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Govt announces will bail out AMI with NZ$500 mln support package if AMI's reserves are exhausted. Full details here. Your view?

Posted in Insurance Updated
See video

By Alex Tarrant and Bernard Hickey

The government has announced a support package worth up to NZ$500 mln for quake-hit mutual AMI Insurance, which it said would give policyholders certainty and ensure an orderly rebuild of Christchurch.

However, a bailout could cost the taxpayer up to NZ$1 billion, depending on the extent and nature of claims that arise for AMI from the Christchurch earthquakes, Finance Minister Bill English said this morning.

The support package would be called on only as a last resort if AMI’s own reserves had been exhausted – "unless the Crown believes it is in the public interest to take control sooner," English said.

“This support package will give AMI the time to seek a market solution to the challenges it faces as a result of the two Canterbury earthquakes,” he said.

If the package is called on, English said the Government would invest up to NZ$500 million of equity in AMI, with the right to take ownership and assume control of the company if it needed to.

Christchurch-based AMI Insurance is New Zealand’s second-largest residential insurer with 485,000 policyholders and 1.2 million policies across the country. In Christchurch alone it has more than 85,000 policyholders with 225,000 policies – or about 35 per cent of the residential insurance market in the city.

“The Government has made it clear that helping to rebuild Christchurch is one of its most important priorities,” English said.

“That is what today’s announcement is about: providing certainty for AMI’s tens of thousands of policyholders in the aftermath of the two earthquakes and ensuring the rebuilding of Christchurch and the insurance claims process proceeds in an orderly manner."

English said AMI approached the government on March 9, saying it was concerned its reserves and reinsurance might not be sufficient to cover the total value of claims resulting from the Canterbury Earthquake.

Interest.co.nz inquiries directly to directors of AMI surprised many.

Regular readers will know Interest.co.nz have been following the AMI story closely.

Here's Amanda Morrall's March 11 article questioning AMI's capital strength

And here's our March 24 article reporting AM Best's credit rating downgrade

“Since then [March 9], officials have been working closely with the company to gather information about what are complex issues and to consider the best option for taxpayers and AMI’s policyholders," English said.

“It was the Government’s judgement that a support package was necessary to give certainty to policyholders that their claims will be covered. This applies to all AMI policyholders – not just those in Christchurch. Because of uncertainty around the cost of earthquake damage, it is too early to tell whether AMI will have sufficient resources to cover all of these claims. The full extent of the claims AMI faces will remain unclear for several months."

AMI rating downgrade could have been worse

Meanwhile, in a press conference in the Beehive, English said after AMI approached the government on March 9, the government gave the company's management a letter of support to take to a meeting with its ratings agency, AM Best, two weeks later.

AM Best downgraded AMI's credit rating two notches from A+ to A- on March 24. See more here.

The letter was a "very light handed indication of support," English said, and did not outline such a proposal as released today.

"But it was required at the time to prevent a sudden and dramatic downgrade of the company," English said.

"It might have been a different situation [if the letter had not been provided]," he said.

Could hit taxpayer NZ$1 billion, not just NZ$500 million

Despite government giving itself the option to inject up to NZ$500 million in capital into the company, it could be hit with a bill of up to NZ$1 billion.

"There’s so much uncertainty here about the number of claims and the nature of those claims," English said.

"There’s a range of estimates that we’ve been provided with from the company and the Reserve Bank. They’re estimates of the excessive claims over the money available to meet them, and those estimates range from NZ$0 – that is the company may be able to meet all the claims, through to about NZ$1 billion more claims than they are able to meet," he said.

But there was a great deal of uncertainty about what the actual number was likely to be.

"The government support arrangement means for policy holders, it’s business as usual. So it is effectively a guarantee that any claims they make will be met," English said.

Incentive for commercial solution

Under the deal, government had the option to pay NZ$100 million of the NZ$500 million uncalled capital at any time to take full ownership and control of AMI, English said.

On the other hand if AMI called for any money, government could take ownership of the company if it chose to.

“So that puts a strong incentive on the current board and management that if they want to continue the business as it is now, then they need to find another commercial solution, such as someone else who will put capital into the company," English said.

Investigation into management

AMI’s situation in Christchurch was “pretty unique,” English said.

“There’s a combination of circumstances here where the company has a concentration of policy holders in Christchurch, compared to other centres in New Zealand; Christchurch has had two major earthquakes in six months; the company is a mutual, which means it can’t go and raise capital easily – it has to essentially sell itself if it wants to get capital into the company," he said.

All those factors had combined to put AMI in its current situation.

"Now at some stage we’ll need to go back and have a look to see whether the management have run the company prudently, whether they’ve complied with industry standards and the regulation," English said.

"Up to now there’s no indication that they haven’t, but clearly the Crown’s getting alongside the board and management here and in another few months we’ll have a much better understanding of how it’s run," he said.

'No talks with other companies'

English said there were no indications other insurance companies were under difficulty.

“The Reserve Bank and the Treasury of course are taking a close interest in the insurance sector, and I can confirm we’re not in talks with anybody else,” English said.

Opposition's reaction

Labour Party leader Phil Goff said Labour supported the government's move.

“But this support package must only be a backstop. The Government will need to ensure that there are safeguards in place to protect the long-term interests of taxpayers," Goff said.

“Kiwi taxpayers are sick and tired of bailing out the private sector, including finance companies which were often reckless and greedy. Those companies capitalised on the good times raking in profits, but when they started making losses and going bust, it’s left to the poor taxpayer to rescue them. That sticks in my throat and the throats of most other New Zealanders," he said.

“AMI is a different situation that has come about through extraordinary circumstances. Action had to be taken to protect the interests of the 485,000 AMI policyholders throughout New Zealand, especially those affected by the disaster in Canterbury."

Meanwhile Green Party co-leader Russel Norman said the government's underwrite of AMI made the need for a temporary earthquake levy more compelling.

“The Green Party supports the Government’s move to underwrite AMI Insurance to give certainty to policyholders, especially those in Christchurch needing to rebuild their homes and livelihoods,” Norman said.

“Giving ourselves the option of a preferential shareholding in AMI is the most prudent way to bail out the company and will ensure the interests of taxpayers are best protected. However, John Key’s Government can no longer continue to keep borrowing indefinitely to pay for the mounting cost of rebuilding Christchurch," he said.

“We have to have to be prepared for more bad news from the Christchurch earthquake, so the Government needs to design a fiscally and economically resilient response. Putting it all on the credit card isn’t really a plan and will simply leave us less able to deal with future shocks.”

See more of the government's statements below:

“Ministers have decided to act now. This provides a financial backstop for policyholders so the rebuilding of Christchurch is not jeopardised by potential solvency or liquidity issues and so confidence is maintained in the insurance sector.

“AMI has confirmed it will seek an alternative commercial arrangement to replace the Government’s support facility as soon as possible. The Government’s actions give the company time to do that.

“The alternative of doing nothing would likely have been severe, potentially leaving many thousands of AMI policyholders without the insurance cover and financial resources needed to rebuild.

“It would also have led to long delays in processing claims, other claims being only partially met and many of AMI’s customers in Christchurch not having insurance cover for future risks.

“With AMI having about 35 per cent of the residential insurance market in Christchurch, a significant proportion of residential repairs and rebuilding in the city will be funded by insurance payments to AMI customers.

“This is an unusual situation requiring a special response.

“In considering options, the Government has been acutely aware of the need to protect the interests of taxpayers, who are already facing significant costs from the Canterbury earthquakes and finance company collapses.

“If Government financial assistance is needed, the Government will take every possible step to minimise the cost to taxpayers,” Mr English says.

“Events such as this show the importance of getting the Government’s finances back into good shape as soon as possible. The Government remains committed to returning to budget surpluses and this arrangement doesn’t alter that commitment.”

AMI POLICYHOLDER SUPPORT PACKAGE – AT A GLANCE

The policyholder support package will be used only as a last resort if the company’s own reserves have been exhausted – unless the Crown believes it is in the public interest to take control sooner. This would involve the Government investing up to $500 million in AMI, with the right to take ownership and assume control of the company.

The full extent of the claims AMI faces will remain unclear for several months – it depends on the scale of damage in Christchurch, which is still highly uncertain.

However, it is possible that the company could face losses in excess of $500 million – or indeed, they could be less. If the loss were to be greater than $500 million, the Crown would stand behind the claims.

Under the policyholder support package:

·         The Crown’s policyholder support arrangement of up to $500 million provides the company with a platform from which to explore further recapitalisation options.

·         AMI has paid the Crown a $15 million up front establishment fee for the support package.

·         AMI has issued convertible preference shares to the Crown, but the Crown has not yet paid for them. AMI tells us that if payment is required, it may not need to happen for two years.

·         Payment of up to $500 million will happen only if AMI’s own resources are depleted below the level that is prudent for an insurance business, or if the Crown decides it is in the public interest to make a payment.

·         In exchange, the Crown could take ownership of AMI and have control of the board.

·         If the arrangement is called on by AMI, it can later exit the support arrangement by repaying the Crown, along with any dividends owing.

The support package for policyholders will:

·         Provide a financial backstop for policyholders so the rebuilding of Christchurch is not jeopardised by potential solvency or liquidity issues.

·         Preserve AMI’s existing contracts, including its reinsurance arrangements.

·         Provide flexibility for AMI and the Crown going forward.

The unpaid convertible preference shares issued to the Crown:

·         Are a last resort – the shares will be paid for only if the company exhausts all other options – or if the Crown  believes it is in the public interest to take control sooner.

