AMI yet to confirm fresh reinsurance as June 30 deadline looms for expiry of current cover

By Hannah Lynch

AMI, Christchurch's largest residential insurer, is dismissing concerns it could be uninsured as soon as Friday as officials scramble to put reinsurance in place in the event of a fourth quake.

AMI CEO John Balmforth restated on Tuesday the company's position that it was confident that reinsurance would be in place before Friday but said the company would not publicly comment on the situation until next Monday.  A company spokesman later said an announcement could come as soon as Thursday afternoon.

“There are some contractual issues that still need to be signed,” he said. 

Balmforth downplayed concerns about policy holders being at risk in the event of another quake after Friday.

Although, Balmforth conceded a deal had not been finalised, he said one was “almost complete.”

“The situation with our reinsurance is that the programme placement has progressed well. Two components of the programme are already in place and the third component is progressing exceedingly well and we are confident that we will be finished by the deadline date of the 30^th June.” 

The urgency of obtaining reinsurance has become clearer since Civic Assurance revealed yesterday it could not get reinsurance. AMI is the insurer most exposed to further Christchurch quakes. If it does not find reinsurance by Friday any new quake damage would have to be paid for out of the government's credit line behind AMI.

In a June 8 press release, AMI chairman Kerry Nolan said the company was in good shape and would have "finalised comprehensive and affordable reinsurance cover for its normal business and for any future catastrophes" come July 1.

Balmforth, who has recently travelled to Sydney, Bermuda, continental Europe and Britain to put in place a reinsurance programme, said in AMI's June 8 release, that reinsurers were not deterred by the earthquake situation in Canterbury. 

"Reinsurance companies have had to face a number of catastrophes around the world in the last year, with major damage arising from floods, tsunamis, earthquakes, tornadoes and other natural disasters.  However, they continue to assess risks and to price their cover accordingly - that is the business they are in. For New Zealand this means higher reinsurance costs affecting the whole insurance industry and making higher premiums for policy holders inevitable. The good news for AMI policyholders is that they will continue to have reliable insurance cover, backed by sound international reinsurance."

The company has not made any public statements until today about its reinsurance since the most recent earthquake in Christchurch on June 13. The magnitude 6.3 caused more destruction and opened up new claims for insurers.

Rating agency A.M. Best has given AMI an "excellent, A-" credit rating based on assurances of a Government bail-out.  See details of original bail-out offer from Government to AMI here. Also read Bernard Hickey's opinion piece on why the insurance sector needs tougher regulation.

The Government has also pledged financial support for Christchurch City Council and Waimakariri District Council as their local government insurer has refused to renew with them.  (See June 27th article by Hannah Lynch).

Additionally, the Government has also pledged NZ$1.5 billion to bailout the worst affected home owners in Christchurch. 

*(Updates with comments from AMI CEO John Balmforth, spokesman on Thursday announcement)