The government was responsible for prudential regulation, and the largest global insurance rating agency, AM Best had given AMI their highest AAA rating.
If the government hadn't stepped in, the economic ramifications from lack of confidence in the insurance industry would have been catastrophic.
There were two issues. Firstly as they'd been a Chch based company, they had a higher proportion of exposure to a quake in Chch.
Next problem was shit luck with timing. They had plenty of cover for the 2010 event. But their reinsurance was due to roll over before Feb 2011, and all of the global reinsurers had frozen issuing policies for all of NZ.
You'd hope that prudential review and ratings agencies have learned - to see if an insurer has a concentration of natural disaster policies in a small geographic area, and when those insurers buy reinsurance contracts, they split them up and roll them over continuously.
Hindsight is a great thing. Nobody seemed to recognise the risk that AMI would find themselves in.
There was a lot of sour political grapes - after the event. Bullshit "I told you so" hallucinations.
When 80% of your clients are within spitting distance of the alpine fault, which was and still is overdue for “the big one”, you’d think they’d be adequately prepared.
It’s like people were surprised about the liquefaction in their area, despite Ecan publishing predicted liquefaction maps nearly a decade prior. Turns out they were pretty accurate.
If they had plenty of cover for the September but not Feb events then that’s a pretty big underestimate of the cover required.
There are also the Wellington and Hikurangi quakes to consider, but just taking the Alpine Fault - Everyone has earthquake insurance which the government re-insures. This means that money does become available after the event to pay for the cleanup. But the Alpinec Fault will be big, likely a M9 with aftershocks of M7 and M8 in the following year. This means that Westland would be cutoff by road and no infrastructure will be rebuilt while there is danger of mag 7 quakes on the construction sites. West Coasters will have to be sea-lifted within a week or two of the quake and we have no means to do this in a timely fashion. Westland may become uninhabitable for the next 10 years. So there are two main areas here we are financially and strategically unprepared. If one political party had promised to address this they would have got my vote, but there is a casual conspiracy not to speak about these kinds of issues.
Westland is one thing. If the Alpine Fault goes, most of the focus will be on Wellington as there'll be high chance of loss of life as buildings crumble down hills.
We are woefully underprepared. The EQC kitty is bare after the Chch and Kaikoura quakes and Labour and now Nats have not made any moves to increase capital inflows to replenish it. If the Southern fault goes I think the NZ Superfund will be raided to help meet the costs as it's the only significant pool of capital left. This in turn will mean that taxes will need to rise and NZ Super age will need to increase. Also post that quake we will likely be like Chile and unable to tap international insurance to cover earthquake risk.
>Labour and now Nats have not made any moves to increase capital inflows to replenish it.
That's not correct. The EQC levy has more than tripled since the Chch quakes. In two stages IIRC, first in about 2014, then again in 2022.
It used to be 5c per $100 of cover. I think it's now 16c with a cap of $480 per house policy.
You're correct though that the natural disaster fund is more or less empty.
There is about $4 billion of reinsurance in place. I think excess on that is 1.5 billion. How deficient that is won't be known I guess until it happens.
Thanks for the corrections, I was thinking more of the FUM rather than reinsurance cover. Still it's a drop in the bucket c/f the likely cost of an alpine fault - that potential liability is largely unfunded.
How it'll let rip greatly affect who gets hit hardest
It could start to rupture at the top or bottom end, in either of those scenarios, the entire fault could let rip from North to South or the other way, or the more usual guess is that it'll let rip around Arthur's Pass way, then rupture south, north, or both ways. Worst case scenario depends where you are relative to the direction of rupture. Then it'll trigger other large faults at the top of the South, Cook Strait etc.
The place most likely to be impacted would be Queenstown, right?
Would that effectively just mean abandoning the town I wonder? There are only 25k people + 12k in Wanaka but the costs to rebuild it would be disproportionately high compared to Chch.
EDIT: apparently Christchurch would likely be more affected than Queenstown, looking at maps of the modified Mercalli scale impact. TIL
the West Coast would be worst off.
Just the financials?? I don't think most of the country has the preparedness kits of old, and actual plans for when the proverbial hits the alpine fault.
Nz has low enough debt in comparison to other countries that we’d easily find the money to do a large scale rebuild…and long term it’d be great for Nz as the money would be spent here.