·         Give the Crown the right to any dividend payments, ahead of ordinary shareholders. This is what the “preference” part of the shares involves, having preferential treatment ahead of other shareholders.

o   Other shareholders won’t get any dividends while the Crown has a shareholding.

o   Dividends paid to the Crown will be at the official cash rate plus an additional 5.5 per cent.

·         Allow the Crown to take ownership of AMI, if necessary, by making a partial payment of $100 million. The convertible preference shares allow them to be converted to ordinary shares in AMI.

Fee paid to the Crown

·         AMI has paid a $15 million fee to the Crown for this support arrangement. The fee is not refundable, even if the Crown never pays AMI for the shares. AMI will reimburse the Crown for the costs of developing and implementing the support arrangement.

Exit arrangements

If it becomes clear that AMI can pay all likely claims by policyholders, or if AMI arranges other appropriate sources of capital, AMI will:

·         Redeem the shares it has issued to the Crown, if they haven’t been paid for, or:

·         If the shares have been paid for, AMI will repay the Crown along with any dividends owing, and then redeem the shares.

Managing the risks

The Crown will soon appoint a director to AMI’s board and an observer to key governance or management meetings. If at any stage the Crown makes a payment for the shares, or if AMI breaches certain conditions, the Crown can replace all of AMI’s directors.  AMI has also agreed that its service levels will meet or exceed industry standards and that it will comply with prudential requirements established for insurance firms by the Reserve Bank.

MEDIA QUESTIONS AND ANSWERS

1.    Why has the Government taken this step?

The Government’s support package for AMI policyholders is designed to ensure that policyholders’ claims are all paid in full, and that the rebuilding of Christchurch is not jeopardised by worries about potential solvency or liquidity issues. The Government will continue to closely monitor AMI’s performance to ensure these objectives are being met. The Government’s focus will continue to be the rebuilding of Christchurch, ensuring the claims process proceeds in an orderly manner and that confidence in New Zealand’s insurance sector is maintained.

2.    How much will this cost the Government?

AMI has agreed to pay $15 million to the Crown for this support arrangement. The Crown will invest up to $500 million if it has to pay for the shares AMI has issued, which would provide the company with a platform from which to explore further recapitalisation options.

The full extent of the claims AMI faces will remain unclear for several months – it depends on the final cost of damage in Christchurch, which is still highly uncertain.

It is certainly possible that the company could face losses in excess of $500 million – or indeed, they could be less. If losses were to be greater than $500 million, the Crown would stand behind the claims.

3.    How will the Government pay for this?

Ministers have agreed to a $500 million appropriation so the shares can be paid for, if necessary.

4.    What influence will the Government have over the company in return for this support package?

We will appoint a director and an observer to the company, who have the right to attend meetings, and a legal contract has been put in place requiring AMI to meet industry service standards. At any time, with the payment of $100 million, the Government can elect to take control of the company.

5.    What does this mean for AMI policyholders – in both Christchurch and the rest of New Zealand?

For AMI policyholders in Christchurch and throughout New Zealand, it means that they can be sure that their insurance claims will be processed and paid in the normal manner. This will allow them to get on with the task of repairing or replacing their insured homes, cars and goods, and rebuilding their lives. For AMI policyholders who don’t currently need to make claims, it means they can be assured that their insurance will still be there if they need to claim on it.

6.    How did this situation arise?

This is the result of the two Canterbury earthquakes.  As far as officials are aware, AMI has complied with statutory requirements.

7.    How long has the Government known about AMI’s problems?

AMI initially approached the Government on 9 March 2011 with concerns that it may not be able to meet all its obligations from its reinsurance and reserves. Since then, officials have been working closely with the company to gather information about what are complex issues and to consider the best option for taxpayers and AMI’s policyholders.

8.    If AMI arranges new capital from elsewhere, is there likely to be any cost to the Crown?

AMI will seek to raise the capital it needs elsewhere. If AMI arranges other appropriate sources of capital, it will redeem the shares it has issued to the Crown, and if the shares have been paid for, AMI will also repay the Crown along with any dividends owing, and then redeem the shares. 

9.    Given all the uncertainty, what is the best case/worst case scenario?

The best case is that AMI can meet all claims from its reserves and reinsurance while remaining within prudent capital limits, or another private-sector solution can be found. The policyholder support package has been put in place because there is some uncertainty about the likely level of claims. If the support package is called on, the Crown will invest up to $500 million in AMI, which would provide the company with a platform from which to explore further recapitalisation options.

The full extent of the claims AMI faces will remain unclear for several months – it depends on the final cost of damage in Christchurch, which is still highly uncertain.

10.When does the Government expect to know whether AMI will need money from the Crown?

This is currently not known. However, it could take up to 18 months before we have clarity about whether support funding is needed.

11.What is the state of the wider New Zealand insurance industry?

The Reserve Bank’s assessment so far is that the bulk of the mainstream insurance sector is sound and functioning well. Policyholders can be confident that New Zealand’s insurance industry has sufficient reinsurance and reserves to cover households insured in the retail insurance market.

12.Will the Government provide similar support for policyholders in other insurance companies?

The Government would need to assess each situation on a case by case basis. In general, the Government does not get involved with supporting companies, because risks should be borne where they are best managed - by market participants.

AMI is in an unusual situation – it’s a significant insurance company with a large proportion of its customer base in Christchurch - requiring a special response, which is not the normal course of action for an insurance company facing issues. There is no need for broader intervention in the insurance industry and no compelling case to handle commercial failures other than in the normal commercial manner

12.Why didn’t the Government provide similar assistance to Western Pacific Insurance policyholders?

Western Pacific faces different issues and is of a different scale and significance to the rebuilding of Christchurch. In this case, there is no compelling case for taxpayer intervention and this commercial failure will be handled in the normal commercial manner.

13.Why didn’t the Government simply accept that AMI might fail and use EQC as a backup to look after policyholders?

EQCcovers the first portion of a residential earthquake claims limit of $100,000 for houses and $20,000 for household contents, plus GST.  AMI’s obligations are for residential claims that exceed EQC’s coverage. 

14.Can the Crown pay less than the $500 million maximum capital into AMI?

Yes, the Crown can pay less. AMI may not need payment for all of the convertible preference shares that it has issued to the Crown.

15.What is a convertible preference share?

A convertible share is a form of company equity that can be changed into a different type of share. A preference share entitles a shareholder to dividends ahead of ordinary shareholders, usually at a rate specified when the share is issued. With the support package for AMI policyholders, in certain circumstances the Government can choose to convert its preference shares into ordinary shares, giving it ownership of AMI. The dividend is payable at the official cash rate plus a 5.5 per cent margin.

16.If the shares can be redeemed by AMI and possibly even without any dividends, isn’t this just a free loan?

No, this support arrangement provides AMI with equity capital as a last resort and for a fee. It is not a loan.

17.What fee will AMI pay for this arrangement?

AMI has paid the Crown a $15 million fee to have this support arrangement in place.

Here is AMI's statement:

AMI is pleased to confirm the arrangement with Government announced today by the Minister of Finance. It is designed to give our customers full confidence in the company following uncertainty about how much AMI will have to pay out in claims following the destructive February 22 quake AMI Insurance Chief Executive, John Balmforth says.

The final amount of AMI’s exposure from the quake remains uncertain. Although the flow of claims has slowed significantly in recent days, the final tally and cost is not known.

“An accurate estimate on the final financial commitments for the second quake are probably still a couple of months away. There are simply too many unknowns at this stage.

“Uncertainty about the final claims tally has translated into uncertainty about AMI’s ability to pay. We could not allow such concerns to mount and it was for this reason that we asked Government to stand behind us during this difficult period. We are very grateful that they have done so,” he says.

“We will not draw down on the capital facility from Government unless we have to. The 22 February event has tested our reinsurance levels, but we have over $350 million of reserves. Time will tell whether these will be sufficient. But even if we exceed our reserves, with the support from Government our customers can be sure they will be paid and the business will continue as usual.

“We are particularly grateful for the speed with which Government has been able to move on this matter. This is a commercial arrangement with Government. Our intention is to seek an alternative arrangement from the commercial sector to replace the Government support facility, but that requires more time. By stepping in now Government has given us time,” he says.

Details of the arrangement have been made public. The issue by AMI of convertible redeemable preference shares allows a capital injection from Government up to a maximum of $500 million. AMI’s objective is to obtain a replacement facility if required, as soon as possible. Options could involve sale of part of the company to a commercial partner or investor.

AMI has had to pursue this line of action because its position is different from the other large insurers in the New Zealand market. It is a mutual company owned by its customers. It does not have access to shareholder funds as do most other companies. When AMI requires additional capital, as it may do in these circumstances, it must raise it in different ways than, say, a publicly listed company.

AMI’s catastrophe reinsurance was purchased at a level beyond that predicted by a variety of independent earthquake impact models. The damage from the 4 September earthquake was consistent with those predictions and well within AMI’s resources. There was no evidence that an extension to AMI’s reinsurance cover above NZ$600 million for the second event was warranted. However, the occurrence of a second earthquake in the same area, resulting in a much higher level of damage, was unprecedented and has made heavier demands on AMI’s resources.

AMI has further reinsurance cover of $1 billion to meet a third event and additional back-up cover to meet a fourth event should they occur before 30 June 2011. Further arrangements are being negotiated for the period after that date.

 “This is a robust and successful company. We do not see any long term risk to our business or our customers. We have moved quickly to secure this arrangement with Government to reassure our customers of our ability to meet claims,” Mr Balmforth says.

