Publications
Annual Report
2003-2004
General Manager's Report
During the 12 months under review, the Commission handled a total of 7,110 claims. It is almost three decades since we settled more claims in a single year and it is more than five times the number we handled last year.
The increase came in the wake of two recordbreaking events. In August, near Te Anau, the biggest onshore ‘quake since 1968 generated 2,966 claims on the Commission. Then in February, a devastating deluge, which saw from four to six times average monthly rainfall in the central North Island, generated a further 1,347 claims.
To handle the increased workload EQC drew on elements of its catastrophe response programme. The Commission’s third party claims processing company added to the number of staff working on EQC claims. Valuers were brought in from outside the affected areas, increasing the pool of specialists, and valuers in particular, who now have EQC-related experience. And in Te Anau the Commission trialled the use of a project manager to facilitate property repairs.
Major landslides in Charles Sound
caused by the Fiordland earthquake
in August 2004.
Events such as Te Anau and the North Island floods provide EQC with insights that will be invaluable for managing future natural disasters.
They have also brought the limitations of our legislation into sharp relief; in particular, the period of notice of damage, land cover and the caps to the Commission’s cover.
During February, the Cabinet announced that there would be a review covering the wider applicability of the Earthquake Commission scheme, for floods and other disasters.
EQC has been pressing for changes to its Act and with a review of its scheme under weigh, we’re optimistic that these issues will be addressed. The deadline for the review is 30 November 2004.
Managing the Natural Disaster Fund
This year EQC reaped the benefits of diversification into international equities. Their performance helped lift the Commission’s overall performance to two percentage points higher than the required rate of return.
The second and final stage of the Commission’s diversification programme began in October, with funds transferred from passively managed to actively managed portfolios of international shares.
New Zealand Government stock earned a nominal positive return while Government inflation-indexed bonds fell, as last year’s exceptional return started to reverse. These results were in line with their respective indices.
* Transition from passive to active global equities began on 31 October. This return ncludes a full year passive return and an active equities return since inception.
** Total portfolio target return is 1% over the NZ Government stock index rate.
The Commission’s rolling New Zealand bank bill and Treasury bill portfolio provided consistent income.
The Commission’s investment performance saw the Natural Disaster Fund grow by $180 million, from $4.32 billion to $4.50 billion.
The reinsurance negotiations completed in June 2003 allowed EQC to retain the same levels of protection from reinsurers, without an increase in the premium paid. This year, the Commission negotiated a small drop in the premium for the same level of protection.
Administration of the Scheme
Private insurance companies collect premiums on the Commission’s behalf and it is EQC’s responsibility to ensure that this happens accurately and expeditiously. To do this we require external audit reports from each insurance company. This year the Commission received nine reports from auditors and one of these returned a qualified opinion. The issues raised in the qualified opinion have been addressed and continue to be monitored.
The final stage of the e-data project went live in November. This has allowed loss adjusters to send their claims reports electronically from the field. The response has been excellent and the Commission has received more than 10,000 reports from loss adjusters since the system’s inception.
The Commission’s operating expenditure for the year was $15.896 million and within budget.
Research
In December, the Board approved funding for the establishment of a senior academic position in hazards planning at Massey University. New Zealand has long been a world leader in the engineering and geological components of hazard studies and this development will improve the social science component of the field
During May, two applicants were granted the inaugural Fulbright-EQC Award in Natural Disaster Research. The recipients, Ben Mackey and Liam Wotherspoon, have begun postgraduate study at American universities in fields directly related to the work of the Commission.
EQC’s general manager, David Middleton (centre) with Fulbright-EQC Award recipients Ben Mackey (left) and Liam Wotherspoon (right).
Four-yearly international conferences on earthquake engineering are held under the auspices of the International Association for Earthquake Engineering. Experience has demonstrated that each conference provides a fillip to New Zealand advances in the field. This was again demonstrated by the highly successful conference held in Auckland in 2000, with principal sponsorship from the Earthquake Commission. The Commission therefore decided to provide substantial support for selected New Zealanders to take part in the next conference, to be held in Vancouver, Canada during August 2004.
The Te Anau earthquake provided a timely work-out for the EQC-sponsored GeoNet hazard monitoring network. EQC contributes $5 million per annum to upgrade, develop and maintain the network. Information about the ‘quake was relayed from the seismic and GPS monitoring systems back to the duty seismologist within minutes, ensuring a swift response to the event.
The core GeoNet seismic and GPS monitoring systems have now been commissioned throughout most of New Zealand.
The immediate future will see more instruments in selected parts of the New Zealand plate boundary (and parts of our urban communities). This will permit exciting advances in understanding the Earth and the great forces beneath us.
Measurements recorded near Gisborne and Hastings during the past two years, and Wellington in recent months, are already changing the traditional view that the Pacific and Australian tectonic plates are uniformly locked under the lower North Island. Present instrumentation is too sparse at this stage to provide answers, yet it is suspected that periodic changes in the stress regime beneath New Zealand may advance the timing of earthquakes and volcanic eruptions at some locations, while reducing the likelihood elsewhere.
Promotion and Education
Television advertising saw the “Fix. Fasten. Forget.” message broadcast in homes throughout central New Zealand for the fourth year. Since first appearing on our screens in 2001, the “three F’s” have become part of common parlance, demonstrated by the Commission’s quarterly survey results. Almost 90 percent of people in the areas where the advertisements are shown recall the “Fix. Fasten. Forget.” message.
Over Easter the Commission sponsored the Earth Rocks weekend at Te Papa. During the three day programme there were lectures, demonstrations, competitions and fi lms that aimed to raise people’s awareness of what they can do to prepare for earthquakes. Specifically targeted, interactive events such as Earth Rocks engage people and allow them to see exactly what needs to be done and, importantly, how to do it.
The Commission’s school resource kit for the Health and Physical Safety curriculum remains popular and the “Shake Safe Starter Pack”, an education unit for primary and intermediate pupils, was well received in schools throughout the West Coast.
The EQC-sponsored Hazardwatch graphic, a new tool in the Commission’s public education armoury, details natural hazards that have occurred in New Zealand over a seven-day period. EQC’s sponsorship of the panel gives newspapers throughout the country the opportunity to run it and thereby raise awareness of the risk of natural disasters in New Zealand.
The storms and earthquakes of 2003-2004 have demanded much hard work from the Earthquake Commission’s staff. I am grateful for their commitment and their empathy for claimants, many of whom faced heart-breaking loss.
A year such as this draws attention to the precarious nature of our relationship with the environment. We have had a less than gentle reminder that both individuals and organisations must be prepared for natural disasters. It is easy to be lulled by the comfort of our modern existence and it can be unnerving to think that a largely benign environment can so quickly become malevolent.
Nonetheless, New Zealanders have an innate resilience to draw on when circumstances demand it. The Earthquake Commission, an organisation unique in the world, supports that resilience, making it easier for people to pick up the pieces and get on with their lives.
David Middleton
General Manager