Prime Minister John Key is confident reinsurers will recommit to covering private insurance providers with business in Christchurch, although they will need a resonable period of time during which there was no significant seismic activity, which could be up to six months.
Talking to media at his post-Cabinet press conference late Monday afternoon, Key said his confidence stemmed from a combination of talks with private insurers, their reinsurers and geotechnical information. Earthquake Minister Gerry Brownlee had reported back from a reinsurance conference in Monaco last week that reinsurers were not wanting to walk away from Chrstchurch, but they were waiting for seismic acivity to die down.
“That’s a delicate situation at the moment, some people have lost a lot of money there, but there are others that are looking to enter the market there. It’s an interesting picture – it’s patchy," Key said.
“For every person you can produce that says they can’t get insurance, we’ll be able to produce someone that is getting insurance...it’s not perfect," he said.
“But what we do know is that the trigger point the insurance companies will look for is good information about the land where buildings will be built, or homes will built – that’s the first thing. The second thing is every day that goes by where there’s not major seismic activity is another day that the decay curve looks better, and another day that they’ll feel more confident about coming back into the market.”
Reinsurers had not told the government exactly how much time of there being no major seismic activity it would take them to re-enter the market, but the "decay curve" used to determine timing, which Key had seen, was “reasonably clear” and falling away.
“Every week, every month is better,” Key said.
“It’s certainly been a lot quieter in the last few months.”
How long it would take reinsurers to recommit was ultimately a matter for them, although some were active, like Lloyds, who underwrote a building in the city last week.
Asked whether concerns from Christchurch residents, that it would take six months without a significant earthquake for insurance companies to return, were on the mark, Key replied:
“I can’t say categorically that’s right, but there’s no question that they’ll want a reasonable period of time where it’s more stable.”
“But all I do know is if the government walks in today and writes a blank cheque, it won’t be a short-term fix,” Key said in reference to the Labour Party’s announcement yesterday it would step in as an insurer of last resort in Christchurch in the short-term in an effort to help kick-start reconstruction activity. See Labour's quake policy here.
“It’ll be there for a long-time, it could be tremendously expensive, and it’ll be very difficult to exit. So there is no free lunch here. If we want to be the insurer of last resort, right as we stand here today, I think everyone needs to understand what they’re signing up for,” Key said.
“My view, having assessed it all, is that we need to give that a lot more time. I think we need to work our way through it, and we need to try and continue to work with the private sector providers. If in the end having tried everything that all fails, then we’ll come back and have another look at it. But I’d rather give that a bit more time,” he said.
See Key attacking Labour's quake plan:
9 Comments
From experience:
No new insurance being written in Christchurch, residential or commercial.
Repairs and rebuilds stalled.
Some panic buying and price gouging by those in a position to do so.
A growing tide of capital flight, with significant numbers taking the high NZ$ and going offshore.
Reality on the ground is somewhat different from the spin.
So Christchurch is still not fixed, and the insurers will not expose themselves to high risk. An epic fail or just the reality of a "world-class" seismic hammering? I read and watch and listen and cannot understand the impatience to rebuild. FFS: the g-forces exerted on the central city (and my house) on 22/2 were way more than any other urban area earthquake, and we were not and could not have been prepared for it. The number of aftershocks is way off the scale of "normal" seismicity. And we now know there are more hidden faults.
Of course the insurers won't play. I for one am thankful they have not pulled the plug on the city entirely, that land is still insurable here (the only country on the rim of fire offering land insurance for earthquakes as far as I am aware).
Yes the "rebuild" is stalled, and there might well be capital flight out when insurance cheques are collected, but when will the govt and the city council and the key influencers be brave enough to stand up and say what many of we residents know: Christchurch is not coming back like it was. The city has changed; there is no "rebuild", which implies resuscitating much of what was there. We are creating a new city, now. We began on February 23 and now many of us just live differently. Our bases, our workplaces are suburban; there is a series of mini-CBDs. Is this a bad thing?
Insurance anecdotal: my friend is green zone, two doors from a smaller riverside orange zone, no red zone for miles. My friend's house is a major repair, all assessed and ready to be started. She was told last week by the insurer that "there are shades of green zone" and it will be at least a year after a large aftershock (how big they refused to specify) before work starts.
ruru, I don't agree with the widely purported view that the shaking intensity was either unusally high or unexpected.
The fact is simply that there were many seismic recorders very very close to the epicentre so the recorded shaking was very high.
