Going further with EQC reform

Stuff reports:

Dr Michael Naylor, a senior lecturer in finance and insurance with Massey University’s School of Economics and Finance, said the proposals were weak and did not solve many of the problems affecting Cantabrians.

Other changes under the proposal include contents insurance being left to private insurers and earthquake land cover only applying to situations where homes could not be rebuilt on their original site and owners were forced to buy elsewhere.

“While these reforms are sensible, they are unimaginative and go nowhere near far enough,” Naylor said.

“Given the multiple problems of the dual insurer model exposed during the Christchurch rebuild, the Treasury needs to be bolder and to rethink the purpose of EQC, including the possibility of focusing on offering reinsurance cover to private insurers.”

He said EQC could be replaced if insurers were required by law to hold “excess-of-loss reinsurance”, which involved a large worldwide reinsurer agreeing to pay all losses above an agreed sum in the event of another disaster.

I agree, and have said this previously. The changes are good, but they do not go far enough. It is very clear that the huge delays in paying out claims have been because of needing both EQC and the private insurer to agree. The delays here have not happened in any other country.

Turning EQC into a reinsurer, is a model that would get rid of these delays in future.