Publications
Annual Report
2005-2006
General Manager's Report 2005-2006
- General Manager's Report
- Catastrophe Response Programme
- Policy and Advice
- Managing the Natural Disaster Fund
- Administration of the Scheme
- Research
- Public Education
General Manager's Report
New Zealand’s landscape is the spectacular product of its position on the boundary of two moving tectonic plates and its isolation in the southern Pacific Ocean. The corollary is that we must often build our homes on less than solid ground. And in recent years, population growth and increased development have brought greater exposure to forces of nature which, while shaping our celebrated environment, can also be very destructive.
The storms and floods that have struck parts of New Zealand over the last few years have served to emphasise how important it is for homeowners and those looking to buy a new property to find out about the natural hazards that may affect their property. Armed with that knowledge they can decide how best to manage any risks that are identified.
Sometimes the worst will happen anyway. It is at these times that adequate insurance, including the Commission’s cover, will help people to regroup and recover quickly.
Having adequate insurance is a fundamental risk management tool but it should not be the only one homeowners use. Family plans, kits and mitigation work are all part of the package. No amount of insurance will make up for the inconvenience of broken appliances or the heartbreak of shattered heirlooms.
New Zealand’s ability to recover from a major natural disaster will depend on what we, as individuals, families and communities have done to prepare.
Catastrophe Response Programme
Catastrophe Response Programme
The Bay of Plenty floods of May 2005 proved a good test for the Commission’s Catastrophe Response Programme through the first five months of the financial year.
The temporary office that was set up in Tauranga remained open until November. The number and complexity of the claims meant having people on the spot was an immense help in settling claims as quickly as possible. It also aided co-ordination among the various organisations involved with the recovery operation.
Co-ordination among organisations is crucial to the success of the recovery process, particularly in a major event. The Commission’s programme of liaison with local authorities through their Emergency Management Groups helps to foster the strong relationships necessary to help a community or communities dealing with the fallout from a natural disaster.
Policy and Advice
In response to the storm and flood events of the past few years, Cabinet requested a Treasury review of insurance coverage and other matters. EQC has assisted with the review and Treasury is due to report back to Cabinet by October 2006.
The Bay of Plenty Floods of May 2005 proved a good test for the Commission's Catastrophe Response Programme through the first five months of the financial year. There was devastating damage to the residential property in the coastal town of Matata. |
Managing the Natural Disaster Fund
During the year the Natural Disaster Fund grew by $690 million to $5.42 billion – an increase of 14.6 percent over last year’s total at balance date.
A drop in the value of the New Zealand dollar against other currencies, the performance of our global equities and the high local cash rate through the year all boosted Fund returns.
One additional global equity manager was appointed during the year, but otherwise the structure and asset allocations remain largely unchanged.
Active equity managers added a healthy 3.3 percent excess return after fees over the MSCI World benchmark for the year.
The Commission has a passive holding of New Zealand Government stock and inflation-indexed bonds and consequently returns were in line with the index.
The Reserve Bank kept the official cash rate between 6.75 and 7.25 percent during the year, ensuring a solid return on EQC’s cash investments.
EQC is considering increased diversification of the Fund’s investments. The aim of any such diversification is to further reduce risk and/or to increase return for a similar level of risk.
The Commission continues to manage the Natural Disaster Fund to maximise returns without undue risk, to maintain best practice and to avoid prejudice to New Zealand’s reputation as a responsible member of the world community.
EQC’s response to its obligations under the Ministerial direction to avoid prejudice continues to evolve.
In order to protect itself from the effects of many claims following a major disaster, EQC has substantial reinsurance cover. The Commission again managed to renegotiate favourable terms, despite events in the world catastrophe insurance market over the last year. Reinsurance now provides cover to $3.1 billion, from an attachment point of $1.3 billion. Also, should another event costing more than $2.6 billion occur during the same year, further cover is activated at the lower attachment point of $800 million.
| Global equity allocation as at 30 June 2006* (target position in brackets) | |
| Passive investment allocation | 40.2% (40%) |
Active investment allocation | 59.8% (60%) |
| + Core 40.0% (40%) |
| + Value 30.5% (30%) |
| + Growth 29.5% (30%) | |
*Global equities comprise 31% of total portfolio
| Asset class | Actual return | Benchmark/ target return |
| NZ Government stock | 5.2% | 5.1% |
| NZ Government inflation-indexed stock | 6.2% | 6.3% |
| Bank bills (registered certificates of deposit)/Treasury bills | 7.4% | 7.3% |
| Passive global equities | 33.5% | 33.3% |
| Active global equities | 36.7% | 33.3% |
| Total portfolio | 14.3% | 6.1%* |
Administration of the Scheme
Private sector companies collect the Commission’s premium on EQC’s behalf. External auditors’ reports ensure that the payments are made accurately and promptly.