 “We believe that a stable insurance market is critical to the rebuild of Christchurch. We are committed to its restoration both as an insurer and as a good Canterbury citizen,” he says.

AMI is the largest New Zealand-owned fire and general insurer with a network of 73 branches, two contact centres and 22 agencies. It has 830 staff and in 2010 produced a sound profit performance of $31 million.

(Updates with English's comments on other insurance companies, comments from press conference, AMI's comments)

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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170 Comments

It's called gravity. At

It's called gravity.

At least the public are getting a good education in risk and how it works.

And the Naked Emperor continues the slow striptease :-)

How so? ie a good education

How so?

ie a good education on risk....

regards

 

With SCF, Feltex and now AMI,

With SCF, Feltex and now AMI, the general public is getting a much closer view into how the risk system is structured. With AMI now there will be a good explanation of how insurance works: the taking of premium, the calculation of risk, the investment of premiums and so on.

There are so many institutional structures we take for granted, without every wondering how they work. Most of them come back to money at some point. 

And hopefully people will start to question current processes and ask if there are better or different ways to do things.

I feel sorry for National. They are so desperate to privatize everything and yet they seem to keep buying new assets :-)

(And congratulations to Bernard for his part in this education process).

"I feel sorry for

"I feel sorry for National"

Its quite funny really....they were so chuffed to get into power until they started to see the GFC unfold before them....BE's, JK's faces just dropped....basically the "free-market" mantra of which they were meant to be THE believers in was dis-intergrating before their eyes....

regards

 

here's how

here's how steven…

Start a business, drive it so hard that it gets to a size quickly enough to reach the 100's of mill. in so-called assets (or reserves, or Tier 1 capital in case of banks, whatever) by undercutting competition by a significant margin and DO NOT keep adequate risk cover. Then wait for the next major disruption of the market you operate in. Ready to go to mummy government and tell them they need to bail you out or the public at large will suffer greatly. Pretty simple really. In the meantime, you pay yourself and a bunch of so-called senior managers a mega salary and everything is sweet until the next time round.

It's called the 'NO RISK - BAILOUT AHEAD' strategy. How's that for a simple explanation?

Of course, you only get to play that game if the government (via dumb public who put them there) doesn't figure out in time that strict, conservative regulation AND enforcement may be required to temper corporate or personal greed and stupidity.

Ah well, we were a bit behind the rest of the world, just like in so many other ways, but it had to come to good old NZ eventually.

I really hope people come to

I really hope people come to see that self-regulating markets only work when there is no moral hazard i.e. SCF should have gone down in flames completely.

When government interferes after the event it's a shambles as losses are socialized. 

This government really doesn't know whether it's coming or going.

You can't please all of the people all of the time. 

If AMI is broke well then it's broke. It pays out what it can and then winds up.

We have to stop whining to the government every time something goes wrong. 

Polanyi would be loving this, Hayek not so much but I'd love to see them going hammer and tongs about it. 

I think self-regulating is an

I think self-regulating is an oxy-moron......I cant say Ive seen even one example where it has worked but many where it has failed....

regards

I Dont agree... This isnt a

I Dont agree...

This isnt a business as such and driven businesses are aimed to make huge short term profits for the shareholders...AMI is a mutual....From what I can read they considered they had adequate cover, except in extreme circumstances, but this happened. 

Yes the management should be queried....lets see what that brings out.

regards

It's also called 'gravy

It's also called 'gravy train'.

EQC (tax funded) pays already the first $100 000 of an earthquake claim before AMI pays anything. They are a corporate listed company with shareholders and investors reaping the profits. The lame argument that people would not get insurance payouts if AMI fails are ridiculous because statutes demand re-insurance of AMI, which has been figured to be a billion dollars. AMI might go bankrupt in the process but paying out they would. This is NOT ‘New Zealanders caring for a few earthquake affected homeowners’, this is ‘New Zealanders having to fork out for a few unlucky investors’. The govt wants to avert loss of ‘faith’ in the insurance industry? What a joke. They re-arrange the dilution of faith in the insurance industry towards a further dilution of faith in the New Zealand state. As if we could afford that.

Risk is socialized, profit is capitalized. Nice one! Smells of political corruption to me. John’s chums will be happy.

Isn't EQC funded by a levy on

Isn't EQC funded by a levy on all policies written - not the taxpayer; and aren't AMI  a mutual society, and hence each policy owners is a shareholders and investors, as such?

Hi, EQC, yes thats my

Hi,

EQC, yes thats my understanding......so no private insurance, no EQC cover.

AMI, Yes and no.....its a sort of a mutual and not a company....so there are no shares attached to any individual....so no, not "as such".

I think the reasoning to bail AMI is a bit dodgy.....it should have had adequate cover and it looks like it didnt....if the risk was so marginal it shouldnt have cost a lot to cover it...they chose not to.  If you had no insurance you had no EQC cover, so Im really pushed to agree that AMI should be covered....

Overall, its pretty clear that a Govn has to be the lender/supplier of last resort the problem is the Govn should have had an income from that. It maybe that in future all insurnace companies have to pay a levy to cover inextremis.

regards

The question remains: WHY

The question remains: WHY should the govt. be the lender of last resort for companies or even mutual corporations? One can twist it any odd way. This is socializing risk and privatising profit.

I cant see where you were

I cant see where you were asking that question....     but anyway....

Why should the Govt do so? for the overall good of NZ......  In terms of the "job" unlike in the US where the private entity remans in private hands the Govn ends up owning AMI....so at least it gets something for the $ whcih I would assume can be sold on....so not a total loss.

regards

With rising insurance cost

With rising insurance cost disposable income of househols will suffer and interest rate expectations will come down too.

Looks like this govt is on an

Looks like this govt is on an asset buying spree. SCF and now possibly AMI .. whats next? 

no - it's on a 'using public

no - it's on a 'using public money (actually debt) to prop up private equity', which fits with their agenda.

The only stupid part, is that the transaction is going on, on a sloping deck.......

"GUARANTEED BAILOUT"  should

"GUARANTEED BAILOUT"  should be the new marketing slogan for AMI

Did they insure Hubbards

Did they insure Hubbards Yellow VW . That blew its big end as well.

Ahh the joys of

Ahh the joys of capitalism!

Privatise the profits

Soclialise the losses

Woopdeedoo

Reserve Bank's BCR Policy now in tatters

If you are big you will be bailed out

Small is good - let the big boys pay for the priviledge

More questions then

More questions then answers.

How much longer can the “Broom With Good Bristles” last to clean up the worldwide mess caused by us and mother earth ? Time for radical changes the way we live and do business.

I felt sorry for Bronwyn at

I felt sorry for Bronwyn at AMI this morning when i rang to cancel my home and content policy with them...it only had a fortnight left to run and the deal AA ( whom i also insure with) gave me wasabout 80 dollars cheaper...Bronwyn had a sound of resignation in her voice and didn't ask me why i wanted to cancel....such is life, said ned kelly on the gallows.

where there's smoke there's fire, said me!

I would think that actually

I would think that actually might be very wise.....if an earthquake hit Wellington tomorrow AMI couldnt pay up....

So in effect AMI policy holders maybe paying for no cover, which strikes me as fraudalent if thats the case....

regards

I guess the govt will need to

I guess the govt will need to build a lot more boats with the increasing nos rushing off to OZ .

 Yes Alexander - just make

 Yes Alexander - just make sure a pair of elephants, giraffes, Kiwis, pork, beef and all other species fit onto one of the boat also. The way the world is going, we need some kind of a Noah’s ark – do we – ???????? -  hmmm.

then you'll just get john key

then you'll just get john key standing at a presser taking all the credit for the nz boat building industry's spectacular growth

 "There will be increases in

 "There will be increases in premiums nationally. I think these will be across the board, that's just going to be a flow-on effect," Balmforth said." herald.

You got that right Balmforth....and hows about you taking a very big salary cut along with the other bosses at AMI....how about that?

This govenment has gone mad.

This govenment has gone mad.  We simply can not afford this.  Those insured with AMI should be getting taught a lesson insurance selection and risk.  The cheapest is not always the best. Companies should be allowed to fail without tax payer backing.  

Expect interest rates to rise as foreign investors insist on a higher return.  Are we to become the next Portugal....?

At last JT. someone gets

At last JT. someone gets it.......MAD.....K..R..A..Z..Y. when the loons are running the asylum...!!

All these things point toward two very significant factors in our economy  and social development 

1. the capitulation of the people due to apathy.

2. A complete lack of robust political opposition allowing the incumbent a hog wild  reign without fear of meaningful repercussions. 

I think State is actually

I think State is actually cheaper....but their repair quality is awful.

You cannot teach a lesson where there is no context or material.....AMI was given a good rating and seems to have been prudent generally....just a very extreme and unknown event.....what has over-welmed is the magnitude....

Consider that it is now difficult and expensive for private NZ based companies to get re-insurance, so it maybe that if there is a 3rd event the rest of them would be in the same boat....

Second para, I dont see the direct / immediate connection...the with us and portugal bit....I do expect that we are likely to have to meet higher returns becasue our economy will be even slower to recover...we are however no where as imprudent as Portugal and Greece.

regards

As I've written on the other

As I've written on the other AMI thread, in what way offering cheaper policies should entitle them to trade while unable to meet their basic obligations as an insurance company?

