It will be interesting to see where the Earthquake Commission has invested its vast resources – a huge chunk of which I assume will need to be liquidated in order to pay out claims resulting from the Chch earthquake. My understanding is that they have around 1/3 invested overseas and 2/3 locally.
Those who know more about this than I do will be able to comment on the impact on local capital markets as the EQC begins to draw down investments.
No.
EQC invests overseas, because, hey, lower values of assets destroyed by a natural disaster here wouldn’t make sense for an insurance company. They avoid geographical risk (which is exactly what they insure against) by not investing in the assets they insure.
The 1/3rd 2/3rd split you have heard is probably 1/3rd in liquid assets (cash and cash equivalents) and 2/3rd in less liquid assets (stocks, bonds etc). The less liquid assets are still pretty liquid. Its not like a finance company debenture or anything.
Or you know, you could look at the eqc website like the rest of us…
http://www.eqc.govt.nz/abouteqc/investmennofndf/sipsp.aspx
Ahhhh…of course, that makes total sense Matthew B.
Great organisation that Earthquake Commisson
So, reading my own link, it looks like 63% of their fund is in NZ debt, which has to be govt issued.
30% in international equities.
Up to 10% in cash.
So I got that very wrong. Sorry.
I’m surprised that the NZ Govt number is so high – that seems like an unusual call.
The website says $5.6bn in the fund, and who knows how much Chch will cost – $2bn seems to be the finger in the air consensus.
$2bn worth of international equities could be sold in a couple of hours, no worries.
I don’t know enough about the NZ Govts market to say what kind of numbers would impact the Treasuries market, but if we are finding $250m/week worth of new buyers, than finding buyers for the EQCs portfolio shouldn’t be too arduous. Might lead to flood the market temporarily meaning the government will have to take a higher yield on the bonds they issue to fund the government spending you guys seem to like so much.
Fortunately, if the cost is $2bn total, there won’t be such an impact – selling down govts and global equities proportionately will mean no impact on the market.
Matthew, $2b seems to be very much a stab-in-the-dark figure based on a phone call from NZPA’s Maggie Tait to EQC’s Iam Simpson on Saturday morning. I suspect he meant the global total might be $2b, of which some will be covered by insurance companies and some by EQC.
defer all South Canterbury Finance and you have the monies there in one lump sum.
The citizens of Christchurch take precedence over financial speculators.
Also Matthew if you read the Financial Statements of the NZ Government for the 11 months to 31 May (latest available), the fund now stands at $6.1b, suggesting a decent recovery of global equities from the 30 June 2009 figure when still recovering from the global financial crisis.
Remember their claim is capped at $100k per structure. Therefore, 20,000 homes at $100,000 per home is $2B. My calculator went to exponents to deal with this
The fund has approx $15b according to reports over the weekend. The cost of the earthquake is expected to be about $2b – but not all of that will come from the EQC – as the EQC covers the first $100,000 – then insurance cuts in after that. In the coming weeks I expect the liability of the EQC will become known – but I think the biggest cost will be the upgrade and repair of the sub-surface infrastrucre (Water and Waste-wate.
For me the most impressive thing has been the leadership of Bob Parker through the crisis. He has done an excellent job and exhausted as he must be – he does not seem to be slowing down. I think the people of Christchurch will be very thankful to the workers who haveworked endlessly over the weekend to restore essential services so quickly.
Monty, citation thanks for the $15b figure. I’ve quoted you the EQC annual report and Financial Statements of the Government.
Phil – I may be completely wrong – but I think it was John Key who in an interview said $15b (I could have mis-understood – I would trust the reports from EQC as being accurate)
Maybe that high figure also includes the insurance companies who pick up the tab in excess of the $100,000 initial EQC Payment? Certainly the EQC seems to have assets of about $6.6b only – which does not seem a lot in the context of need of a major event. (should those of us in Wellington be a little nervous?)
Monty it seems like you are repeating hearsay and ignoring the sources Phil has already quoted to magic up a number for the EQC which you have no idea what it consists of.
Yeah that’s exactly what I mean, FUD.
yes monty, the fact that parker did nothing more than what was required and necessary was, in my view very responsible handling of a difficult issue. showed up (don)key for the sideshow hick that he is.. so far all he’s done is muddy the waters on figures relating to repair cost and assets available to pay for reconstruction.
and, of course being the only polly cynical enough to use this as a pr opportunity.
Loota @ 9:00am
I DO like the way you think.!
