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:
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