EQC Toka Tū Ake, or New Zealand’s Earthquake Commission (EQC) in a record move has secured a whopping reinsurance tower of $9.2 billion from 1st June 2024 to protect homeowners from the impact of natural hazards, helping to ensure home insurance remains affordable in the country.
The renewal includes $225 million that is in place from a multi-year catastrophe bond, Totara Re Pte. Ltd. (Series 2023-1) placed in 2023 and is close to a $1 billion increase from last year’s total reinsurance cover.
New Zealand homeowners pay an EQC levy of up to $480 along with GST for the first $300,000 of natural hazard damage to their homes.
Tina Mitchell, Chief Executive, EQC, commented, “We use some of that levy to buy reinsurance so we can be confident there are always funds available to meet any claims that may arise. This keeps the scheme affordable for homeowners and protects the Crown from financial risks in the event of a major event like the Canterbury earthquakes,” says Mitchell.
The EQC only makes a claim for reinsurance when the damage from one event exceeds $2.1 billion, which it has done twice so far, after the Canterbury earthquakes in September 2010 and February 2011, when EQC received about half a million claims which are currently estimated to cost around $12 billion.
Mitchell, stated, “The continued growth of the programme demonstrates the confidence the international market has in our national insurance scheme. Once again, we have been really well supported by our reinsurance partners, with many substantially increasing the amount of capital they have committed to the programme.”
It has been further stated that the increased interest this year included existing partners increasing their offering, and offers from new and returning markets.
Mitchell has emphasised that securing reinsurance is one of EQC’s primary tasks and has further noted the continued interest from partners in the scheme is seen as a huge vote of confidence in New Zealand and its approach to natural hazard risks.
Mitchell has equated a major earthquake or volcanic eruption in Auckland to damage to the economy caused by the Covid pandemic, further stating, “Most of the time the EQC scheme is able to cover events, even the bigger events like Cyclone Gabrielle, through levies, but reinsurance protects New Zealand from any future devastating events and helps to ensure we will be able to pay claims when they fall due.”
Mitchell concluded, “We can’t change the natural hazards we live with in our beautiful country, but we can prepare ourselves to reduce the impact of those hazards and provide a safety net to help New Zealanders recover from any major event.”
