Earthquake Commission

Publications

Annual Report
2002-2003

Statement of Intent – Performance Measures Report

Following is a list of the Commission’s objectives and performance measures from its Statement of Intent and an indication of progress during the year.

• Claims Handling and Catastrophe Response
• Management of the Natural Disaster Fund
• Administration of the Insurance Scheme
• Public Education
• Research and Evaluation
• Promotion of EQC and its Role
• Policy and Advice
• Financial Management

Claims Handling and Catastrophe Response

1. Ensure the levels set in all service level agreements have been met, in times of normal and abnormal activity.
   Performance measurement
   Keep the performance of service providers under constant review and rectify any failures in agreed service level.
   Achieved.
2. Meet the requirements of the catastrophe response training and exercise programme.
   Performance measurement
   Carry out the planned testing and exercise programme on time and within budget. Implement improvements where necessary. approximately one exercise per month.
   Three tests postponed. All exercises completed.

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Management of the Natural Disaster Fund

1. Diversify investments to include an allocation to global equities in accordance with the terms of the Minister’s directive for the investment of the Fund.
   Performance measurement
   Complete arrangements for contracting fund custodians, investment managers and investment management advisers, maintain prudential oversight of them, and report regularly to the investment committee and Board.
   Active investment manager agreements to be finalised. Otherwise achieved.
2. Improve the real value of the Fund (excluding cash held as working capital) over the medium-term utilising a mixture of assets designed to:
• Achieve an average rate of return of at least 1% p.a. over the Crown’s cost of borrowing over a rolling 10-year period.
• Subject the Fund to no more than 1 chance in 4 that over any 10-year period the annual rate of return will be less than the Crown’s cost of borrowing.
• Ensure that there is no more than 1 chance in 30 of the Fund incurring an investment return of less than negative 2% in any one financial year.
  Performance measurement
  Report to the investment committee and Board in relation to these goals and make recommendations when needed.
  Achieved.
3. Meet or exceed the performance benchmarks set by the Board for individual investment classes and maintain the safe-keeping of assets in accordance with best practice.
   Performance measurement
   Report to the investment committee and Board in relation to these goals and make recommendations when needed.
   Achieved.
4. Ensure cash inflows from investments, reinsurance and other financial protection policies are sufficient to meet all claims and other liabilities under foreseeable circumstances.
   Performance measurements
   Maintain the agreed Fund liquidity at Board-approved levels.
   Achieved.
   Ensure reinsurance agreements have adequate claims payment provisions.
   Achieved.
5. Meet best practice for the transfer of insurance risk and financial protection of the Fund, which:
• With the Fund’s investment strategy, provides optimal cost/benefit and risk management.
• Implements a reinsurance programme providing stability over time against reasonably foreseeable events.
• Provides flexibility in the reinsurance agreement terms and conditions should the Crown determine a different risk profi le under the natural disaster insurance scheme in the future.
• Controls the risk to the Commission of default amongst reinsurers/capital markets.
  Achieved.

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Administration of the Insurance Scheme

1. Maintain a programme of physical checks and commercial audits which adequately verifies the integrity of the premium payments by insurance companies.
   Performance measurement
   Maintain system of external auditor checks and act on any weaknesses disclosed.
   Achieved.
2. Complete the programmes of electronic cover verification and compilation of a database of insureds for statistical and analytical purposes, subject to insurance industry co-operation.
   Electronic cover verification achieved for the majority of insurance companies. Development of database of insureds continuing.

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Public Education

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Research and Evaluation

1. Carry out the contestable grants round in accordance with the approved timetable and procedures, and monitor for satisfactory project completion.
   Achieved.
2. Support GeoNet in accordance with approved budgets and procedures, and monitor successful delivery of planned outcomes.
   Achieved.

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Promotion of EQC and its Role

1. Increase correct awareness of the roles of EQC to 80% by June 2005 according to quarterly surveys.
   Performance measurement
   Awareness of the role of EQC.
   Achieved 67 %.
2. Sponsor public exhibits that enhance awareness of the roles of EQC and natural disaster matters.
   Achieved.

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Policy and Advice

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Financial Management

Financial statements meet standards required by the Board, as attested by the Commission’s auditor.

Performance measurements
Expense levels are maintained within the following parameters:

Financial controls will be maintained to ensure current excellent audit management findings are retained.
Achieved. EQC has received three “excellent” ratings from Audit New Zealand.

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