Government prepared to bail out AMI

Thursday 7th April 2011 4 Comments

The Government is prepared to pump up to $500 million of equity into AMI Insurance after it reportedly had $1 billion of capital and reinsurance cover wiped out by the two Canterbury earthquakes.

The support package would be called on only as a last resort of AMI's own reserves have been exhausted - unless the Crown believes it is in the public interest to take control sooner, Finance Minister Bill English said today.

"This support package will give AMI the time to seek a market solution to the challenges it faces as a result of the two Canterbury earthquakes," he said.

Christchurch-based AMI is the country's second-largest residential insurer with 485,000 policyholders and 1.2 million policies across the country.

In Christchurch alone it has more than 85,000 policyholders with 225,000 policies – or about 35% of the residential insurance market in the city.

"Ministers have decided to act now. This provides a financial backstop for policyholders so the rebuilding of Christchurch is not jeopardised by potential solvency or liquidity issues and so confidence is maintained in the insurance sector."

Comments from our readers

On 7 April 2011 at 10:38 am Energy Investor said:

Yet again, the taxpayer is called upon to meet the cost of a failing business. In this case it is the insured, who by the level of their premiums have no provided enough. We must stop allowing profits to be taken privately while losses are passed back to the taxpayer. We really do have a stupid government.

On 7 April 2011 at 11:16 am Matt said:

Well said.

On 7 April 2011 at 12:42 pm Market investor said:

Here, here.

On 7 April 2011 at 1:07 pm AJ said:

Did I not read elsewhere that this would be done for an equity stake in the business? Our govt may very soon be a multi sector conglomerate similar to Tata. Except that its portfolio will be made up from marginal entities in high risk markets that need propping up all the time....