The New Zealand Earthquake Commission (EQC) faces approximately NZD7 billion ($5.5 billion) in liabilities following the Christchurch earthquakes and has had it reinsurance program cut significantly at renewal, according to the agency’s annual report issued Thursday.
According to the report, the EQC’s direct loss to the 2010 earthquakes and its aftershocks include:
- A reinsurance excess of NZD1.5 billion for the September 4, 2010 earthquake.
- A reinsurance excess of NZS 1.5 billion for the February 22, 2011 earthquake, including claims payments above the upper reinsurance threshold of approximately $2.5 billion
- A reinsurance excess of NZD 1 billion for the June 12, 2011 earthquake.
- Claims payments of NZD.05 billion for aftershocks that do not exceed the reinsurance excess — or meet the criteria — to be included with a parent event approximately $0.5 billion
Beyond claims and liabilities the EQC said in the report that its reinsurance premiums increased “significantly” and that reinsurers rebuffed plans for using three-year placements and pre-paid reinstatements.
“EQC’s annual reinsurance renegotiations took place in March 2011, immediately after the Tōhoku earthquake and tsunami in Japan. In addition to the impact of the Canterbury earthquakes, reinsurers considered the Australasian region to be particularly unstable following the Queensland flooding and Cyclone Wilma in January 2011,” the report says. “This had the effect of pushing up catastrophe reinsurance rates and toughening up contract conditions, especially on loss-affected treaties.
The report states that the EQC used Aon Benfield to purchase its reinsurance program.