Thursday 24th February 2011
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Standard & Poor's Ratings Services has stopped short of putting a figure on the insurance cost of Tuesday's magnitude 6.3 earthquake in Christchurch, saying only that the unprecedented event will cost more than the September earthquake.
"While still very early to accurately assess, we would expect the insurance loss to far exceed that of the September 2010 Christchurch earthquake, which currently stands at around NZ$5 billion, and add to the general insurers' recent major flood losses in Australia."
Yesterday JP Morgan estimated the cost of the earthquake at NZ$16 billion.
Standard & Poor's said today that the earthquake placed further downward pressure on the earnings of the general insurers in New Zealand.
But their capital strength and reinsurance protection would limit negative rating pressure at this stage.
The scale of the event in terms of loss of life and damage to property was unprecedented for the region in recent times.
Suncorp Group Ltd, which owns Vero insurance New Zealand, has reinsurance cover which limits its exposure to NZ$60 million. Insurance Australia Group, which owns IAG New Zealand, has reinsurance cover which will limit exposure to A$40 million.
The Earthquake Commission will meet the first NZ$1.5 billion of its eligible residential exposure. It has substantial reinsurance protection beyond that.
The availability and cost of reinsurance protection in future may be an issue for insurers.
"Reinsurance capacity has been ample in recent years, but we are now moving from a buyers' to a sellers' market, in view of these catastrophic events. As a result, the cost and availability of reinsurance cover may not be as attractive as before."
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