My understanding is the $2b came from a Treasury exercise where they modelled different scenarios and this was the closest. Probably useful to get an idea of magnitude.
Monty, yes Key did say $15b on TV3 Saturday night and I have asked his office where that came from.
From the Financial Statements of the Government as at 31 May 2010, EQC has $6.1b, Plus they have reinsurance overseas, apparently about $2.5b. ANd beyond that there is a Crown Guarantee.
At least dont pay the $10 to $20m to the non guaranteed (overseas) folks at SCF and send that to the MayoraL FUNDS ASAP.
Loota – as Phil Lyth has pointed out and independantly confirmed there is a $15b mentioned. So in that context I was correct (but also note very happy to admit I could have got it incorrect.
Seems there are funds of about $6.6B – but the interesting point as phil points hout is that there is $2.5B re-insuance – I wonder at what point that kicks in – is there like an “excess” and if so is that excess $1B or $6.6B or somewhere in between.
Then there is the interesting question about what happens to those without insurance – my view is that they can go to hell – in they are uninsured then they took the risk and now have to pay the price. They should realise that the rest of our society should not pick up the risk for their gamble.
I think we have to be careful about rewarding folks for not insuring and risking folks relying on earthquake commission instead of insurance,which will fail because EQ only gets money from those who pay insurance (or have I misunderstood?)
I accept some people cant afford insurance premiums and rent or food or school books
A $15B mentioned? Which consists of what? Because you first said:
So if you weren’t talking about the EQC here what were you talking about?
Careless imprecise use of figures lumping together everything under the sun into one pot.
Typical. But you’re all for society picking up the $1.7B tab for the speculative investors who gambled in SCF?
Hypocrite of the worst order.
So what, you’re going to suggest that we leave a house in every street in Christchurch damaged and uninhabitable, while SCF fund speculators get 100c in the dollar for their risks?
108c
I stand corrected.
Loota you fool – there is no way I support the bail out of SCF – I understand the rationale for the Gaurantee scheme I think the people involved are fools and given the poor management of the company as expressed by Bernard Hickey recently. Like my views on tough luck for those uninsured, I say tough luck on investors for SCF. No hypocisy down here sonny Jim.
Those with insurance deserve protection – and will get it. The fools who thought they could could take the risk have lost – why should the country bail the idiots out?
They need to understand the concept of self-responsibility!
Key, replying to a press conference question said (if I have this right) that EQC has to meet the first $1.5b of claims before reinsurance of $2.5b kicks in.
160 State houses damaged in Chch.
Monty, you and I both heard Key say $15b. I am still waiting for a response from his office about where that number came from.
No my friend, you give people a hand up so the community as a whole can be stronger together.
And if you want to be a mercernary Righty about it, if you don’t fix up their homes, everyone else on the street will have their properties devalued by the unsightly rubble.
Also explain to me how having someone made homeless, possessionless and destitute teaches “personal responsibility”?
I guess your rich investor mates could swoop in and by the land up at firesale mortgagee rates?
One person’s tragedy is another’s cash windfall, is that it? Or is this all a way for Righties to feel smug and superior over their fellow man?
“Self-responsibility” NACT code for – you’re on your own, get used to it, if you want to get ahead fight it out amongst yourselves while we drink imported beers in the VIP box.
Loota 5:15pm and 5:17pm.
Well said mate!
Typical leftward response Loota. Ownership of assets means there is an inherent responsibility to look after those assets if you want to protect them. In respect of property that means paying rates, maintaining, paying bills like electricity, phone gas, water. If someone wants to run the gauntlet their issue but when it goes to custard then pay the price. Otherwise what would happen if we all decided no point insuring the government will bail us out. Well the $15b would not cover that off.
Thanks phil Lyth for that info about the excess. Very interesting that the EQC liability is $1.5b. I am pleased that those of us who pay insurance over the years have built up rainy day fund for such an instance.
I still think the the losers without insurance can go to hell – maybe a very good wake up call for others around the country that they will pay the price if they run the gauntlet.
That is the question, if the government pays out for all those that have no insurance it is a disincentive for people to get home and contents insurance in the future…
Does anyone know if we can give to the Mayoral fund.?
Jeremy, from the Civil Defence update on the Ministry website:
I’m assuming, reasonably I think, that this will all end up in the Mayoral Fund.
There’s been a little discussion across at Public Address about the uninsured – 5% nationally says Key.
