Early estimate puts Kaikoura quake insured losses at $US3.5 billion

The insured losses from the Kaikoura earthquake could run to $US3.5 billion, with at least half of that incurred in Wellington and up to 30% in Canterbury, according to an early estimate by a US-based catastrophe modelling firm.

AIR Worldwide released its estimate, which doesn't include uninsured damage, just days after the November. 14 quake, which at magnitude 7.8 was one of the four most powerful to strike New Zealand since 1855.

Some 27 buildings in Wellington city are classified as being at risk, including three the city council is demolishing and government buildings that have been condemned.

"Much of the central business district and waterfront of the capital is underlain by soft sediments, which amplify ground shaking," says the release from AIR, which is a unit of New Jersey-based Verisk Analytics. While Wellington initially appeared to have survived relatively unscathed, building inspections had shown up the extent of the damage, it says.

The government has now extended its employee support subsidy for quake-affected businesses o some specific businesses in the Wellington region and says the $7.5 million allocated could be extended.

Among the Wellington businesses affected by the quake, Centreport lost virtually all of its container operations, disrupting its 130,000 TEU-a-year business during the peak October-to-March period, with its two gantry cranes and container berth out of action. Chairman Lachie Johnstone told Radio NZ there were "demerged piles and they have fractured."

The port company, which is 77% owned by Wellington Regional Council and 23% by Horizon Regional Council, will welcome a container vessel tomorrow but it will be equipped with its own crane for unloading, as are a handful of vessels in most global container fleets, and will dock elsewhere. It is too early to put a cost on the damage, Mr Johnstone says. Its cruise terminal has been abandoned, with passengers now bused straight into the CBD.

"We're well insured" with a combination of insurance for the infrastructure and business interruption, he says. Asked by Radio NZ how high the cost of business interruption could be, he says: "We don't know. But we do know we're well covered for a number of years."

The port company is hoping to gain fast-track resource consents for any work it undertakes. The scope of the work could be significant, with Mr Johnstone saying while it is too early to say what the port will end up looking like, it will look "different". It estimates freight over its wharves amounts to a $2.5 billion contribution to New Zealand's gross domestic product.

"We're definitely a sustainable long-term option. We're going to have to reassess how we do business," he says.

Wellington-based insurance risk consultant John Sloan says the Kaikoura quake is likely to dredge up some of the same issues for insurance cover as were evident after the two Canterbury quakes, even though issues such as the extent of commercial insurance and EQC cover had been clarified.

"Many problem areas will still arise in the wake of the Kaikoura earthquake which also had a significant impact on Wellington commercial properties," Mr Sloan says. One such issue is in self-insured claims deductibles which run at about 5% in the Wellington region. That means the claimant must bear the first $1 million of a site's insured value of $20 million.

"It is likely these claims deductibles will rule out many claims that fall below the threshold," Mr Sloan says.

(BusinessDesk)