New Zealand: Quakes drain disaster fund totally
Source: Asia Insurance Review | Jan 2018
New Zealand’s emergency cash stashed away for major natural disasters is forecast to be “fully exhausted” once all of the Canterbury and Kaikoura earthquake claims are settled, according to internal government documents.
It could take about 30 years to replenish the Natural Disaster Fund (NDF) to the level of current reinsurance deductible of NZ$1.75 billion (US$1.22 billion), reported New Zealand Herald.
A briefing document, given to the new Minister Responsible for the Earthquake Commission (EQC) Megan Woods, said that although increased premiums would see the funds topped up within 10 years, that does not take into account any future events. The document also said EQC accepts that “mistakes and missteps” were made after the devastating 2010-11 Canterbury earthquakes. Lessons have been learned from the unprecedented event, including the need for “early, ongoing and effective” communication, particularly with affected residents.
Crown Guarantee might be triggered
It also stresses the need for clear and simple claim processes, and streamlined internal processes, “so as not to add additional stress to individuals and families coping with a difficult situation”.
Managing the scaling up of the organisation in a controlled way was crucial to ensure there are sufficient trained frontline staff to manage the volume of claims.
The document also said: “Since the November 2016 Kaikoura Earthquake, modelling of the expected liabilities suggested the Crown Guarantee might be triggered for the first time since EQC was set up in 1945.”
The Crown Guarantee is a long standing agreement for the state to come to people’s aid if the EQC went broke paying for a large-scale disaster. The disaster fund stood at NZ$6.1 billion at the time of the first Canterbury earthquake in 2010. A