From a customer perspective, there are many reasons why they could have been able to offer cheaper policies. Eg, cutting cost on customer service, hiring more young graduates than other companies, not upgrading their equipment (PCs etc) as regularly, having offices in cheaper parts of town etc. And it's definitely not an excuse to not provide the service they claimed to provide, or a reason for the customer to think that they would not provide the said service that they were paying for.

Have you ever flown on Jetstar or Ryanair? Many people do, and I'm pretty sure that while they probably expect the pathetic customer service, delays, more frequent cancellations that go with flying on a low-budget airline they also most likely do expect to get the service they are paying for, ie, being flown from A to B and getting there in one piece. Charging a lower fee for a service does not entitle anyone to not provide the said service. In fact, if I took on contracts, got paid a deposit and then failed to deliver I'd probably be taken to court, whether I was charging above or below market rate. Similarly, if a client failed to pay for the service provided it'd go to court. And the party in the wrong would quite rightly be called a thief.

I fail to see how it's different for AMI. They took the responsibility to offer a service, no one forced them to take more policies than they could handle, they signed on the dotted line just like their customers did, therefore they are liable to provide the said service. The very fact that they were allowed to call themselves an insurance company seems wrong but blaming the customers and saying they should be taught a lesson instead of focusing on AMI's failure as an insurance company is a bit rich...

Those who need their insurance to come to the party following the earthquakes are those most affected by the earthquake (EQC pays for the first 115K). So on top of possibly having lost their job, maybe even a family member, and definitely having to leave in stressful and poor (lack of water/sewer) conditions, you'd like them to be told that although they paid their premiums in exchange for a service, well too bad they won't get it and will lose their house too? There's only so much people can take.

All this said, I do agree that the govt can't afford to bail out everybody and that it's just crazy. But how come things were even allowed to come to this? Is it poor insurance regulation?  Whatever it is the culprit is AMI, not its policy holders!

...... If I eschew American

...... If I eschew American or German Gummy Bears in favour of cheap Chinese ones ...... Who is responsible for my subsequent medical treatment and for the decontamination of Mum's house ... ..... me , or the tax-payer ?

Caviar Empty , as they say .

So would you go for Chinese

So would you go for Chinese cheaper Gummy Bears knowing they'd have an adverse effect on your health and that you were taking that risk? Or did those Gummy Bears have a high AM Gummy rating and a solid reputation and from all you could see as a customer, were just as safe as the other kinds?

I prefer to buy quality stuff than cheap, low-quality stuff but you can not say that price is everything. There are many things that are only sold at an expensive price simply because of their marketing/attractiveness of the brand/"status" associated with that brand. Not necessarily because they are that much or at all better than a similar cheaper product.

(Personally I'd go for chocolate rather than Gummy Bears). Probably won't be at the Farmer's market this Sunday btw. Are you back in Rangiora for good?

Another company

Another company bailout?

What happened to CAPITALISM??????

It was a con or at best an

It was a con or at best an illusion....

regards

Another proof of Black Swans

Another proof of Black Swans existence.

AMI take a hit greater than competitors possibly because they stand as a major insurer of the Mum & Dad property owners in the east Christchurch area?.

Some other companies would probably have a risk profile with a more comfortable geographic spread. Higher income owners in other areas would be using insurers that come via brokers or business association?

There is also  the reportage that they may have a lower reinsurance level than some overseas owned companies who do their reinsurance with a world view?

Question marks because none of this is obvious to me.

Yes....pretty much... Except

Yes....pretty much...

Except I dont think other insurers have a world view/spread, that is what the re-insurer does have though.

regards

http://www.stuff.co.nz/busine

http://www.stuff.co.nz/business/money/4856873/Quake-hit-AMI-insurance-bailout-could-cost-1-billion

The budget planners will need to go back to the drawing board. ....

more borrowing needed and maybe some more cuts .....

 

This will expose our national

This will expose our national borrowing up to 1$B and you have to think more if there was to be another disaster.

I'm bitterly distressed that my vote for the National Party two years ago has ended me up in the situation I am today having to pay for SCF shareholders to continue to enjoy their lifestyle and now buying an insolvent insurance company.

Is this just another vote bribe to secure that Christchurch vote National or what?

In the mean time they want to sell our real and productive assets like power generation to Australian interests.

Vote National to privatize the gains and socialize the losses.

It's always about votes in

It's always about votes in Election year...

the stress is starting to

the stress is starting to trickle down to readers.......

...what about worldwide chaos

...what about worldwide chaos on many fronts is causing stress starting to trickle down to readers.......

oh I agree....it accumulates

oh I agree....it accumulates

A shame this trickle can't be

A shame this trickle can't be harnessed by whacking a turbine on and generating electricity

Smile - youre with AMI )

Smile - youre with AMI )

Don't you mean: "Smile, you

Don't you mean: "Smile, you own AMI."

great you own a black hole

great you own a black hole

Now that we have AMI by the

Now that we have AMI by the balls, exercise the option, take the company into conservatorship, fire the board and senior management, then sell it off to the highest bidder a few years from now.  Capitalism in practice.  Under-reinsuring for catastrophic events is inexcusable.

About foiur weeks ago, I told

About foiur weeks ago, I told those not living here in wonderful canterbury, that the pain we feel will be felt by everyone...well chooks are coming home to roost, this won't be the first bail out due to NZ BIGGEST Natural disaster.

But this is not new...BNZ, AIR NZ ring any bells

I think the best thing is for

I think the best thing is for Govt to implement an incentive scheme for people to bail out of  ChCh cause we just aint gonna pay for a Sideshow Bob idea of ChCh post earthquake Canterbury people.
The rest of NZ  will support a significant demolition , deconstruction and de population of ChCh ,  so if your business and job have @#*t themselves move north my friend.

Not when you see the

Not when you see the inter-linked economic relationships and economic consequences spillover from that. ChCh is not an economic island any more than Wellington or Auckland. I know people don't want to pay for it however it would be nice if people park the emotion and think in real terms and realise it is all inter-related, do yourself a favour and try...if you don't... you will soon realise too late it will have a personal effect on your own finacial position.

I

My "finacial" position took a

My "finacial" position took a hit when 1st SCF was given a Govt Gtee by some clown from Mataura ...even when we all knew they were shonky (apart from the good Timaru folk) . This allowed every greedy investor to pump some dosh into Hubbard who was offering rates so far out of whack he must have been on P.  Now we have AMI which has been ever so shonkily run for some time. What would be the cost of  flogging the rights to Lancaster Park I wonder ?
Despite those inter related links  , I do suggest  some social intercourse  on how we need to wise up . With respect to CHCh lets .....Demolish anything Stuffed , Deconstruct anything that is Dodgy  (AMI & SCF included) & then Depopulate the city  to encourage people to get some work elsewhere asap . That will leave a few good folk on deck but I am not going to sit back and see NZ go down the Toilet in an effort to recreate Sideshow Bobs dream of a new ChCh with or without AMI's help.

Thank you for your

Thank you for your comments.

I have been told that is always a good idea to keep an eye on this site, just to see what the really deluded people think. Obviously you are a good example, going by what you have said.

In terms of paying for our disaster, you already have, so thank you. I hope you enjoy those traffic jams just that little bit longer.

In return, if you just keep sending your semi-skilled rugby players down here we will continue to keep teaching them to kick, catch and pass. Then you will have something to cheer about in the weekends.

good sledge

good sledge jeremy

pointless, but entertaining

Thanks. Piffle like that is

Thanks. Piffle like that is an easy and worthwhile target.

Seriously though. People need to understand that this is not a situation that really could have been planned for to the nth degree. AMI do not seem to be in that bad a position and have gone to the government 'in case' something untoward happens in the next 18 months to 2 years with regard to the final claim situation. It is better that they did it now rather than later. 

It may just be that in the end AMI need no assistance at all, which would make all the ranting that is going on here completely pointless.

The problem is not so much

The problem is not so much this claim but a 3rd claim.

If you are in Wellington or anywhere else and a huge event happens, just where is the money coming from from AMI to pay up?  it doesnt have another 500million....now does it?

Given the amount AMI is still insuring you have to wonder if it could pay....and so you are paying a premium but may have no cover.

regards

"AMI had reinsurance

"AMI had reinsurance arrangements in place which included cover of a further $1 billion in the case of a further disaster till the end of June"

I think you'll find steven the problem is not such much a 3rd claim...

Found that......however we

Found that......however we are in April....June isnt far away.

regards

 

FCM- agreed - every time I

FCM- agreed - every time I hear McCully speak, I think of the BNZ.

How much longer and the

How much longer and the “tax- prayer” has to bail out the government ? Where does the money come from ? More Trademe time !

 "It's a strategy which seems

 "It's a strategy which seems to be bringing good results, for AMI has seen satisfying growth in its premium business, operating surpluses and asset base in the past few years. The company specialises in general insurance, focusing on house, contents and motor insurance, and is among the top four general insurers in New Zealand with about 20% market share. 2006 saw written premium income increase to NZ$251m, up from $200m three years earlier, with a claims ration of 62%-63%. Helped by strong investment returns, AMI posted a surplus after tax of $37m. The company's solvency margin is also looking strong, up from 84% in 2003 to 108% today. “Our solvency margin is high by New Zealand standards, where the insurance average is 57%,” John Balmforth says."

http://www.andrewbibby.com/socialenterprise/balmforth.html

However everyone wants

However everyone wants someone else to pay for it :-)

"3.    How will the

"3.    How will the Government pay for this?

Ministers have agreed to a $500 million appropriation so the shares can be paid for, if necessary."

