EQC funding, structure to come under microscope

BUSINESSDESK: The Earthquake Commission's funding and structure will come under scrutiny in a government review of the legislation designed to provide a degree of public insurance when natural disasters strike.

Finance Minister Bill English and Earthquake Recovery Minister Gerry Brownlee have announced a legislative review of the Earthquake Commission Act 1993 to be led by Treasury, with help from the Reserve Bank, EQC, Ministry of Business, Innovation and Employment, and a yet-to-be appointed independent policy expert.

The review's objectives include:

  • Supporting a functioning insurance industry for economic growth opportunities.
  • Minimising the fiscal risk to the Crown in covering private property damaged in natural disasters.
  • Supporting efficient management of natural disaster risk and recovery.
  • Reducing the potential for socially-unacceptable distress and loss for property owners caused by natural disasters.

"The government will review disaster insurance arrangements to look at where changes to existing policy settings are desirable," Mr English saiys.

"The review is also an opportunity to consider possible changes consistent with other government initiatives, particularly the Better Public Services programme."

Mr English flagged the review last year after the cost of the Canterbury quakes escalated, wiping out the $6 billion Natural Disaster Fund and sending the government's operating deficit to $18.4 billion, or 9.2% of gross domestic product in the 2011 fiscal year.

The Treasury-led review will cover what the EQC insures, including the layer of loss covered, which natural disasters are covered, how multiple events should be treated, which types of property should be covered, the coverage of land, building and contents, what caps should be on the scheme and whether it should be voluntary or mandatory.

The present legislation covers earthquakes, natural landslips, volcanic eruptions, hydrothermal activity, tsunami and natural disaster fires, and residential land is also covered by storms and floods.

Questions on pricing will include whether the levy should be risk-based, and if so if should be broken down by regional or policyholder risks, and how revenue should be collected.

The government also wants to consider the schemes design and how the EQC as an institution should be structured.

The review will also consider what the government's risk preference is, and how that risk should be financed, including the size of the disaster fund and alternative financing instruments.

Under the current act, the government guarantees any shortfall in the natural disaster fund to meet the EQC's liabilities.

The review will not cover the EQC's performance and will not affect current claims and entitlements.

A discussion document will be put out for public consultation in March next year, with Cabinet expected to make a decision on legislative changes in mid-2013.


2 · Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

2 Comments & Questions

Commenter icon key: Subscriber Verified

English & Brownlee all serious and diligent trying to polish a t*rd. EQC and all it encompasses has been an extraordinary failure when benchmarked against its continued inability to resolve in a timely and equitable fashion what was promised to those forced to pay eqc premiums and worse the implied guarantee of an organisation for so many years to the public at large. I measure the performance by those still waiting for justice. I expect nothing of consequence to result from this latest review and the usual farcical consultation circus.

Reply
Share
  • 0
  • 0

On the other hand the EQC could be made into a modern 're-insurer' of last resort with capability to take on risk and be paid extra premiums for those seeking extra cover to fill the gap left by ordinary insurers. In short commercialise EQC similar to ACC plus.

Reply
Share
  • 0
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.6882 0.0036 0.53%
AUD 0.9036 0.0011 0.12%
EUR 0.5822 -0.0010 -0.17%
GBP 0.5165 -0.0003 -0.06%
HKD 5.3740 0.0265 0.50%
JPY 76.5590 -0.3540 -0.46%

Commods

Commodity Price Change Time
Gold Index 1291.9 11.700 2017-11-22T00:
Oil Brent 63.3 0.770 2017-11-22T00:
Oil Nymex 58.0 1.170 2017-11-22T00:
Silver Index 17.1 0.150 2017-11-22T00:

Indices

Symbol Open High Last %
NASDAQ 6869.5 6874.2 6862.5 0.07%
DJI 23597.2 23605.8 23590.8 -0.27%