means it will not provide earthquake cover from the inception of the policy for a period of 21 days.

Balmforth has clarified to interest.co.nz that existing customers would be receiving preferential help with new insurance needs. Those existing customers in the Canterbury area would have their new insurance looked at on a case by case basis, he said.

AMI says it has since come to an arrangement with the two families featured on Closeup.

AMI chief executive John Balmforth told TV ONE's Close Up programme  he went and personally saw the families on Thursday.

"I contacted Darryn Ross and Mark O'Reilly, spoke to them, told them we were there to support them. "We've now put in place the cover that the families required and they have AMI insurance policies on their homes." He said he was aware other AMI customers would be put in similar situations. He advised them to get a geological survey of the site and and advice on the structure of their home to help the company assess cover options.

"For AMI's existing customers, the starting point that we can offer them is fire insurance, burglary and theft together with the EQC's $100,000 cover on the home. Advertisement "If they can provide us with the geo-technical material, then we'd certainly be able to go further, but we're looking at that on a case-by-case basis."  

Insurers are facing bills of probably in excess of NZ$1 billion. Mostly this is reinsured with Catastrophe Reinsurance programmes that for most will have a deductible of around NZ$4 million to NZ$5 million. Therefore the true cost of the Canterbury earthquake for New Zealand insurers is likely to be less than a combined total of NZ$100 million. Reinsurers will be picking up the balance of NZ$900 million plus.

What are you seeing in the Canterbury market? What other issues are affecting house sales there? What has been your experience? We welcome your comments below.