Indeed the big California quakes had similar shaking, and the reality is that we had that very strong shaking for no more than 4 seconds. If we had been on or near an M9 quake like Japan had (note we "apparently" don't have the structure that would generate a quake of that size), the very intense shaking would have lasted perhaps minutes. The destruction would have been total.
So we might think that the destruction was catastrophic and that this was a one off event - what rubbish. Compare the damge in Napier to Christchurch. Napier with the same (80 years newer at the time) and therefore more solid buildings had significantly more damage to its brick buildings. Wellington in 1855 had total destruction of all but single storey wooden structures. The same types of buildings that collapsed in Wellington 1855 stood comfortably in Christchurch 2011 despite 100-150 years of rot and borer. Murchison, Inangahua and all the big events had similar or worse destruction near the epicentre.
The only unusual or unexpected thing about the Christchurch quakes was the proximity to a major centre.
Sadly this had been predicted for decades. In 1979 TVNZ made a dramatised documentary of a large earthquake on the Hope Fault with its effects on ChCh including the toppling of the Cathedral Spire, collapsed shopfronts and impassable roads. (Screened recently on TVNZ Heartland)
The line in the documentary that NZ could not cope if a large earthquake struck a major centre has clearly rung true.
ChrisJ: My understanding is that the shaking was not so great or prolonged but the G-forces exerted were massive. See this link
The other unusual factor was the angle of the fault rupture which directed the force of the rupture towards the city centre; the shock then in layman's terms bounced back to the Port Hills and rebounded from the underlying hard rock of the hills to the city.
I'm particularly interested in that one because I was just on 3km from the epicentre at the base of the hills. My very heavy 8-seater dining table (takes three people to lift it with effort) leapt from hip-height to shoulder-height without any shake, roll or warning. It moved up, down as far again (like the floor had opened), up and down again, then one east to west shake, then a north to south wave and a south to north wave. And this all happened on a spongy liquefaction-prone soil structure thrpoughout the city.
I agree that longer shaking would have taken out many, many more structures. And that is the forecast for ruptures of any of the Alpine, Hope and Porters faults.
The only new construction is being done by building firms that had pre-existing policies which covered all of their construction business on 12 month renewals.
And this is only a couple of firms.
If there had been a rational response after September, we would not have this dilemma now.
Houses started after BOTH February and September are now total write-offs, which is inexusable. This gives insurers the VERY ACCURATE view that authorities have no idea what they are doing and can guarantee nothing in terms of the quality or durability of new buildings.
Throw in the complete usurpation of property owners' and insurers' normal rights being displayed by CERA, then you can see that it is not only an environment caustic to insurers but also one toxic to developers, businesses and investors.
The fact that Key is pretty much saying it will all be fine, shows his complete ineptitude and as we have no other alternative to him, many are simply voting with their feet and abandoning a city that they love, which has very much abandoned them through political mismanagement and bungling.
This could have been a fantastic opportunity for the South Island and Christchurch, yet instead, authoritarian bickering, a lack of any progress and decisions of mass stupidity have turned recovery into disaster.
Change the focus to earthquake and liquefaction resistance, and stop building houses on foundations that will simply just fail next time, making them complete write offs.
Build fixable, insurable buildings.
"Change the focus to earthquake and liquefaction resistance, "
And make Christchurch a world leader in that and disaster studies in all areas from geology to building to psychological trauma and beyond. Huge opportunity to refocus ourselves from the third-world tourism-dependent economy we have become.
I think that what Key is trying to say in this item is that there are not that many National Votes to be had in Christchurch But that it is important to put a good spin on things for the votes in Auckland who are still interested in the earthquake- not that many , but every vote counts, And we are not really going to do anything much at all until after the election.
No ! .. You're talking complete & utter bollocks there , pal ....
..... National have no ulterior motive . . . honest to God , they're just too thick to come up with a slime-ball strategy , or a dirty-tricks campaign .. National & their Brethren are the common clay of the good Lord's soil , simple folk ...... you know , morons .....
You're confusing them with NZ Labour ! .. .. those guys are subliminally clever ,.. they are low enough to slip under a marsh full of swamp-eels , with an armful of sunshine promises .......
Actually the NATS will be taking their instructions from offshore and will be holding their breath until after the election, and the lapdog media in NZ will not dare ask a single questions that resembles difficult, or helpful.
Bernard will you be unloading with some real questions running up to the election? You know the type I am talking about, and in case you don't they revolve overseas borrowings, where from, at what rate, and why from abroadd if we have "sovereign currency"
NZ gets what it deserves regardless the colour of the banner the party has.
The moron politicians are pretty much a mirror of the electorate & the media!
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