Regulatory Alerts2022-05-17
Earthquake claims: Canterbury 2010-2011 and Kaikoura 2016
The New Zealand Superannuation Fund presented a June 2018 sessional meeting update on the financial status of the Canterbury and Kaikoura earthquake claims. The report details that paid claims reached $34.6 billion for Canterbury and $1.4 billion for Kaikoura, with estimated ultimate costs significantly higher at $36-39 billion and $2.5-4.5 billion respectively. It highlights that while payment rates for Kaikoura are faster than Canterbury, the latter still faces increasing costs, difficult litigation cases, and remediation issues.
Earthquake claims Canterbury 2010-2011 Kaikoura 2016 NZSA sessional meeting June 2018
2 Overview Canterbury Kaikoura Paid to 31-Mar-18 $34.6 billion $1.4 billion Estimated ultimate claims cost gross net of reinsurance (existing) $36-39 billion $13-16 billion $2.5-4.5 billion $0.7-0.9 billion Funding of ultimate claims cost reinsurance (existing) existing capital post-event (new capital, ADC reinsurance & future profits) ~$23 billion ~$8 billion $5-8 billion $1.8-3.6 billion ≤$0.9 billion $? (EQC only)
3 Canterbury earthquakes • Rate of claim payment slowing • Ultimate costs still increasing for some – median +15% of outstanding at Dec-16 • Mixed success with ADC reinsurance – 5 fully or materially utilised – of which 1 @ nil recovery & 1 @ 50%
4 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 $b $b Paid, ultimate incurred & outstanding claims Canterbury EQs, all insurers incl EQC RBNZ estimate Paid Ultimate incurred Outstanding
5 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Mar-18 Mar-18 Paid as % of ultimate incurred claims (at date) Canterbury EQs, insurers excl EQC 16% to 84% range median
6 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 300% 320% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 300% 320% Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Mar-18 Mar-18 Latest incurred claims as % at date Canterbury EQs, insurers excl EQC 16% to 84% range median
7 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 300% 320% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 280% 300% 320% Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Mar-18 Mar-18 Latest hindsight outstanding claims as % at date Canterbury EQs, insurers excl EQC 16% to 84% range median
8 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Mar-18 Mar-18 Ultimate incurred claims 22-Feb-11 allocation Canterbury EQs, insurers excl EQC 16% to 84% range median
9 Canterbury earthquakes • Difficult cases left including litigation • Remediation issues – Extent? Cost? Liability? • EQC issues
10 Kaikoura earthquake • Ultimate costs large % increases & decreases – particularly first 6 months, more stable since • Payments as % ultimate faster than Canterbury • Higher % paid residential than commercial
11 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 $b $b Paid, ultimate incurred & outstanding claims Kaikoura EQ, all insurers incl EQC RBNZ estimate Paid Ultimate incurred Outstanding
12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Oct-16 Apr-17 Oct-17 Mar-18 Mar-18 Paid as % of ultimate incurred claims (at date) Kaikoura EQ, insurers excl EQC 16% to 84% range 50% percentile
13 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260% Oct-16 Apr-17 Oct-17 Mar-18 Mar-18 Latest incurred claims as % at date Kaikoura EQ, insurers excl EQC 16% to 84% range 50% percentile
14 Discussion