By Amanda Morrall
Emergency reserves held by the EarthQuake Commission are not expected to fall beneath NZ$3 billion, even after pay-outs for damage caused by the latest disaster, according to officials with the authority.
Commission chief executive Ian Simpson told interest.co.nz while there was no question the fund had been greatly diminished by the Sept.4 and Feb.22 earthquakes, subsequent pay-outs under the current insurance formula would likely leave NZ$3 billion remaining.
"The only way we'd start diminishing the remaining NZ$3 billion is if we start going through the top of reinsurance cover which is NZ$4 billion,'' Simpson said.
The way the EQC insurance scheme is structured, EQC covers the first NZ$1.5 billion in damage and the subsquent NZ$2.5 billion is covered by reinsurance up to a maximum of NZ$4 billion. Simpson said while estimates were hard to gauge right now, it was unlikely the EQC pay out this time around will blow the thresholds.
"We started the 3rd of September with NZ$6 billion. It is a safe assumption that we will pay two lots of NZ$1.5 billion, which is the payments we make before the insurance kicks in. We'll pay it for the 4th and the 22nd, that will leave us with NZ$3 billion.''
The EQC's optimistic view of the situation contrasts that of the Prime Minister's office. John Key today (Monday) suggested that EQC levies would have to be trebled to bring the fund back to pre-Sept.4th levels within nine years. (For more see the article by Alex Tarrant.)
Simpson declined to comment on the accuracy of those projections. He said the EQC was focused less on figures than it was the on-going 'harrowing' aftermath of the quake.
Global reinsurers are reassessing NZ
According to a Sydney Morning Herald report, some global reinsurers may be reluctant to do business with Australia and New Zealand after meeting current obligation sbecause the region has been so fraught with natural disasters over the past few years.
QBE Insurance chief executive Frank O'Halloran said some of the world's biggest reinsurers had taken a financial "hammering" from payouts linked to floods, hailstorms and now earthquakes. (For more see SMH article here.)
QBE's payouts linked to disasters since Jan.1 were at $US385 million. It estimates that the New Zealand earthquake could cost it up to $US175 million after taking reinsurance costs into account.
Simpson said the EQC had dispensed with 'normal assessment procedures' and was instead concentrating on emergency repairs. Staff that would ordinarily be conducting housing inspections were assisting civil defence and council authorities with inspecting buildings to determine whether they were safe.
As with the last earthquake, houses and buildings in affected regions are colour-coded for safety reasons. Red-stickered homes or buildings are those condemned, yellow are deemed structurally uncertain and green safe but with potential fix ups.
"We're giving all the support we can to the response phase, which means that the assistants we have on the ground (which is about 160) are out helping councils with damage assessements and tagging of buildings.
"We're still very much in the response phase rather than recovery. We're lending out cars and people to civil defence teams to help with that phase because that's the most important.''
Simpson said many Cantabrians had fled the city as they were 'more worried about their health and family than they are their property at this stage.'
Regular EQC assessments have been postponed now until March 7th with the new emphasis on emergency repairs.
EQC-contracted Fletcher Building was dispatching repairs crews where possible once an intial claim had been lodge. While that assessment process could normally take up to six months (as was the case of the Sept.4 earthquake), Simpson said repairs were being expedited so that those who were able to stay in their homes could do so.
Although damage to residential homes was a lot more extensive this time around, Simpson said it was more isolated. The already hard-hit neiggborhood of Bexley was among them, as well as Mt. Pleasant, Sumner, Red Cliffs and Lyttleton, where the quake was centered.
Simpson said the nature of the damage this time around would be reflected in the total costs to the EQC.
"What's important to remember is its incremental costs from Feb.22 and exposures are limited to $100,000 for houses, $20,000 for contents, plus land.''
Although liquefaction is a chief issue in many areas, it was going to settle, he said.
"With liquefaction, the land when it stops shaking returns to its previous state.''
So far, around 20,000 claims have been received but the EQC is expecting 100,000.
Around 30% of the claims so far are weather-proofing related and homes were deemed uninhabitable.
As EQC did not compensate for temporary accommodation, private insurers would likely be hit up for such expenses.
The EQC, which received more than 170,000 claims from the Sept.4, 2010 earthquake, said it was too soon to tell how many homes were beyond saving.
EQC's contracted construction firm, Fletcher Building, has been dealing with emergency repairs, safety and sanitation issues to help those who can remain in their homes.
Fletcher Construction advises that the residential repair programme it is operating in Canterbury as agent for the Earthquake Commission (EQC) is temporarily on hold while resources are directed to emergency response.
Fletcher and EQC are working together to identify urgent requirements for repairs to ensure that buildings are safe, secure, sanitary and weathertight after yesterday’s earthquake. No other work on homes can be undertaken at this time.
This work is being co-ordinated through the Hub offices established in suburban locations over recent months. Fletcher is acting on claims information provided by
EQC, which is taking urgent claims and related information on the established 0800 DAMAGE line.
The company is marshaling additional internal resources, including engineers, supervisors and other staff who have not been involved in the residential repair
programme, who can be made available to assist with the response to yesterday’s earthquake, at the direction of established civil authorities.
The command centre for the Fletcher repair programme, in Deans Avenue, Christchurch, was damaged significantly in the earthquake. The building is being
assessed for re-occupation and it is hoped that this can take place today.
Most of the Hub network has not been disabled by the earthquake and is able to participate in the emergency response process in conjunction with EQC.
In the meantime, it is vital to the recovery process that homeowners use the established EQC channels for any communication relevant to existing claims
– ie. any communication on claims or related information must be via 0800 DAMAGE.
(Updates with warnings from reinsurers concered about rising risk in Australasia.)