Taxpayer's quake bill to rise again

By Derek Cheng, Adam Bennett

Protesters outside the Cabinet meeting in Christchurch criticised Government action on the earthquake recovery.  Photo / Simon Baker
Protesters outside the Cabinet meeting in Christchurch criticised Government action on the earthquake recovery. Photo / Simon Baker

The taxpayer's share of the $29.5 billion bill for rebuilding Christchurch is set to rise yet again - by as much as $1 billion according to Prime Minister John Key - after a High Court decision late last week.

Late on Friday the court issued a declaratory judgment confirming the Earthquake Commission's maximum cover of $100,000 for properties and $20,000 for contents applied to claims resulting from both the September and February major quakes and associated aftershocks, rather than just the first one.

The decision effectively shifts hundreds of millions of dollars in liability for quake damage from private insurers to the EQC which only last week raised its estimated liability from $3.05 billion to $7.1 billion.

Mr Key said the additional liability for the EQC could be as much as $1 billion.

"We think that's probably at the top end. My guess is it's considerably less than that, but we won't know for some time."

Given the EQC's reserves are now effectively wiped out, the taxpayer, through a Government guarantee for EQC, will meet any shortfall.

Meanwhile, at yesterday's Cabinet meeting, held in Christchurch to mark the one-year anniversary of the September earthquake, ministers discussed insurers' reluctance to insure repair or rebuilding work, which was now hampering the recovery.

The meeting was greeted by a group protesting about Government action on the quake recovery, and other issues.

Mr Key said he expected the market to fix the problem eventually, and Friday's High Court decision would help to ease the insurance sector's concerns.

"Obviously we need insurance to be operating for the city to be rebuilt, so it's something we'll stay very close to, but our preference is, if at all possible, to find a commercial solution," he said.

"It's obvious there have been very substantial losses incurred by the insurers, they are taking a cautious approach at the moment. [But] our long-term prognosis for Christchurch is that it's not going to be a more risky environment than the rest of New Zealand, and arguably will be a less risky environment than other parts of the country.

"As soon as they feel the seismic activity is declining rapidly, we will see [insurers] come back to the market."

Earthquake Recovery Minister Gerry Brownlee said some insurers were still in the game. "We know that because we're paying invoices at a heck of a rate ... some of that work is progressing."

- NZ Herald

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