AMI in financial strife - report

Thursday 7th April 2011 1 Comment

The Government is closely watching AMI Insurance which reportedly has had its $1 billion of capital and reinsurance cover wiped out by the two Canterbury earthquakes.

The Dominion Post said today that it was feared AMI would not be able to afford to pay out on new insurance claims if it could not raise extra money.

AMI is the biggest insurer in Chrsitchurch covering a third of all homes, contents and motor vehicles.

It was understood it probably had enough money to pay out all its existing earthquake claims.

Sources told the newspaper there was little or no money left to cover new claims either from earthquake victims or any other customers in other parts of the country, and that the Government had come to some arrangement to allow the company to continue trading

A spokesman for Finance Minister Bill English said he was aware of the speculation and the Reserve Bank and the Treasury were taking an interest in it "as it would be a significant issue".

A rescue package could involve the Government offering to underwrite or guarantee a capital raising and allow AMI to buy more reinsurance cover to meet future claims.

Earlier this month AMI said it was looking at options to raise money to help pay claims from the February 22 earthquake. As a mutual owned by its policyholders, AMI does not have shareholders or other investors it can go to for funding.

AMI had $600 million of reinsurance cover for the February quake and about $500 million in cash and investments.

NZPA

Comments from our readers

On 7 April 2011 at 12:59 pm Steve Gardner said:

Not at all surprised. Insurance companies are just like finance companies, but of a different guise. I predict they will all fail, if they are exposed to christchurch.