At first glance, it would seem reasonable to move to a system where an EQC levy is collected with rates by local Councils, and passed to EQC. This would make cover pretty well universal, as opposed to the current system where the EQC levy is collected by insurers only on those properties with insurance.
And of course a Labour PM would have behaved completely differently in myriad ways we all intuitively understand. Yes, JK’s response to this crisis will be measured in the polls, won’t they, bb?
I personally can’t wait to see what they say.
Re: From whence came $15B – I too am curious. Perhaps he was thinking of his own personal fortune
Apart from that, IMO he’s performed superbly both as a Leader and as a man of action. I’m just waiting for him to go and shoot some whales harmlessly with a crossbow in order to tag em.
@Loota 5.15 excellent points my man
I’ve been slogging all day and most of the night and it’s good to see you 
@Anne – boy are you a sight for sore eyes
Evening Monty
@Jeremy – Some people could never afford insurance in the first place.
Monty @ 6:30 “I still think the the losers without insurance can go to hell”
That’s pretty harsh Monty. As Bob Hope put it:
“If you haven’t any charity in your heart, you have the worst kind of heart trouble.”
It may be some consolation to you that the situation of the uninsured is hellish already. Personally I’d like to see them back on their feet, and quickly.
Grandma and Wideboy live next door to each other in Seabreeze crescent which is well poked. Grandma can’t aford insurance and Wideboy plays the averages and spent what would have covered the insurance on a fat bore exhaust for the EVO.
Both houses are in several pieces with an “open flow” toilet and Al-Fresco ensuite.
Will the lefties now please explain why I should now pay for Wideboy to have his house rebuilt. Will the righties please explain why I should not pay for Grandma. ????
I think something that’s worth drilling into, Armchair Critic, is precisely why the uninsured were uninsured.
Obviously, this should neither divert nor delay neither resource delivery nor longer-term reparation.
Who has ever said it would?
Also, living in the Aucland Volcanic Zone. Should I be surprised/horrified/delighted if an ashfall collapses my roof. I stop paying insurance now. After all, volcanic eruptions can go on for months or years and who would build a house netx to a volcnao. I might not want to rebuild here.
Great comment Andy C
1, No one in the neighbourhood wants to see Wideboy on the John.
2, Living nextdoor to Grandma probably means that if we don’t fix up Wideboy’s home then that poor old lady will feel sorry for him, take him in and he’ll eat her out of house and home.
3, Wideboy’s ruined house, which he’s too lazy to get fixed, will become a haven for rats!
Yeah funny looks like certain people don’t give a…um, rats behind…if fellow NZers become street urchins and vagabonds due to an earthquake.
Ah well the NATs need an underclass to continue attacking so I guess this will do.
Remember its the lower socioeconomic groups who always have less resilience to shocks and down turns. We ain’t begun to see the effects of this quake on Chch society yet.
“Yeah funny looks like certain people don’t give a…um, rats behind…if fellow NZers become street urchins and vagabonds due to an earthquake.”
It’s sad to me Loota, that some people look to score a political point, out of a tragedy.
@Loota
Some of those SCF investor that where bailed out live in CHCH.
@Monty
I doubt you would have that attitude if that happened to you and you lost everything. Plus the insurance company refused to pay you out. There alot of people in CHCH who need help, the earthquake was out of there control. It not there fault that this disaster happened.
As for John Key, I was surprised by his response! It his home town and he has family living there. He turned up for a few hours then jetted up to Auckland to watch a netball game. He could of at least stuck around a bit longer.
In my eye’s he just turned up for show and treated a bit like it was some ‘cheap’ PR stunt. I know he has to ‘important’ thing but I this one of the worse disasters we had in a long time. He could stuck around longer.
Well Parker and the Nats can expect a bump in the polls, it seems to always happen after disasters, doesn’t seem to last though…
@Phil, thanks…
Don’t know if things have changed for the better; somehow, I doubt it. Just a few years ago, tenants were sued for the entire loss by their landlords’ insurance co when an accidental fire razed the property and it was discovered the tenants didn’t have contents insurance. I learned then how difficult and expensive it was for people who didn’t own their own home to even get contents insurance particularly if they did not own a car. No car no household contents insurance – go figure! Most of my clients were young and just starting out on their adult lives – with few possessions and limited incomes. Perhaps it is still hard for some low income people to even obtain insurance even if they could afford the premiums?
“Ah well the NATs need an underclass to continue attacking….”
Ah well Loota, Lab need an underclass to continue to vote for them, so it’s a win win.