Monday 6th September 2010 |
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New Zealand's insurers are expected to weather the fallout from the Christchurch earthquake in good shape, thanks to reinsurance and the Earthquake Commission's contribution.
Chris Ryan, chief executive of the Insurance Council of New Zealand said the industry is well structured to weather a disaster of this magnitude, and has sufficient cover to make payments without a danger of local insurance companies collapsing.
"The cost of the event is unknown at this stage but the vast majority of payments will be from reinsurance," said Ryan.
"Ironically, New Zealand could see a large influx of capital from offshore to rebuild, with reinsurers drawing down claims from international markets."
The Earthquake Commission, a government agency providing natural disaster insurance to residential property owners, covers the first $100,000 of any insurance claim. It has an estimated $6 billion that is can draw on, with access to additional funds should it need more.
Shares of Tower, New Zealand's largest listed general insurer, dropped 3.7% to $1.84, the biggest declined on the NZX 50 today. The firm said in a statement today it expects claims arising from the earthquake to cost the company about $5 million, or $3.5 million after tax - which will mostly be covered by reinsurance arrangements.
"As far as these events are concerned we carry a large amount of reinsurance so our financial accounts in any one year and capital don't get hit," said Rob Flannagan, group managing director for Tower.
"I presume the decline (in the share price) is just a reaction, we do have a lot of investors overseas."
Although no lives were lost in the disaster, a spike in personal injury claims is expected, according to Stephen Leslie, communications managers at the Investment Savings and Insurance Association.
"There is a blurring between what represents income protection and an ACC claim," said Leslie.
"Either way if someone is injured and they require time off work, I dare say they will be covered - it is just a matter of how."
Craig Brown, a senior investment analyst at ING New Zealand, said the disaster could be an opportunity for insurers to revisit the pricing of their policies, helped lift the prospects of the sector in the longer term.
Businesswire.co.nz
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