EQC secures record levels of natural hazard reinsurance
EQC Toka Tū Ake has secured a record level of reinsurance of $9.2b from 1 June 2024 to protect New Zealand homeowners from the impact of natural hazards and keep home insurance affordable. This includes $225 million that is in place from a multi-year catastrophe bond placed in 2023, and is close to a $1b increase from last year’s total reinsurance cover.
“The continued growth of the programme demonstrates the confidence the international market has in our national insurance scheme,” says EQC Chief Executive Tina Mitchell.
EQC Chief Executive Tina Mitchell
“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.”
Mitchell explains that the increased interest this year included existing partners increasing their offering, and offers from new and returning markets.
“It is always encouraging to see partners returning to the programme and new reinsurers wanting to support our scheme. We see this as a huge vote of confidence in New Zealand and our approach to natural hazard risks,” says Mitchell who reiterates that securing reinsurance is one of EQC’s primary tasks.
“New Zealand homeowners pay an EQC levy of up to $480 (plus GST) for the first $300,000 of natural hazard damage to their homes.
“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.
She explains that EQC only makes a claim for reinsurance when the damage from one event exceeds $2.1 billion. EQC has done that twice, 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.
“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 says that a major earthquake or volcanic eruption in Auckland has the potential to damage the economy like the Covid pandemic.
“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.”