Reinsurers continue to show their confidence in New Zealand and EQC
International reinsurers have shown their continuing confidence in New Zealand and the Earthquake Commission with this year’s agreement for $6.2 billion of reinsurance with EQC for the policy year beginning 1 June 2019, according to EQC Chief Financial Officer Chris Chainey.
Reinsurance is how EQC insures itself (and the Crown) to be able to pay claims for damage to insured homeowners in very large hazard events covered by EQC like earthquakes, volcanoes and tsunami.
Chris Chainey says reinsurance is similar to a large household insurance policy for over 90% of New Zealand homes that are covered by EQC through their private insurance policy.
“We pay a premium to buy reinsurance cover. This gives us $6.2 billion cover for this coming year. And like a house insurance policy, we have an excess. Ours this year is $1.75 billion. Below that amount, claims are paid from the Natural Disaster Fund, which is currently being rebuilt through EQCover levies - or we call on the Crown Guarantee to ensure claims can be paid.”
Mr Chainey says that as New Zealand is exposed to high levels of natural hazard risk, EQC and its broker Aon, work hard to build confidence in New Zealand and maintain access to reinsurance.
“Our natural hazards research programme, claims information and ability to estimate the impact of events all help reinsurers understand their level of risk. We also talk to them regularly and each year host reinsurers who want a closer look at New Zealand and how EQC operates.
“New Zealand is a very small player in the international reinsurance market in terms of premium spend, however EQC buys one of the largest catastrophe programmes in the world. Since the Canterbury earthquakes, EQC has more than doubled the amount of reinsurance purchased which demonstrates the confidence the market has in EQC,” he says.
Mr Chainey says that so far, the only time EQC’s reinsurance has been used is in relation to the Canterbury earthquakes, where reinsurers are expected to contribute about $4 billion of the $10 to $11 billion that EQC expects to pay out to homeowners.
“Our reinsurance programme is critical to providing cover to New Zealand homeowners for big events like the Canterbury earthquakes, so we’re very pleased our reinsurers continue to back us,” he says.