Govt to make AMI announcement

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.

Finance Minister Bill English has just called a press conference for 10am in the Beehive, where he is expected to make an announcement on the situation.

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 $500m in cash and investments.

AMI chief executive John Balmforth, said just after the February earthquake that it was the worst disaster his firm had faced.

"We have not had events of this magnitude before, he said in late February. "But we had $600 million reinsurance for the first event and we have another tranche of $600 million we can draw down on and another tranche of $400 millon we can draw down on," he said.

He said AMI "had no issues meeting its commitments" but he predicted insurance costs will rise.

"There will be increases in premiums nationally. I think these will be across the board, that's just going to be a flow-on effect," Balmforth said.

New Zealand companies offered more affordable insurance than in many other parts of the world.

Balmforth said AMI was backed by some of the largest international reinsurers based in Bermuda and other parts of the world. Claims would be met.

"I'm completely confident we can cover this. I've had messages from reinsurers offering support and saying they are ready to assist."


- NZPA / NZ HERALD STAFF