Publications
Annual Report
2002-2003
General Manager's Report
Since its establishment in 1945, the Earthquake Commission and consequently New Zealand, have benefited from a long period of seismic quietude. The year under review was even more uneventful than we have become used to, with only half the average number of claims handled during each of the past five years.
Of course at some point the calm will break. Of that we can be certain. However, nature’s benevolence has given us the time to build up the Natural Disaster Fund and develop a comprehensive catastrophe response programme. Together they provide a bulwark against the devastating effects of natural disasters, which are inevitable in this geologically unstable land.
Managing the Natural Disaster Fund
Diversification of EQC’s investment portfolio into international equities was slowed during the year to take into account world-wide bear markets. Diversification began in November 2001 at a rate of $75 million per month. However, the continuing market downturn saw the Commission change this to $50 million a month from October 2002. At the end of the financial year $1.2 billion was invested offshore.
Strong returns from fixed interest securities underpinned those from equities. The overseas equity market went down in value, although there was a three-month rally at the end of the year. Despite the downward trend, the Natural Disaster Fund grew from $4.037 billion to $4.316 billion.
EQC’s largest expenditure item is the premium it pays to transfer much of the Commission’s financial risk to overseas reinsurance companies. Forward-purchasing, its record in the reinsurance market and its reputation as a perceptive, powerful buyer, mean the Commission is able to negotiate favourable rates in a volatile market.
The year under review reflects the results of the reinsurance renewal negotiations of 1 June 2002. By increasing the deductible – the amount EQC pays before making a claim on reinsurers – the Commission was able to make an overall saving of $12 million on premiums.
The reinsurance negotiations completed in June 2003 will see no increase in expenditure while retaining the same level of protection for the coming year, despite continuing high rates in the international market.
Catastrophe Response Programme
The Commission’s catastrophe response programme (CRP), its contingent capability to handle the extraordinary number of claims that will follow a major catastrophe, was refined and expanded during the year.
EQC’s job after such a disaster will involve many external organisations in undertakings to supply the needed premises, equipment, services and people. Furthermore, experience, knowledge and technology do not stand still. Consequently EQC’s catastrophe response programme must keep pace with change in these areas and with the changing environment in which it will operate.
Nineteen training sessions and 11 exercises and tests were carried out to ensure EQC’s plans and resources will stand up to the great demands of a large natural disaster.
The CRP’s sophisticated technological armoury has been boosted with the addition of “The Ultimate Map of New Zealand” or TUMONZ. TUMONZ is electronic mapping software that will help loss adjusters to prioritise claims in the fi eld by showing them their location and severity. Already in place are computer systems that allow us to predict the likelihood of events and the probable location and extent of damage arising from these events.
Following the introduction of the Civil Defence Emergency Management Act in December, the Commission initiated liaison with the Civil Defence Emergency Management Groups (CDEMGs) which are being established throughout the country. A CDEMG is a consortium of the local authorities in a region working in partnership with emergency services to identify, understand and manage hazards and risks in accordance with the 4R’s (reduction, readiness, response and recovery). The Commission is encouraging the groups to involve EQC in their recovery planning.
Administration of the Scheme
Insurance companies collect premiums on behalf of EQC. External auditors’ reports ensure the integrity of the relationship between the Commission and private insurers. We received eight reports from auditors through the year. Seven showed no internal control weaknesses. One returned a qualified opinion and the necessary upgrade to the insurance company’s system was made. Phase II of the e-data project commenced during the year. Phase I allowed confirmation of claimants’ insurance to be received by email and automatically uploaded into the Commission’s claims information management system (CIMS). The second phase allows loss adjusters to send their reports directly from the field to CIMS.
There has been further improvement to the claims handling process with the introduction of a new imaging and document storage system. Dubbed Copycat, it was purpose-built for EQC and allows integration with the claims information management system.
The Commission’s operating expenditure for the year was $13.607 million and within budget.
Policy and Advice
The Commission continues to work with Treasury to ensure that the role of EQC and the terms of its scheme remain relevant to New Zealand society. EQC and Treasury provide advice to the Government on longer-term policy issues.
EQC has a presence on the decision-making bodies of many New Zealand research organisations, including the New Zealand Society for Earthquake Engineering, the Institute of Geological and Nuclear Sciences (GNS) and the Ministry of Research, Science and Technology. This enables the Commission to facilitate the complementary development of the many different strands of research that are of particular interest to EQC.
As in previous years, there was world-wide interest in the EQC model for the role of government in disaster recovery. The General Manager attended the International Emergency Management Symposium held in Turkey during November, as part of a New Zealand delegation.
Research
GeoNet is now producing higher quality seismic and geodetic (ground movement) data as the EQC-supported hazard monitoring network is modernised and expanded. Major landmarks in the GeoNet year were completion of the national strong motion network and the upgrade of several regional seismograph networks including a complete upgrade of the Taupo seismic network.
GeoNet is a collaborative project with GNS and the Foundation for Research, Science & Technology. Over a period of 10 years the Commission is supplying the greater part of the funds to establish the network.
Late in the year, EQC approved sponsorship of a new Fulbright-EQC award. The award will allow one New Zealand student per annum to undertake post-graduate study or research at an American university in a fi eld directly related to the work of the Commission. EQC has a legislative responsibility to facilitate natural disaster research and the new award provides an ideal mechanism through which to do this.
During January, the Commission sponsored the very successful 7th Pacific Conference on Earthquake Engineering which was held in Christchurch.
EQC approved $700,746 for 15 research projects through its biennial round of contestable grants. There were 90 applications for funding in the round. The selection of the research projects was based on the expert input of our independent research panellists, following EQC Research Foundation guidelines.
Promotion and Education
The Commission committed to a second five-year sponsorship of the very popular Awesome Forces exhibition at Te Papa in December. Awesome Forces has been consistently the most popular exhibition at Te Papa since the museum opened its doors in February 1998 and in that time more than 5 million people have seen the exhibition.
One of the Commission’s roles is to educate New Zealanders about natural disaster damage and how to reduce or prevent natural disaster damage. Through Awesome Forces and its companion exhibition, Quake Braker, EQC is able to provide visitors with a dynamic, immediate and quality educational experience.
The earthquake house – Awesome Forces exhibition at Te Papa
The exhibition has also helped the Commission to publicise its own role and raise the profile of EQC as an organisation.
The Te Papa sponsorship is one of a range of tools that the Commission uses to educate New Zealanders. Television advertising is another. In addition to the “Fix. Fasten. Forget.” commercials, three new commercials were produced highlighting the risk of experiencing a damage-causing earthquake in the ‘quake zone (from Hamilton in the north to Timaru and across to the West Coast in the south). A cinema commercial using the statistics from the television advertisements was also produced and shown in theatres throughout the region.
The television and cinema advertising was complemented by the distribution during May of an EQC fridge magnet and notepad to all households in the ‘quake zone.
EQC magnet and pad –
Quake Safe Your Home.
The “Shake Safe Starter Pack”, an education module for primary and intermediate school pupils, was successfully introduced to Wanganui following earlier trials in Blenheim and the Hawke’s Bay. The Commission’s resource kit for the Health and Physical Safety curriculum, “As Safe as Houses”, remains in schools throughout the country.
My sincere gratitude goes to the committed and experienced people who make up the team at EQC. The Commission is fortunate to have people with skills, forbearance and dedication, and a determination to meet the enormous challenge that will confront us in the event of a major natural disaster.
David Middleton
General Manager