 

Approriation? As in theft?

word from industry sources is

word from industry sources is AMI probably didn't have enough castastrophe reinsurance cover, and maybe didn't fully reinstate it after 4/9. A lot of different castrophe reinsurance contracts, but generally a cat RI contract provides 1 reinstatement of cover which the purchaser needs to pay for (once you use up the limit, have to reinstate and pay for). compared to the offshore owned companies based in NZ, AMI are a small purchaser of reinsurance in the global market. The reinsurers are looking to reduce exposure in Australasia, so possible AMI couldn't source enough cover or weren't willing to pay the premium charged (which would be huge). A lot of questions for their CEO to answer. especially after he told NZH on 24/2 they had two lots of reinsurance plus assets totalling $1.65 bill, now anything over $1 bill, they will need government help. and apparantly they were offered a deal a few years ago from an Australian corporate (who had $30bill market capitalisation) for shareholding.

word from industry sources is

word from industry sources is AMI probably didn't have enough castastrophe reinsurance cover, and maybe didn't fully reinstate it after 4/9. A lot of different castrophe reinsurance contracts, but generally a cat RI contract provides 1 reinstatement of cover which the purchaser needs to pay for (once you use up the limit, have to reinstate and pay for). compared to the offshore owned companies based in NZ, AMI are a small purchaser of reinsurance in the global market. The reinsurers are looking to reduce exposure in Australasia, so possible AMI couldn't source enough cover or weren't willing to pay the premium charged (which would be huge). A lot of questions for their CEO to answer. especially after he told NZH on 24/2 they had two lots of reinsurance plus assets totalling $1.65 bill, now anything over $1 bill, they will need government help. and apparantly they were offered a deal a few years ago from an Australian corporate (who had $30bill market capitalisation) for shareholding.

Key might have been a great

Key might have been a great currency trader and he seems to be making real time decisions on the spot.  However, realistically they have no idea what type of beast AMI could turn out to be.  They can't have had time to go through the books.  So just like South Canterbury Finance, there could be bigger losses to come. 

The decisions being made are of National significance and will affect generations of New Zealanders to come. 

The government has no business being a bank an airline owner or an insurance company. That is what the private sector is for.

FYI, here's Matt Nolan's take

FYI, here's Matt Nolan's take on this over at TVHE 

http://www.tvhe.co.nz/2011/04/07/ami-and-moral-hazard/

As an investor Im thinking

As an investor Im thinking that the taxpayers are on the hook for a lot of dodgy dealings. How do we pay for all this, by increasing taxes? As my assets are liquid then my best option is to move them away before the taxes start increasing and the bond markets become aware that we can no longer pay our way.  The Government stepping in and backing every company going broke, borrowing 300 mill a week about to go to ??? is going to hurt as interest payments compound and the cost of borrowing goes up.   

exactly and we have people

exactly and we have people going crazy buying property in Auckland lol

How do we pay for all

How do we pay for all this.....?   A question that needs to be asked more often.

The stealthy inflate-our-way-out-of-debt scam is going to have to be ramped up big time. Raising taxes will cause outrage amoungst the few remaining productive workers and businesses, so I personally don't believe National will try this trick especially in an election year.

Updated with AMI's statement

Updated with AMI's statement telling us they are robust.

cheers

Bernard

On Radio National this

On Radio National this morning AMI's CEO , Mr Bumfart stated that the firm was in robust health .........  Katherine Ryan asked him , then why do you need the government's help .

Not normally an " attack dog " interviewer , she  carved  into the guy with a master butcher's precision .

....... Bravo Ms. Ryan !

Must be a typo Bernard,

Must be a typo Bernard, perhaps they are trying to tell us:

they are about to gobust

or maybe that they've been out to robus.

Maybe a mix of the two makes them robust??  Creative english, a bit like the creative accounting so popular nowadays??

@Andrewj Good on you if you

@Andrewj

Good on you if you are liquid an thinking of moving. But pray tell me, which country in the whole world is economically/politically  safer to live in and which country gives you the emotional/ cultural background to be comfortable with? If you know one, please tell us..........

just asked a friend the same

just asked a friend the same question he didn't know anywhere else either. German Bunds?

He also thought that AMi is just the'first cab of the rack", more to follow.

Germany? Heck no! When

Germany?

Heck no!

When you're hearing about potential bailouts of Greece, Portugal, Spain et al, what you're really hearing about is a potential bailout of German banks.

I have worked bloody hard all

I have worked bloody hard all my life (I'm 69 & still working) to build up a modest asset portfolio. I am certainly not rich. Thru good times & bad - & there has been some very bad times - my private family company has paid every account due , on or before the due date.My suppliers & subbies have never had to wait for payment.

I can see now I have done it all wrong! I should have had palatial offices, masses of staff, luxury vehicles & paid myself an enormous but legal salary & a small nest egg safe from liquidators . Every account should have been delayed payment for as long as possible.When inevitably the company went bust I should have shrugged my shoulders, whined to the government (& everybody else) for a handout - from the comfort of my overseas retreat, & to hell with the peasants who  made me rich.

There's only one thing left

There's only one thing left to do: get active and tell EVERYONE who wants to know or not, what National (and Labour is the same) has done to our country. And then look for a new party. Or found one.

Certainly the policy holders

Certainly the policy holders of Western Pacific must be feeling mightlily aggrieved that they have not had the same government handout bestowed upon them as the AMI policy holders have. 

yet.....

yet.....

...what I want to know is who

...what I want to know is who is going to bail us out (NZ). Portgual, Greece and Ireland can go to the ECB. America can print because it is the gloabl reserve currency. NZ has nowhere to go if its debt and interest payments become unmanagable...only down the gurgler. It's all very well for Natioanl to keep throwing money around but at some stage the bill comes due, and we can't afford this kind of constant bailout largess as a country.

Our last port of call is the

Our last port of call is the IMF....

America cant print for ever......it can only do so as long as ppl hold onto their debt.....and after Pimco bailing its pretty obvious the limit is closer than was thought....

At some stage taxes for the higher earners is going to have to rise there is no other sane option I can see....

regards

You gotta be joking! The IMF

You gotta be joking! The IMF and their SDRs are just another fiat windegg. The New Zealand producer of wealth and value is the one who picks up the pieces left by the parasites of public wealth. Ask yourself: Do you produce value and worth? If not, you are part of the problem. Times are over, one way or another, to leech on the few who still do.

That'll be the IMF rp....soon

That'll be the IMF rp....soon to have a major role in the setting of rates in NZ...and you should expect them to go higher. Think this is a recession?...you aint seen nothin yet!

Actually reading what the IMF

Actually reading what the IMF is saying recently is interesting/enlightening....while the OECD is still a bunch of right wing loons, its starting to look like the IMF is less ideological and more pragmatic.  Indeed anyone who can think should be blinkers just bugger you up...ie when you look at the last 30 years asset stripping and draconian measures and free markets has not worked to pay back didnt do any country any good really.....plus the IMF doesnt have money to bail everyone...

Rates, not so much rates as taxes Wolly.....the top 33% (or whatever) will go to 40% or more...its the only place there is any disposable income to collect off.  Unless we go GCT, land taxes etc....sometthing has to give.....

regards

...pretty harsh

...pretty harsh consequences...higer taxes, higher interest rates, maybe IMF...perhaps cuts to entitlements...this is all further drag on an economy struggling to stay afloat...."ain't seen nothing yet" alright

That's the picture rp...no

That's the picture rp...no way out now...how can the sods socialise the losses when doing so ensures the recession drags on for twenty years plus...the 6 part strategy was pure humbug...Labours promises are more humbug...National's principles are in the gutter...the debts are now heading over $400 ooo ooo ooo and they will keep rising until we too become a recognised piigs failure.

Thank you to all the useless swine who over the past few decades painted themselves as great leaders and excellent financial managers of the nation...we owe you all so much!

...yes, they've all been

...yes, they've all been pretty good at giving money away....but hopeless for earning more (e.g. re-allocate investment so we earn more)

Little Johnny and Grim Bill

Little Johnny and Grim Bill should really come clean on what they believe in.  Because, as far as can see it is not a market based philosphy.

Let us call it political capitalsim.  What this means is that they will preach the benefits of capitalism when it come to slicing bits of value off the average joe, but will turn political (as in caring for voters) when not givng away significant amounts of taxpayers' money to a defined group would threaten the vote at the next election.

Here is a list of the latter.

1. Guaranteeing the finance companies.  Although this was a Labour initiative, Little and Grim were right behind it.  No other country guaranteed finance companies.  The financial sysytem would not have crashed, but a lot of voters would have been very annoyed.  Almost all the finance companies went to the wall anyway.  South Canterbury was just the most obvious example of a politically driven rescue.

2. The leaky homes debacle.  Never heard of caveat emptor? OK, there were regulatory failures driven mainly by big business pushing cheaper ways of throwing up the NZ dream, but seriously anyone with any nous could have seen those monoclads were rubbish.  Buyers and banks should have worn the cost but that was vote threatening. So everyone is going to be picking up some of the tab.

3. Letting dairy farmers away with environmental costs.  Such a significant monopoly and block vote could not be offended.

4. And now bailing out AMI.  It might seem cruel given that it was an act of nature that has caused confidence in AMI's abilty to pay out to be threatened.  But that is the the harsh truth of markets. Moral hazard writ large. Pleasing voters writ larger.

I am sure the list can be extended.

So, please Little and Grim, don't preach the efficiency of markets and count yourself lucky that there is no alternative political philosphy out there.  Because Labour trods the same path albeit in a more confused and less charismatic fashion.

