Failed Queenstown company Western Pacific Insurance has cancelled 7000 insurance policies and its ability to pay claims of the Christchurch quake victims remains unknown - until overseas reinsurers settle their payouts.

It is the extent of the "significant financial exposure" to the Christchurch claims - at least 155 of them - which tipped Western over, after its directors Graham Smolenski of Queenstown and Jeffrey McNally of Australia became concerned about the company's solvency, in spite of injecting $500,000 into Western late last year.

Western was placed in voluntary liquidation on April 1 and owes almost $6 million to creditors and unsettled insurance claims. It had about 7000 policies across the country, with about 50 per cent of its South Island business being Christchurch policies.

Unsecured creditors were understood to be owed $3.8 million while unsettled insurance claims were about $1.95 million.

It was understood those 7000 policies became null and void last Thursday when liquidators David Ruscoe and Simon Thorn, of Grant Thornton, wrote to policyholders, outlining reasons for cancelling the policies.

"All insurance policies held by Western Pacific Insurance have been cancelled after the liquidators were unable to sell, transfer or assign the business," the pair said yesterday.

The cancellation was made under Section 269 of the Companies Act 1993, with the liquidators disclaiming the Western insurance policies as "onerous property", the effect being "the cancellation of all policies immediately", the pair said.

The liquidators gave little indication of what insurance claimants can expect in the near future.

"Our priority is to ensure that reinsurance with offshore companies can be collected. Once we confirm this amount, we will be in a better position to progress the individual claims," they said, noting they hoped to update policyholders at the end of May.

Western's website said it had successfully renewed its reinsurance treaties last December, for the calendar year 2011, with a total of 15 reinsurers, which included seven Lloyds syndicates.

This month the liquidators said the claims of both Western policyholders and creditors were expected to increase after the February Christchurch earthquake.

Alongside the money owed by the reinsurers, is also how much is involved in the "significant amount" of premiums still being held by brokers. Liquidators identified this issue this month but did not mention it yesterday.

Since appointment on April 1, the liquidators said they had been reviewing and checking all client insurance policies in respect of which premiums were paid and registered with the company and which were valid.

For policyholders who have claims to make, before the cancellation last week, the liquidators were keeping the claims department operational, on (09) 365 1642.

The liquidators said to assist former Western policyholders find alternative insurance cover, they had entered into a "preferred supplier agreement" with Tower Insurance.

- Otago Daily Times

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