A Treasury briefing made public on Thursday has a carefully worded message for the new Minister responsible for the Toka Tū Ake Earthquake Commission and Southern Response Earthquake Services.
“Toka Tū Ake EQC and Southern Response operate at arm’s length from Ministers,” the document says.
“This means that you are able to direct Toka Tū Ake EQC and Southern Response in certain respects, however, this is a mechanism that we would advise only be used in exceptional circumstances.”
But who in the new government is the Minister in charge of this?
The Treasury’s briefing was for the Minister of Finance – which is Nicola Willis – but the new minister responsible for Toka Tū Ake EQC and Southern Response appears to be David Seymour.
However when Seymour’s office was contacted on Thursday to confirm this, Interest.co.nz was told EQC was overseen by Chris Penk – not Seymour.
Penk is the new Minister for Land Information, Veterans, Building and Construction and Associate Minister of Defence and Immigration.
Interest.co.nz then went to Chris Penk’s office who said it was overseen by Seymour – not Penk.
After contacting the Earthquake Commission, the agency said on Thursday that Seymour was indeed the new Minister responsible for Toka Tū Ake EQC and Southern Response.
But when Seymour’s office was contacted again on Friday morning to confirm this, his office was still unsure if the delegation was correct and needed to check.
They confirmed later Friday that Seymour is indeed the new Minister responsible for Toka Tū Ake EQC and Southern Response.
Due to the Treasury briefing being to the Minister of Finance, it’s assumed that Toka Tū Ake EQC and Southern Response are now in Seymour’s court because he’s the Associate Minister of Finance.
Seymour is also the Minister of Regulation and the Associate Minister of Health (Pharmac), and Education (Partnership Schools) and will become deputy Prime Minister from May 25th next year after current Deputy PM Winston Peters surrenders the role.
The arm's length model
The Treasury says given the "arm’s length model," the three “most important levers” available to the new Minister to influence these entities’ performance as follows:
- Being clear about the Crown’s purposes for establishment and the continued operation of the entities
- The appointment of high-performing, effective Board members
- Participation in the annual business planning and reporting process, including setting clear ownership, legislative, and Ministerial expectations.
“Your key opportunities to influence Toka Tū Ake EQC and Southern Response’s strategic direction and performance expectations, annually, are through the Letter of Expectations and signing off the Service Agreement (a statement of performance expectations) with the boards,” Treasury says.
The briefing – which was written last year – says the Minister’s Letter of Expectations is usually provided to Toka Tū Ake EQC and Southern Response in October/November.
“The boards subsequently provide the Service Agreement to you at the end of April. This allows you to sign off on the boards’ proposed performance expectations for the upcoming financial year.”
Under matters of current interest, board appointments are a big one. Treasury says it provided advice to the Minister in December 2023 regarding director terms ending by June 30 2024 and vacancies on boards.
Three commissioners at Toka Tū Ake EQC have terms due to end by mid-2024 with Treasury noting that decisions needed to be sought by early December 2023 to “ensure sufficient time to call for nominations over the summer holiday period and complete the board appointment process”.
All terms for the four board members on the Southern Response board will expire on June 30.
“This is because the entity was due to complete its work at this time. This is now looking unlikely as there are outstanding claims to be worked through,” Treasury says.
Three of the four board members on the Independent Oversight Committee will also expire at the end of June, with one member’s term due to expire at the end of March.
The Natural Hazards Insurance Act
Later this year the Earthquake Commission Act 1993 (EQC Act) is being repealed and replaced by the Natural Hazards Insurance Act 2023 (NHI Act) from July 1.
Treasury says Toka Tū Ake EQC has drawn down $240 million from the Crown, with the last payment made in November 2020 and currently pays the Crown an annual fee of $10 million for this guarantee.
The $10 million annual fee will no longer be required under the NHI Act.
Treasury says Toka Tū Ake EQC is currently working to operationalise the NHI Act requirements in time for its commencement, with assistance from the Treasury.
Also of interest is the mention of the Funding and Risk Management Statement (FRMS) which Treasury says must be developed every five years “to provide transparency” about cost-sharing between the Natural Hazard Fund and the Crown –including how the settings are determined and to communicate the strategy for funding the costs of claims."
“Work is currently underway to develop and publish the first FRMS by 1 July 2024. You must present the FRMS to Parliament,” Treasury says.
Included in Treasury’s briefing was an update on residual Canterbury claims still left over from the Canterbury earthquakes.
“Toka Tū Ake EQC received around 469,000 claims after 2010 and 2011 Canterbury earthquakes and subsequent events. All have been settled, however under the EQC Scheme claims can be reopened due to poor repair quality and/or missed damage,” Treasury says.
“As of 28 August 2023, Toka Tū Ake EQC advised that there are 810 reopened claims remaining. We expect that it will take several more years to resolve all the remaining outstanding Canterbury earthquake claims.”
There are also several outstanding legal cases against Toka Tū Ake EQC related to the 2010 and 2011 Canterbury quakes and subsequent events – Treasury says due to the nature of the cases, it has concerns over being unable to estimate or budget for costs.
“As at 30 June 2023 there were 24 open litigation cases made up of 19 Canterbury earthquake sequence claims and five Kaikōura earthquake claims.”
Treasury also notes in the briefing that Toka Tū Ake EQC received 3,339 claims for Cyclone Gabrielle and 4,313 claims for the Upper North Island flooding event.
As of August 28 last year, Toka Tū Ake EQC advised that the total number of EQCover claims resolved for Cyclone Gabrielle was 835 and 1,091 for the Upper North Island flooding event.
“We expect Toka Tū Ake EQC to continue to receive claims and for it to take several years to resolve all remaining and incoming claims.”
Exploring options for Southern Response shutting up shop
Treasury says it has also been working to explore options for the eventual closing of Southern Response and the work has been outlined to Southern Response in its 2023/24 Letter of Expectations.
“We will provide further advice on this matter as work progresses.”