During the year we received eight reports and all returned unqualified opinions.
The Commission’s operating expenditure for the year was $25.163 million and within budget.
 Eminent earthquake scientist Ivan Skinner (pictured at right with his wife Pat at his farewell) retired during the year after 11 years as EQC's research director. In honour of his distinguished career, EQC has initiated the EQC/NZSEE Ivan Skinner Award for the Advancement of Earthquake Engineering. |
Research
A new research manager, Dr Hugh Cowan, was appointed in October. Dr Cowan is responsible for managing EQC’s research activities and working directly with research stakeholders. He comes to the Commission from GNS Science (formerly the Institute of Geological and Nuclear Sciences) where he directed the establishment of GeoNet, the EQC-funded hazards monitoring and data collection network.
Following ratification of the GeoNet triennial review recommendations, EQC has taken on full funding of the project – a total contribution of about $75 million over 10 years. This has and will continue to improve New Zealand’s readiness and ability to respond to an emergency, ensuring better distribution of sensing sites, better access to the data for researchers and greater emphasis on transforming the raw data into useful information.
Clinton Mexted-Freeman (pictured below) from Porirua is this year’s recipient of the Fulbright-EQC Graduate Award in Natural Disaster Research. Clinton will complete a master of science degree, specialising in crisis, emergency and risk management, at the George Washington University in Washington DC.
In November, 17 research proposals were selected for funding from the Commission’s biennial competitive funding round at a total cost of $790,000. The projects cover a wide range of subject areas including mitigation motivation, earthquake resistant design and tsunami hazard around New Zealand.
Public Education
The Commission’s television advertising campaign continued through the year and was complemented by a brochure and fridge magnet that were delivered to all households in the country.
Two new projects designed to target smaller groups within New Zealand got under way during the year.
A pilot programme with Whanganui iwi, which has the aim of making EQC’s communication with Māori groups as effective as possible, saw EQC booklets with Māori translation delivered throughout the community.
Another new programme is designed specifically to communicate with other ethnic communities in New Zealand. This activity included a brochure, newspaper advertisements, feature articles and web pages in Chinese and both radio and press advertisements in Samoan and Tongan.
The opening of the EQC-sponsored exhibition “Volcanoes” at the Auckland War Memorial Museum took place in December. The exhibition is an exciting and fascinating way for Aucklanders and others to learn about the volcanic hazards they face. Further it provides them with the opportunity to learn about the important role that EQC plays in natural disaster recovery, both in their region and throughout the country.
The Commission’s very successful eight-year sponsorship of the “Awesome Forces” exhibition at Te Papa was enhanced by the addition of a new EQC-supported online resource. The “Awesome Forces” interactive resource supports teachers and students in a unit of work investigating earthquakes, tsunami and volcanic eruptions in New Zealand.
This year was the last with Neville Young as chairman. Neville has been on the Board for nine years and for eight of those he served as chairman. He brought a wealth of experience to his role in a period of significant change for the Commission, with the diversification of the Natural Disaster Fund, full funding of GeoNet and the sponsorship of Te Papa and the Auckland War Memorial Museum. I would like to record the appreciation of the staff for Neville’s contribution.
The well respected EQC Commissioner Jeremy Dwyer died in December. Jeremy’s concern for people over processes was always evident and he was supportive and encouraging. His extensive background in local government brought a new perspective to the Board and his death was a very sad loss.
The Commission farewelled Ivan Skinnner, our long-serving research director, in February. His studious and active stewardship ensured EQC fulfilled its mission to support natural disaster research in New Zealand. In honour of Ivan’s distinguished career EQC has initiated an award, the EQC/NZSEE* Ivan Skinner Award for the Advancement of Earthquake Engineering.
With great sadness I note the passing of Leicester Steven, a Board member of the Commission for 15 years (1982–1997). Leicester rejuvenated EQC’s research support programmes and championed the need for the Commission to develop extensive catastrophe response plans. Leicester retained close ties with the Commission until the time of his death in July 2006. His insights, experience and sense of fun are greatly missed.
My thanks go to the staff at EQC once again. While it is impossible for an organisation such as ours to know the nature of the challenges we may have to face in the year to come, the commitment and experience of our team means that, whatever Mother Nature has in store, we will be ready to meet the challenge.
* New Zealand Society for Earthquake Engineering
David Middleton
General Manager