Also count youself lucky that your average woolly out there has it pulled so far over their eyes, they don't realise they are being shorn.

Do they realise that inequality has been rising in NZ almost to the same extent as in the US? Why don't they choke when Little Johnny says "we are all in this together" ? Wonder if he will give a lend of his Hawaii bach to some Christchurch refugees?

Have they seen fuss in the US about GE paying no tax? Do they wonder how much Graeme Hart pays? Do they realise that the big Aussie banks here actively manage their tax bill to pay a rate in the mid 20% because the banks realise that is the polically acceptable limit? They cocked the last bit of structured finance trickery, but they will be at it again.

I should have known better having worked in the industry from whence Little Johnny came, but I thought he might not play politics having made his f--- you money, but he is just a power junkie after all.

Should make you all despair, my woolly friends, but I fear the reaction will be: Pass the No 8 wire, we'll make do, good old plucky Kiwi's that we are.

Almost makes you want to vote Green.

If you want to lift the wool from your meat pies, have a read of The Predator State and be wolves not sheep.

I agree... "Pass the No 8

I agree...

"Pass the No 8 wire, we'll make do, good old plucky Kiwi's that we are."  I think most ordainary ppl have morals and want to be fair...what they fail to realise is there are amoral ppl out there that will fleece you from behind while standing in front of you expecting you to be honest and pay it back.....

regards

...don't forget - giving away

...don't forget - giving away mineral and aquaculture rights for the foreshore, carbon credits which only paid out a select group (pine forresters)

Nice piece.  Crony

Nice piece. 

Crony capitalism is another term used in this situation. 

The revolution is coming..........doesn't matter what your political worldview is........it's time for the next iteration....and it won't be national or labour......

Firstly, I have MANY friends

Firstly, I have MANY friends in Christchurch and my heart goes out to them in this horrible situation. There is no easy answer here. I didn't want to post my thoughts for fear of sounding insensitive but I feel I must.

This bailout just goes to prove that 'Too Big to Fail' has infected NZ just like the rest of the world. These situations are why we have bankruptcy laws! To re-structure an unsustainable debt load.

Why some private businesses qualify for bailouts (like AMI, Air NZ, BNZ, the finance companies etc etc etc) whilst others do not (like small mom and pop shops hit hard by the recession such as my business which I recently sold) is just another example of socialism at work. The government is not bailing out AMI - the TAXPAYER is. And that is wrong if we want true capitalism in this country.

You simply CANNOT have capitalism on the way up and socialism on the way down, it simply does not work and this has been proven over and over again worldwide. And these bailouts always happen at 100c on the dollar. WTF? Should there be no risk in the world these days? Risk/reward is what makes capitalism work in the first place and when you remove the risk component all hell breaks loose in the markets through insane risk taking for short term business gains.

All NZ'ers are going to wear these bailouts in the form of higher premiums, higher taxes and rampant inflation. In life you never get something for nothing.

The government tries to play it down by saying they'll do a cash for equity swap like they did with AirNZ. If this was such a great deal then PRIVATE investors the world over would be chomping at the bit for some of that action. They obviously are not. So, if it's not a good deal for business people and investors WHY is it suddenly a good deal for the taxpayer?

This bailout totally harms AMI's competitors too, you know the ones who did not take the geographically concentrated risks AMI did in the market? What SHOULD happen is that policy holders flee AMI for their competitors, meaning they pick up market share through wise business practices. Now, instead, poor risk management is being rewarded and their competitors do not derive the benefit from free market dynamics. If I was an AMI competitor I would be PISSED right now. But then again it sets a nice little precedent for them in case they are ever in the same position so I doubt they will make too much noise about it.

Since NZ is and always has been left/socialist leaning (and as such bailouts will most likely occur until we're broke), at the very least AMI should be forced into liquidation/bankruptcy and closed up with the directors not allowed to run a business again (or at least for the normal statute period under bankruptcy law).

If the government chose to honour historic claims against the company then so be it but they should not be allowed to continue to operate to the detriment of the country (taxpayers), the industry and their competitors. This is the only thing that will help prevent the moral hazard that bailouts create in the first place.The current bailout package is just a bandaid on a very broken system.

Yeap the sooner all of us

Yeap the sooner all of us realise that we are just good farmers and really need the Aussie insurance companies and big businesses the better. Lets face it with only 4 million we are always going to find it diffcult in the international market place. Just as AMI has with trying to get reinsurance...without the big daddy across the ditch (like the other insurance companies) offshore reinsurers just think NZ is now just too high a risk.....just like when we had our  own Bank and Airline..the squeeze will come at some time.

You have a misplaced faith in

You have a misplaced faith in the Aussie big 4 and insurance base, look what happened in the GFC. It was off to the government to use their AAA.

FYI from a reader via

FYI from a reader via facebook:

"If insurance companies misrepresent their ability to pay the piper, then they deserve to fail. If your child gets caught shoplifting, do you protect them or let them feel the condemnation of society. If you don't let them know they have failed, they will simply go on doing the same. We simply cannot keep bailing out failures."

..that person is spot on. My

..that person is spot on. My first thought was AMI should be proseucted for insufficinet reserves to cover claims...not much goiod having insurance if they're not saving funds to payout. They should at least be allowed to fail horribly, so it doesn't happen again.

"If you don't let them know

"If you don't let them know they have failed ..they will simply go on doing the same.."

This is also true of the current administration....on an economic and social policy reform level...they have .....FAILED...........to manage...deliver...provide confidence.

And yet the only way to punish them is to accept the alternative....which if I'm not mistaken is too unpalletable even for Selwyn Pellet.....upshot...no one gets punished and they just go on doing what they do......

Funny that as a society we reward people for just participating......I guess some things never change.

 

Viva the Revolution...!

Exactly Christov....If they

Exactly Christov....If they want to help the people of christchurch - then do...but let AMI go to the wall in ignomy and ensure all the other insurers have appropriate reserves...

I see it's official for

FYI via Andrew Patterson at

FYI via Andrew Patterson at Radio Live

PM John Key told John Tamihere on 11 March that he didn't want to engage in speculation on the future of AMI when he knew that two days earlier on 9 March, that AMI had approached the government seeking a financial assistance package.

Here's the audio

http://www.radiolive.co.nz/John-Key-evades-AMI-questions/tabid/506/articleID/19585/Default.aspx

cheers

You of all people should know

You of all people should know better than stirring the pot like this, BHickey !

At this very moment ( as you know) the CEO of Tower is in negotiations to buy  ALL of AMI if they want to not have to go to the Govt.

also AMI are having to pay the Govt.. $15 million just to have that backup faciltiy of bailout in place...even if they don't call on it.

regarding Johnny Key on Radio Olive back on March 9 just after the 2nd quake...what did you expect him to say, Bernard?.

." yeah, AMI are up the creek without a paddle" and destroy whatever hope was left for ChCh e/quake punters waiting for insurance payouts.

I've done talkback in my time and that i/view with Tamihere and JK was selectively edited.

Why doesn't everyone see that the Govt is doing it's best for people in the real world and damn the money!

after all it's only a concept and a series of  000's on a piece of paper whereas peoples lives are for real...shame on you!

Oh really .. so you advocate

Oh really .. so you advocate NOT telling the truth, the whole truth, and nothing but the truth? You prefer feeding the chooks, even if the chooks go and make life-destroying decisions because they were told everything is all right and the sky isn't falling.

Feeding the chooks,huh? Now

Feeding the chooks,huh?

Now that really dates you given that was a Joh Bjelke Petersen line back in the eighties in Qsld...so i would expect nothing more than your comments about the whole truth and nothing but the tooth..smite them down, eh?

vengeance is mine sayeth the Lord etc...let the people eat cake...etc etc....too bad about the poor shivering bastard in Chch trying not to go insane as winter closes in....you want the truth to prevail...lesson number, turkey.....there is no such thing as the truth..your sad version is subjectively different form the bloke who lives in Sumner or Aranui..

Iconoclast...i've watched your posts on here for a long time and you also should be ashame d of your lack of style and a modicum of intelligence and compassion.

but then again that's what you lot do on Wednesdays isn't it?

Almost Insolvent, or just AMI

Almost Insolvent, or just AMI for short

Indeed POP. Perhaps their new

Indeed POP. Perhaps their new marketing campaign could be AM I solvent?

We just can't take our

We just can't take our medicine.....

Actually that's whats

Actually that's whats happening...

regards

I wouldnt panic about these

I wouldnt panic about these guys using any of tax payers money..I would expect another announcment in four weeks on who thye will really get into bed with.

What i would panic about though is that NZ may just end up with a couple or maybe Three big Insurance companies that control the enitre market (i.e IAG and SunCorp)...this is the more likely situation that will occur.

Accepted the government needs

Accepted the government needs to step behind the company to protect policy holders. However should the additional funds be drawn on, AMI should be purchased for $2 by the government.

If this is required management (all top and mid level) should be bonded to the company, until such time that the Eq claims processes are settled. If they should choose to leave, these management should lose all licenses to work in the areas of finance, insurance, accountancy, or any area of risk management or acturial related areas.

The government should seek to recapitlise the company (fire management) and then sell it off (if there is 'brand' value remaining) or wind the company up.

The key issue for the future will be future capital requirements and indeed whether earthquake risk is going to be an insurable risk in the future with current EQ coverage limits. I suspect this is only going to be known when all parties EQC, government, private insurance have had a chance to renegotiate reinsurance contracts. One thing is for sure the cost of insurance is going up.