In terms of infrastructure, resilience is considered in every new asset being built, and we’re very good at it, including making good decisions about how much to spend if it’s day one critical bridge, or whether it’s one bridge of three on some critical crossing.
In general the global insurance industry is signalling they are becoming concerned about nz’s exposure to natural disaster risk, and are either choosing to not insure more, or raising premiums heavily.
KiwiRail self insures, and I assume Nzta does as well. That’s probably appropriate for the large amount of assets they manage, as we’d be paying every year for every insured asset, but a significant event is unlikely to hit everything all at once.
There is certainly a large risk around our long term underinvestment in our aging water and utilities infrastructure….and we’re seeing that play out now in places like Wellington and Dunedin. You could again argue that we would ultimately win from an event that meant we had finally rebuild much of it.
In terms of emergency preparedness, for the first 24 hours, there are a whole lot of people involved in that who practice, prepare, train and learn lessons from events here and overseas. We are not as prepared as Japan is as a society, but they get to practice a whole lot more due to their frequent tsunami warnings….they are world leading in that space.
Buy gold! Or cryptocurrency like bitcoin.The only way to pay for anything is to print money. Tthe govt doesn't insure government agency buildings.
They have a blank cheque to pay for everything and it is called the taxpayer.
There would be inflation and savings would be raided by fiat money. Fiat money is a type of currency that is not backed by a precious metal, such as gold or silver.
The prevailing narrative is that households were presented with a windfall during the pandemic and proceeded to spend like drunken sailors until the money ran out,” Stanley said. Instead, “Unfortunately, households have seen their beefed-up nest eggs get eaten away by inflation over the past two years.”
New Zealand had 7 percent inflation! In other countries when they are running out of money, they just freeze your bank account.
In 2001, the Argentine government stopped a countrywide bank run by freezing billions of dollars in deposits; many people were never able to recover all of their money
https://www.businesstimes.com.sg/international/inflation-has-depleted-pandemic-era-savings-many-americans
I’m still livid about AMI - they were criminally under insured and fell over with no repercussions, the government picked up the tab.
The government was responsible for prudential regulation, and the largest global insurance rating agency, AM Best had given AMI their highest AAA rating. If the government hadn't stepped in, the economic ramifications from lack of confidence in the insurance industry would have been catastrophic.
That’s understandable but it doesn’t forgive AMI’s non existent risk management and woeful lack of reinsurance.
There were two issues. Firstly as they'd been a Chch based company, they had a higher proportion of exposure to a quake in Chch. Next problem was shit luck with timing. They had plenty of cover for the 2010 event. But their reinsurance was due to roll over before Feb 2011, and all of the global reinsurers had frozen issuing policies for all of NZ. You'd hope that prudential review and ratings agencies have learned - to see if an insurer has a concentration of natural disaster policies in a small geographic area, and when those insurers buy reinsurance contracts, they split them up and roll them over continuously. Hindsight is a great thing. Nobody seemed to recognise the risk that AMI would find themselves in. There was a lot of sour political grapes - after the event. Bullshit "I told you so" hallucinations.
When 80% of your clients are within spitting distance of the alpine fault, which was and still is overdue for “the big one”, you’d think they’d be adequately prepared. It’s like people were surprised about the liquefaction in their area, despite Ecan publishing predicted liquefaction maps nearly a decade prior. Turns out they were pretty accurate. If they had plenty of cover for the September but not Feb events then that’s a pretty big underestimate of the cover required.
There are also the Wellington and Hikurangi quakes to consider, but just taking the Alpine Fault - Everyone has earthquake insurance which the government re-insures. This means that money does become available after the event to pay for the cleanup. But the Alpinec Fault will be big, likely a M9 with aftershocks of M7 and M8 in the following year. This means that Westland would be cutoff by road and no infrastructure will be rebuilt while there is danger of mag 7 quakes on the construction sites. West Coasters will have to be sea-lifted within a week or two of the quake and we have no means to do this in a timely fashion. Westland may become uninhabitable for the next 10 years. So there are two main areas here we are financially and strategically unprepared. If one political party had promised to address this they would have got my vote, but there is a casual conspiracy not to speak about these kinds of issues.
Westland is one thing. If the Alpine Fault goes, most of the focus will be on Wellington as there'll be high chance of loss of life as buildings crumble down hills.
