Brian Rudman: Insurance worries from on high

Let's pray the Government doesn't step in to cover churches, writes Brian Rudman.

The boutique insurance company that covers around half the country's churches has been brought to its knees pleading for mercy following the "acts of God" still rattling Christchurch.

In a move that could have come out of the movie The Man Who Sued God, Ansvar New Zealand has announced it will no longer cover churches for future earthquake damage.

In the film Steve, played by Billy Connolly, is out on his boat when it's destroyed by a bolt of lightning. His insurer refuses to pay up, claiming it was an "act of God" so Steve decides to sue the Almighty's agents on earth, the Pope and his local bishop.

It becomes a class action, with hundreds of similarly short-changed insurance customers joining in. The insurance company has to prove the existence of God so it can escape liability, while the Vatican, facing a ruinous bill if the insurers win, has to try to prove the opposite.

With Christchurch, the insurer has no "act of God" escape clause. Earthquake damage was included in its church cover and the cost to Ansvar, and its British-based parent, The Ecclesiastical Group, has been high. Since the first quake in September last year, the group has received $700 million of claims related to earthquake damage to churches and received just $35 million in premiums.

The parent company says this is its biggest series of losses. As a consequence, credit-rating agency AM Best has downgraded Ansvar NZ from A- to B++.

In response, Ansvar NZ will write no new earthquake cover, and will only renew existing earthquake insurance until December 1 this year. More than 600 churches of many denominations are affected.

If one were of a superstitious mind, a quick look at aerial pictures of Christchurch after the quakes would have one noting that churches seemed to have been singled out for specially savage treatment and have one wondering why. Perhaps, for instance, the Great Shaker was expressing his displeasure at discovering his flock on earth were hedging their bets, and taking out insurance against his wrath. After all, the Bible is full of tales of his willingness to smite those who disobey his rules.

In a sermon following the deadly February quake, Christchurch Cathedral's theologian in residence, Lynda Patterson, said some people "believe that the earthquake is a sign God is punishing us" and are rolling out their "favourite hobby horse" to blame. "I'm already starting to receive angry emails from people who insist that everything from transvestites in Latimer Square to the ordination of women to the Christchurch Wizard and - remarkably - the floral carpet are at fault."

She dismisses this as nonsense, along with the theology that "sees God like a puppet master who stands above the stage and pulls our strings with a supreme lack of interest". Ah yes, but can we - and the insurers - be sure it is her loving New Testament version of God that does rule?

Whatever, the insurer of London's Westminster Abbey and St Paul's Cathedral has had enough of acts of God in New Zealand, either deliberate or not, and is pulling out of this side of the business.

It appears it is not alone. From Florida this week comes news that insurer State Farm Florida is pulling out of insuring houses of worship in that state because of increased costs from hurricanes and other storms since 2004. In the United States, there are other insurers willing to take on the business, and New Zealand Insurance Council chief executive Chris Ryan says he's not overly concerned about Ansvar's decision. He said competitors here were likely to fill the gaps. Let's hope that occurs, and that the Government doesn't feel the need to step in.

The thought of the Government stepping in where insurance companies refuse to tread seems far-fetched, but alarmingly, it's not. Both Earthquake Recovery Minister Gerry Brownlee and Prime Minister John Key are refusing to rule out the Government becoming insurer of last resort if the rebuilding of homes and businesses is stalled by the reluctance of insurers and overseas reinsurers to write new insurance in the Christchurch market. Mr Key wants a "bit more time" to work with private sector providers before coming back for another look.

But breathing down his neck is Labour leader Phil Goff, who says a Labour Government would resolve the insurance stand-off, by, as a last resort, intervening on a short-term basis to get the market functioning again.

Whether you believe earthquakes are acts of God or of nature, the reality is, predicting their occurrence is a mug's game. But you do like to think professional insurers have a better idea of calculating the odds, and spreading the costs, than politicians.

The world's insurers, having taken a huge hit from Christchurch, are saying it's time for a breather, and for caution. We should listen to them.

The taxpayers of New Zealand already face a rebuilding bill of several billion dollars. The last thing we need is to add to the debt by dabbling in insurance the private providers fear is too risky to touch.