Bernard, remember you

Bernard, remember you censored me for saying that exactly this would happen 4 weeks ago!

http://www.interest.co.nz/news/52626/christhchurch-residential-insurers-...

(My comment 5.08pm 11 March)

It was the only possible outcome and I think you knew that too.

Problem is the taxpayer is now going to foot an extra $1b at least.  If I had this much at risk, I would put them in administration now and look at selling or separating their remaining non Christchurch customer book to raise funds.

One question now needs to be (apart from where were the regulators??):  How much reinsurance does EQC and AMI have together for ANOTHER event?

Given the sequence of earthquakes has not been normal for a single event and its decaying aftershocks, if another M6+ event struck in or near Christchurch (particularly on the fault that runs under the CBD towards the north east) then the Government could easily bear the full cost on 30% of the residential damage (thanks to AMI) plus the remaining EQC liabilities, amounting to many more billions.

For those outside Christchurch and are unaware, the shaking intensity from smaller magnitude quakes is now much stronger than it was before Feb. 

For instance a M4.0 in the city feels like quite a big shake.  A M4.0 last night created peak gravitational accelerations close to 9% of gravity in some areas, the M7.1 only created PGA of 17% of gravity in badly affected areas such as Avondale.  The M5-5.5 aftershocks  near Darfield in Sept only created PGA in east ChCh of around 1% of gravity.

Essentially Christchurch is now a giant wobbly jelly.

I think you will all find

I think you will all find that this is a backstop to a longer term solution that no doubt they are working on, with someone, Bernard will find out, they will be getting into bed with a Whiteknight for sure, the government won't be it, but it provides them with the time to work through the issues with doing such a deal becuase it is a mututal company it wont be as easy as it would with a shareholding company.

Wishful thinking. The

Wishful thinking.

The whiteknight will come in the form of a raider wanting their non Christchurch customers for a pitance, leaving the Government saddled with liabilities.

Let's watch the customers fly out the door from today on.  IAG doesn't need to buy them, they just need a bit of advertising and a few gimmicks and they will pick the customers up for free!

This'll make SCF look cheap to bailout.

NZ Inc will be added to the insolvency list soon too.

"Let's back Christchurch!" or

"Let's back Christchurch!" or something like that was a slogan I ran across recently. What better way, than by shipping our insurance policies INTO AMI ( not out, ) as they progressively mature. A low cost and helpful way of us all giving a helping hand. Besides, it's pretty much OURS now anyway !

OMG we are  going head to

OMG we are  going head to head whith the state of BHUTAN in Fiscal Responsibility.

When this sort of corporate

When this sort of corporate mismanagement occurs, wouldn't it be sensible for those that made the decisions to be removed (and potentially placed in custody???), so that the true position and the reasons for the failure are investigated.

Surely it's criminal to take on maybe $100billion?? in policies (1.2m policies at $80k average??) and obtain just $600m in catastrophe reinsurance???

Where was the oversight???

...exactly. The board and

...exactly. The board and executives have a lot to answer for. That was my first thought as well Chris_J, that it sounded criminal. They took insurance premiums off people for years but didn't keep enough for claims or do enough re-insurance.

By the wya, I think the reserve bank is supposed to oversee the industry. There's some quesitons that need to be answered there as well. 

Isn't this an appropriate

Isn't this an appropriate case to apply "statutory management"?

...yep, that would be the way

...yep, that would be the way to go.

I think you atre being

I think you atre being OTT.

It would have to be shown or reasonably assumed that they acted recklessly or fraudantly and indeed knowingly mis-managed for it to be criminal.  They say they did modelling to justify their level of re-insurance etc....So I cant see there is much of a case....

The amount of re-insurance would be to cover excess claims in any one year...I think they said their annual claims were 57% of their annual premiums.

regards

 

A level of reinsurance 70%

A level of reinsurance 70% less than most of their competitors?? Is that not reckless when you don't have any global firms underwriting your brand??

What were they thinking?  Forget Napier 1931, Wellington 1855, disasters don't strike NZ cities.  Hadn't they been watching the Civil Defence ads "get ready, get thru".

http://www.getthru.govt.nz/web/GetThru.nsf/web/BOWN-7HG6JA?opendocument

I think you are right, they

I think you are right, they did modelling - and used Aon Benfield reinsurance brokers to arrange it,  who are pretty big and work for many big international companies.

There are different types of reinsurance, for more run of the mill claims and for big catastrophes. Most of the $600m will be specifically for catastrophes.

Can't see that there is any case...

Follow the Money. This reeks

Follow the Money.
This reeks of patronage and privilege. It has the thumbprints and fingerprints of the elite all over it. Guess who stand to lose the most if AMI was left to fail. Guess who stand to gain the most if AMI is back-stopped by the government. Credit where credit is due, Chris_J was all over this right from the start. The final "tell" was when AMI declared they were talking to the government. The AMI management wouldn't have been the only phone callers.

Yeah right....... regards

Yeah right.......

regards

What happen to insurers

What happen to insurers having their own insurance policies? Whether it's a mutual or not, there MUST NOW be a board of directors who lose their jobs.

What happen to Nationals policy of getting rid of strategic assets?

"too big too fail" has again taken place in NZ.

 

FYI here's Roger Douglas with

FYI here's Roger Douglas with a less than charitable view of the world. Fair enough.

Here's what he says:

"In normal circumstances, the Government should not step in and bail AMI out.  Certainty is essential to the operation of the market, bailouts undermine this certainty by suggesting to businesses that the Government will start actively picking winners and losers.

"In the case of insurance companies, there should be very little problem.  It is not difficult to sell insurance, collect premiums, hedge your risk elsewhere with reinsurers and then conservatively invest the remaining premiums.

"However, in AMI’s case this was a company that gained a large market share through low premiums and a policy of limiting expenditure by having too little reinsurance.  They took a risk and those who took out insurance with them benefited from the risk for a while, it was a risk that did not work."

He's BANG ON! They took a

He's BANG ON! They took a gamble and lost. TOO THUCKING BAD!

Well I have some insurance

Well I have some insurance with AMI, so am glad for the government support, otherwise there would be a run on the company with people leaving AMI and going to State etc, and policy holders needing asistance from the earthquake (not me) being left high and dry.

muzza, can you please explain

muzza, can you please explain why AMI policy holders should get any more special treatment  than someone who hadn't insured their house, but lost it in the quakes?

That's an easy one, I can

That's an easy one, I can answer that. People who had not insured their house had made the choice to take the risk to lose it in case of such an event. People who did take out insurance had made the choice to be responsible and pay a premium every month, when they could have used the money for other things like the uninsured, in exchange for just one thing: a service that they might need in the future and that now the insurance company fails to provide.

As far as one could tell, AMI had a high (the highest?) AM rating, had a solid reputation, and dealt with claims promptly and courteously. Does the AM rating mean nothing then? Should customers have known (through divine intervention maybe?) that AMI wouldn't be able to meet their basic obligations as an insurance company when a disaster struck, when they claimed they would by signing a policy?

 Don't tell me the "premiums were lower than other companies' " argument. I don't think it is correct (def not the lowest) and on top of that, there could be many reasons for a lower premium other than they mismanaged their business. Should I cancel my life insurance, as if there is some kind of plague and lots more people than usual die at one time the insurance company may well not be able to pay?

Iconoclast , you have a point

Iconoclast , you have a point about companies being bailed out by the government, but Elley has pretty much addressed your particular question. Actually Elley you always make very good points and don't get into the exaggerated, emotive dramatics that some misguidedly seem to think is intelligent comment.

Says?

Says?

Come on PDK, someone gave me

Come on PDK, someone gave me a compliment; it doesn't happen everyday, be a sport!

Thanks Muzza :)

No offence Elley - you I

No offence Elley - you I regard as a thinker. I have a lowering tolerance for those who don't, and won't, though. We're running out of time, as a society, to make some pretty urgent changes, and I get a wee bit antsy about it sometimes.

go well

Thanks, that's 2 compliments

Thanks, that's 2 compliments in a day, I have to put a tick in my calendar :) Off to bed with a smile now.

You should take up chess -

You should take up chess - there's a white knight in every set     :)

And AMI made a conscious

And AMI made a conscious choice not to up their own insurance. NOT the NZ taxpayers problem

But should it be the policy

But should it be the policy holders' responsibility? What did they do wrong, other than keeping to their end of the contract (through paying their premiums)?

Anyhow, although I think policy holders should be able to have their claims met, I also think that they should get paid directly by the govt and that AMI should cease to exist as a business as they have spectacularly failed. 

Chris_J and others - have a

Chris_J and others - have a look at this meet-the-victims of the insurance companies and the Queensland floods and note the speed with which payouts are being made and cry. These are the same insurance companies you will be dealing with.

http://www.abc.net.au/7.30/content/2011/s3183175.htm

I'm still waiting after 7

I'm still waiting after 7 months for anyone to even come through houses which were (probably??) written off on Sept 4.  Neither eqc nor private assessors have visited some.

Not a single claim out of 25 in Christchurch has been settled by the private insurer.  (Thanks NZI), if anyone from NZI is listening you can contact Bernard, he has my email.

when it comes down to it the

when it comes down to it the i2nsurance companies are a pack of bastards

Nah, too emotional, rubbish

Nah, too emotional, rubbish comment

whats wrong with some emotion

whats wrong with some emotion Muzza? There is far too little of it in this day and age.

We sit and listen to the cold, emotionless and "objective" pronouncements of so called "experts" who are usually wrong.