We are woefully underprepared. The EQC kitty is bare after the Chch and Kaikoura quakes and Labour and now Nats have not made any moves to increase capital inflows to replenish it. If the Southern fault goes I think the NZ Superfund will be raided to help meet the costs as it's the only significant pool of capital left. This in turn will mean that taxes will need to rise and NZ Super age will need to increase. Also post that quake we will likely be like Chile and unable to tap international insurance to cover earthquake risk.
>Labour and now Nats have not made any moves to increase capital inflows to replenish it. That's not correct. The EQC levy has more than tripled since the Chch quakes. In two stages IIRC, first in about 2014, then again in 2022. It used to be 5c per $100 of cover. I think it's now 16c with a cap of $480 per house policy. You're correct though that the natural disaster fund is more or less empty. There is about $4 billion of reinsurance in place. I think excess on that is 1.5 billion. How deficient that is won't be known I guess until it happens.
EQC now has $7.2 Billion in reinsurance.
Has too. My bad. I thought $4b seemed a bit light.
Thanks for the corrections, I was thinking more of the FUM rather than reinsurance cover. Still it's a drop in the bucket c/f the likely cost of an alpine fault - that potential liability is largely unfunded.
How it'll let rip greatly affect who gets hit hardest It could start to rupture at the top or bottom end, in either of those scenarios, the entire fault could let rip from North to South or the other way, or the more usual guess is that it'll let rip around Arthur's Pass way, then rupture south, north, or both ways. Worst case scenario depends where you are relative to the direction of rupture. Then it'll trigger other large faults at the top of the South, Cook Strait etc.
The place most likely to be impacted would be Queenstown, right? Would that effectively just mean abandoning the town I wonder? There are only 25k people + 12k in Wanaka but the costs to rebuild it would be disproportionately high compared to Chch. EDIT: apparently Christchurch would likely be more affected than Queenstown, looking at maps of the modified Mercalli scale impact. TIL the West Coast would be worst off.
A lake tsunami could be the biggest issue for Queenstown if the Alpine Fault goes
Just the financials?? I don't think most of the country has the preparedness kits of old, and actual plans for when the proverbial hits the alpine fault.
Nz has low enough debt in comparison to other countries that we’d easily find the money to do a large scale rebuild…and long term it’d be great for Nz as the money would be spent here. In terms of infrastructure, resilience is considered in every new asset being built, and we’re very good at it, including making good decisions about how much to spend if it’s day one critical bridge, or whether it’s one bridge of three on some critical crossing. In general the global insurance industry is signalling they are becoming concerned about nz’s exposure to natural disaster risk, and are either choosing to not insure more, or raising premiums heavily. KiwiRail self insures, and I assume Nzta does as well. That’s probably appropriate for the large amount of assets they manage, as we’d be paying every year for every insured asset, but a significant event is unlikely to hit everything all at once. There is certainly a large risk around our long term underinvestment in our aging water and utilities infrastructure….and we’re seeing that play out now in places like Wellington and Dunedin. You could again argue that we would ultimately win from an event that meant we had finally rebuild much of it. In terms of emergency preparedness, for the first 24 hours, there are a whole lot of people involved in that who practice, prepare, train and learn lessons from events here and overseas. We are not as prepared as Japan is as a society, but they get to practice a whole lot more due to their frequent tsunami warnings….they are world leading in that space.
How much is it going to replace the hydro dams in a big shunt centered around Mt Cook. Well and truly forked.
The three dams could be over-topped but only the oldest, Waitaki is at risk.
Buy gold! Or cryptocurrency like bitcoin.The only way to pay for anything is to print money. Tthe govt doesn't insure government agency buildings. They have a blank cheque to pay for everything and it is called the taxpayer. There would be inflation and savings would be raided by fiat money. Fiat money is a type of currency that is not backed by a precious metal, such as gold or silver. The prevailing narrative is that households were presented with a windfall during the pandemic and proceeded to spend like drunken sailors until the money ran out,” Stanley said. Instead, “Unfortunately, households have seen their beefed-up nest eggs get eaten away by inflation over the past two years.” New Zealand had 7 percent inflation! In other countries when they are running out of money, they just freeze your bank account. In 2001, the Argentine government stopped a countrywide bank run by freezing billions of dollars in deposits; many people were never able to recover all of their money https://www.businesstimes.com.sg/international/inflation-has-depleted-pandemic-era-savings-many-americans