Labour leader Phil Goff is calling on the government to say whether it has considered setting itself up as an insurer of last resort for Christchurch homeowners and businesses, while Finance Minister Bill English is playing down the idea, at least for the time being.
The key concern in Christchurch was that if insurance companies held back in terms of writing new policies, rebuilding would not be able to get underway as quickly as hoped. English said the government was working on providing insurers with all the geotechnical information it had on Christchurch as parties waited for aftershocks to die down.
Goff told media in Parliament on Tuesday morning it was the unknown time until aftershocks died down that Labour was worried about, with there perhaps being a role the government could play by stepping into the gap until private insurers were willing to enter into new business in the city.
English later responded by saying it was unlikely the government would step in an insurance provider role, although all options were still on the table as uncertainty around aftershocks and land in Christchurch continued.
Prime Minister John Key said it could be a very expensive process for the government to step in and take a risk the private sector was not willing to take, in terms of postioning the government as an insurer of last resort.
Last week, when announcing a blowout in costs faced by the Earthquake Commission (EQC) due to new estimates of damage caused by the Christchurch earthquakes, English said in a media release that several major insurers were not currently writing new insurance over in Christchurch as continued seismic uncertainty made it difficult for them to anticipate risk.
Minister for Earthquake Reconstruction Gerry Brownlee is set to lead a government delegation to a reinsurance conference in Monaco this month in an effort to provide the private companies with all the geotechnical information the government has on Christchurch, in order to help provide more certainty to insurers and their reinsurers on risks in the city.
'Should govt step in?'
Talking to media in Parliament today, Goff said there were real problems with insurance companies not paying out in some cases and not being prepared to insure people wanting to build in the city.
“You can’t leave that situation like that indefinitely, so the government needs to come clean with the information that it’s got,” Goff said.
Labour would support the government on the issue, if the government provided it with the information it had.
“What can they do to actually get that rebuilding process underway, because at the moment it’s stalled,” Goff said.
Rebuilding was being held up by unwillingness from insurance companies to re-enter the market.
“We need to know from government, have they considered making the government the insurer of last resort. What are the arguments for that, what are the arguments against?” Goff said.
“Is this the critical factor holding up the rebuilding of the city? Is the government prepared to sit back and wait longer-term without intervening? Can they intervene, can they provide that support, what are the costs?” he said.
'Unlikely, but nothing's off the table'
Finance Minister English played down the idea, telling media the the government was not looking at setting itself up as an insurance company. However all options were still on the table.
“There’s quite a mix of evidence about insurance in Christchurch. For instance, a lot of insurance companies are continuing to cover their own clients – so if someone sells a house and goes to another one, it appears they can get coverage," English said.
There were a number of stories of commercial business owners being quoted very high prices for insurance that made it almost impossible for them to buy cover.
“We’ve got to bear in mind here, the insurance companies will be wanting to see the prevalence of earthquakes actually drop-off. You can understand them being concerned about the risk of further quakes,” English said.
The government was monitoring the issue closely.
“This is really a matter of timing. We’re confident that the aftershocks will tail off, that the possibility of higher premiums is going to attract insurers into the market. The question is really how long that will take, and whether there’s any action we can take in the meantime to encourage insurers back into the market,” English said.
One of the most important things government could do was provide insurers with information about the area.
“We probably know more about the natural hazard risks in Christchurch than any other place on earth at the moment, and Gerry Brownlee’s going to talk to the reinsurers this week to give them all the information we can give them to demonstrate that with higher standards of building code, with a good understanding of the earthquake risks, that the insurance companies can come back in because they know what the risks are,” English said.
The government wanted to minimise delays, but had not made any final decision about what role it could take in this.
“We are trying to get a really good understanding of what insurance activity is occurring, because, while on the one hand there are a lot of stories about real difficulties, and I’ve talked to some of those people myself, on the other hand there’s clearly some insurance activity going on because houses are being bought and sold,” English said.
The government had not considered “in detail” whether it could perhaps be an interim guarantor of insurance companies.
“At the moment we’re dealing with our guarantee of EQC to make sure that they can continue with business as usual, and monitoring the insurance market pretty carefully," English said.
"We're not going to rule anything out, because we are keen that we can get on with the rebuild of Christchurch. Just bear in mind, the biggest single problem here has been the ongoing significant aftershocks, which no one can control. And until or unless they drop-off, it's going to be a bit of a challenge to get insurers in and get rebuilding going," he said.
"But the signs are the aftershocks are dropping off."
'Would be costly'
Speaking to media on Tuesday afternoon, Prime Minister John Key said the insurance process in Christchurch was a challenging process.
"It also could be a very expensive process for the government to step in and take a risk that the private sector’s not prepared to take," Key said.
"It’s not clear-cut in terms of insurance down there, quite a number of people are getting insurance, others aren’t. I’m confident that the government’s on the right track, we’re working with the insurers," he said.
(Updates with Key, English quotes, videos of Goff, English)