Berkshire Hathaway, the company chaired by legendary US investor Warren Buffett, has received an insurance licence from the Reserve Bank and will provide earthquake cover for reconstruction in earthquake hit Canterbury, the Reserve Bank says in its Financial Stability Report released today.
"Berkshire Hathaway International Insurance Limited, a UK-based member of the global insurance group Berkshire Hathaway Inc, has obtained a New Zealand insurance licence and intends to provide earthquake cover for construction in Canterbury," the Reserve Bank, regulator of the insurance sector, says.
The central bank also says as the insurance sector continues processing claims stemming from the Canterbury earthquakes, only about one-third has been paid out so far from an expected total claims cost now "well in excess" of NZ$30 billion.
"Total insurance claim payments for the Canterbury earthquakes currently stand at NZ$10.8 billion, comprising NZ$3.8 billion by the Earthquake Commission (EQC) and NZ$7 billion by other insurers. This represents about one third of the ultimate total claims costs, which are estimated to be well in excess of NZ$30 billion.
Claims cost estimates are still increasing and have risen by around NZ$1.5 billion since May."
Many significant issues affecting insurance claims are yet to be resolved, the central bank adds, and uncertainty about the total insurance claim cost estimate remains high with about a NZ$10 billion difference between the upper and lower estimates used by the Reserve Bank.
Examples of significant remaining issues that would affect total claims costs, or costs borne by individual insurers, include:
• allocation of costs between EQC and private insurers and between specific earthquake events; litigation - which is beginning to occur;
• reinsurer disputes;
• changes in land condition where these are not covered by EQC, or where EQC cash settles instead of fixing land damage;
• response to various new and amended regulations (such as flood management rules and changes in building codes); and
• inflationary pressures due to resource constraints.