Government says no risks to AMI policies

The government is reassuring AMI Insurance customers about the security of their policies after fears were raised about customers deserting the company.

Finance Minister Bill English announced a support package of up to $500 million for the Christchurch-based insurer last Thursday because of concerns it might not be able to cover claims from February's earthquake.

Mr English said the "back-up" package would offer reassurance to the company's 485,000 policyholders, 85,000 of them in Christchurch.

Last week, Tower New Zealand said it was investigating a possible purchase of AMI. Another competitor, AA Insurance, said it was financially sound and open for business from customers with other companies.

AA Insurance is a joint venture between the Automobile Association and Australian company Suncorp.

"There's some insurance companies in the market that see an opportunity, but AMI policyholders are now doing business with an insurance company that has the support of the taxpayer so we can ensure that the people with severely damaged houses in Christchurch get their claims met," Mr English told reporters yesterday.

"AMI in that sense is a going concern, there are no risks to the policyholders from staying with AMI."

Mr English said he could see no reason why there should be a run on AMI, because the company had taxpayer support.

The Green Party called for greater regulation in the insurance industry following the bailout, saying the package highlighted the need for stricter solvency standards in the industry.

"New Zealand taxpayers are now paying the high cost of low quality, light-weight regulation," Green Party co-leader Russel Norman said.

The Reserve Bank was currently reviewing solvency standards, and it needed to take a more hands-on role in regulating the industry, he said.

"The Reserve Bank should also investigate the risk profiles of insurers operating in New Zealand to ensure they're not exposing themselves unduly, as AMI did with its over-exposure to a natural disaster in one city -- Christchurch," Dr Norman said.

"Our economy will continue to be hit by one economic shock after another until we regulate it smartly."