In my opinion we are far too apathetic these days. Only emotion and a bit of anger draws people out of their apathy.

Much of the great change and development of the world has come from anger and rebellion in the face of repression and corruption.

  

 

 

 

 

 

AMI is now destined to fail

AMI is now destined to fail regardless. They will have too put up premiums through the roof which will make other insurers far more attractive. I.E. The taxpayer just blew another 500 mill-1 bill. Socailized losses yet again.

This makes Air New Zealand and the BNZ look cheap in the 90's

Even bigger than the failure

Even bigger than the failure of the Colonial Bank in the 1890's too.

This country has completely

This country has completely lost the plot. Corporate failure after failure is bailed out with no accountability as yet seen. If my business fails do I get bailed out by the NZ taxpayer?  do I get too walk away from the bank debts or creditors I may owe? Do I get to continue to trade regardless of running a sham or miscalculating my risks?

Hell know!

. Luckily my business is well run and  DEBT FREE!

And I will be taking that business overseas. Screw this country. NO MORE of my taxes will be wasted on these shores.

This decision has just made up my mind on whether to move abroad permanently. 

OK, have a good trip

OK, have a good trip

So there's a silver lining in

So there's a silver lining in this grey cloud then. It's convinced Justice to go away.

Good.

 

You're running your business

You're running your business "DEBT FREE"? 

"NO MORE of my taxes will be wasted on these shores."

Well, sounds like you've been paying too much tax through your "DEBT FREE" busines.

Heard of leverage?

Justice - correct - this is

Justice - correct - this is the very same point I made last week about Bernard Hiki advocating a CGT and how any people re-locating to AU are taking their un-taxed gains out of NZ and paying it straight into the coffers of the AU tax-gatherers. In this case AMI will have caused a massive transfer of business into the arms of the overseas-owned insurers.

So with the government

So with the government bailing everyone else out, who's going to bail the government out?
They could start by getting their tax take back up again.
They can't just keep borrowing like no tomorrow, they'll have to raise taxes soon.

exactly IF THEY CAN ENACT A

exactly

IF THEY CAN ENACT A BAILOUT LIKE THIS WITH URGENCY WHY THE HELL DO THEY NEED A ONE YEAR STUDY TO LOOK AT HOUSING AFFORDABILITY. GET ON WITH A CGT / LAND TAX PROMPTO, WE NEED MORE REVENUE  

The recommendation will be

The recommendation will be the green belts get turned into land development....screw qulaity environemnt there is money to be made!!!!!

etc

etc

ACT

yuck....

regards

this has really really really

this has really really really pissed me off

Why do we have to pick up the bill for this business failure?

Does anyone want to start a protest up Queen street - ditch the apathy 

the world is truly fucked up

Take a chill pill Matt, you

Take a chill pill Matt, you are getting too emotional. You mightn't get much support for your march, a lot of people don't see it as a business bail-out, but as a support to victims in the Chch earthquake.  

I agree, about ditching the

I agree, about ditching the apathy and getting really concerned about what's going on.  But not about the bailout itself (which had to happen), instead about why regulators let it come to this.

Fortunately for those in Auckland you do have a street to protest on. 

Down in ChCh we need to protest to get access to our own streets. 

Of course the rest of NZ won't realise what a problem they've got until they start seeing figures such as unemployment and GDP for Q2 and Q3.  John Key may be regretting setting an election date so early when he had such an enormous lead.  Goff and co would do well not to try and prompt a snap election.

Smash the windows of every

Smash the windows of every AMI you can find. They are now YOUR windows to smash if you want! ;-)

Justice, does this help?The

Justice, does this help?The windows are insured, the premiums for building insurance would go up because of "higher risk/cost"  and we all pay for it again........

Justice with comments like

Justice with comments like that you make the village idiot appear quite bright.........

And the weather on TV3 is

And the weather on TV3 is sponsored by guess who.... AMI.  Reminds me of Hanover....

Get the guillotine out , I

Get the guillotine out , I say...let there be blood in the streets...string them up...hang on a sec..who are they?

Not that this is a good thing

Not that this is a good thing but, their solvency is at least assured for the short-medium term future. They have $600,000,000 in reinsurance.

As it turns out that figure is highly inadequate and not even close to being good enough but....

that $600,000,000 will take a long time to get through. As those of you in Chch know, EQC pays the first $100,000 of claims and takes a month of Sundays in most instances to even get to your house before even getting to the stage of giving you that money.

Once that $100,000 has been paid by EQC, then AMI would have to start paying, and this will not be an all at once thing but will be dripfed one repair invoice at a time.

The $600,000,000 will probably last 12-18 months at a minimum I would guess. They also have $500,000,000 in reserves which could then potentially last a similar amount of time. So there goes possibly 3 years before the govt guarantee is called upon. And in the meantime, they have been trading for 3 further years and provided that not too many of their customers crash their cars or drops a vase etc, they will have 3 years of further reserves generating to assist.

Potentially, the govt get away with not paying anything and AMI buy much stronger reinsurance contracts in future and all their customers pay more for the premiums.

 

I agree it's all not good enough, but, at least it's not going bust tomorrow.

Well said. regards

Well said.

regards

What if there's the

What if there's the equivalent of a bank run on AMI, a poster above said he rang up a resigned sounding AMI representative and switched his policy to AA this morning?

If there is the equivalent of

If there is the equivalent of a bank run, that's not a bad thing. That time frame of 3 years or so before the money runs out still stands, and if people take their policies away, that does reduce income, but it also removes the risk of paying a claim for that customer.

All it means is that if there was a really large run, that the claims would be paid out over the next 3 or so years and then the government would top up what's left to pay (if needed). Then there would be no more AMI.

I think they supported AMI

I think they supported AMI because of the claims pending and its failure would have dire consequences on the rebuild of Christchurch and the flow on effects to the economy. As it is not on your doorstep for most here...I know you really don't care and you most likely suffering media fatigue on this earthquake...still doesn't  make it go away. Most of the arguments above ignore the specific circumstances.

In this context, given the earthquake effect, I can support the wider community needs to provide cover which the private sector cannot. I'm happy with this Governments call even though fiscally it puts them/us more in the corner and is against their right wing instincts.

Think this Government showed real leadership today as the consequences of their decision is not an easy path to follow and it was not an easy call to make.

 

 

Muzza As an isolated

Muzza

As an isolated incident this would be OK. It is the cumulative effect of bailout after bailout that really concerns me and hacks me off. Where do you stop with bail outs?

Very dangerous precedents are being set by this behaviour - Ireland here we come

muzza, elley, pdk, re my

muzza, elley, pdk, re my question at 5:06 pm
I apologise for my question being inexact. Dont misunderstand me. I'm not against the back-stop of AMI by the Government. I was more concerned about the divide being created for the un-insured, by this government (bailout) action of the insured. To explain. Insurance originates from bookmaking. The un-insured made a bet they wouldn't get hit and lost. The insured makes a bet against the odds of being hit. The insurance coy bets against them. If the insurance company goes broke the insured loses. In the same way if a punter lays a huge bet on a high priced outsider, the bookie will lay the bet off with other bookies. As AMI should have laid it's large exposure off with re-insurers, but didn't. But in doing so was making a decision collectively on behalf of it's insured customers. It was making a bet its customers wouldn't get hit with a catastrophe. Well the worst case happened. And AMI and its customers all lost. It's a case of ALL respective bets losing. And then in steps the government and backstops the losses of AMI and its customers. But nothing for the un-insured who ALSO took a bet and lost. The only difference is the insured paid premiums to the company and lost. They didnt pay the premiums to the government. It just appears that the AMI bet is "too big fo fail" whereas the uninsured are voiceless and have no representation. As another poster comments, the government is creating a set of ever increasing precedents. I hope that is a bit clearer. I reckon the government by standing in the shoes of AMI it should treat the un-insured in the same way and indemnify them. Thats the moral hazard of it all.

Thats right Ivan....some of

Thats right Ivan....some of these people like nothing more than putting the boot in constantly ..it is a backstop and has not been drawn on yet and looks of it wont if they can sell a chunk of the business..and they paid $15 million for this. Unlike SCF who had 1 billion deposited overnight whos intercompany lending to directors etc raises some serious questions..and whose assets are still not sold.

I actually know some of these people who work for AMI- after the earthquake a few had there houses totally destroyed, there head office total destroyed, branches etc..they had young families that were hurting..and they got a plane the next day and left there families behind went to AKL to help on phones and offer what assistance they could to other people in the same situtation they were in....people on this website sometimes forget these are Kiwis just like you and me...there are faces behind the company..I'm sure they would not of wanted to end up in this position and are asking for a bit of a helping hand..sure be some question to be answered about there modelling etc..but typical kiwi culture knock them while they are down. 

Lets look at this from

Lets look at this from another perspective, AMI wasn't the only one caught short, in general EQC and NZ as a whole was.

For example, we spend $21 billion a year on welfare costs. Now I'm not bashing beneficiaries here, but using it for mere perspective.

Large natural disasters don't come along often, but when they do, they are costly. What if we had put aside $1-2 billion a year for the last 40 years into a rainy day fund. There's $40-$80 billion right there for emergency use.

The reason is solely political, what politican could resist either the temptation to spend the money on some new social issue, or else give it back in the form of a tax cut. This I see is the fundamental problem relating to the whole bruha over the earthquake recovery, the spend-every-last-dollar mentality of politicans and complicity in every voter who goes along with it. Perhaps we need a national security fund, enshrined in law that even politicians can not access. Funds to be only accessed by supermajority referendum perhaps?