Beginning 1 October 2022, EQC will cover the first $300,000 of damage caused by earthquakes, tsunamis, volcanic eruptions, hydrothermal activity and natural landslips. Private insurers cover damage above the EQC cap, which is currently set at $150,000.
The change will take effect over the 12 months from the October 2022 change, as people’s policies come up for renewal.
“The immediate damage of the 2016 Kaikoura earthquake and its long tail of financial and emotional stress, particularly on our apartment and building owners, has been something the city has felt deeply. It has been ruinous for some and its lessons for the future cannot be ignored.
“This announcement will help go some way to building confidence with a level of surety for the future that supports the commercial and social wellbeing of our cities and, small urban and rural communities,” says Mayor Foster.
“It is also an important step in supporting Council’s longstanding compact city strategy. This is critical in providing desperately needed housing, supporting a dynamic central city and vibrant suburban centres, and reducing pressure on transport systems and the environment.”
The Government move follows recommendations made in Dame Silvia Cartwright’s report from her 2018 public inquiry into EQC. The inquiry followed the insurance fallout from the Canterbury earthquakes in 2010 and 2011.
Wellington City Council staff worked with Dame Silvia as part of her inquiry and raising the cap, was a specific recommendation in Council’s Mayoral taskforce report on insurance, says Mayor Foster.
“The increase in the cap was specifically singled out by the Mayoral Taskforce into insurance as a key initiative to help grow Wellington’s resilience. For Wellington homeowners this would provide a measure of comfort.
“The Taskforce also called on the insurance industry to play its part through pricing insurance sensitive to the risk to each property - rather than postcode which seems to be the level of granularity the sector currently achieves.
“Increasing the cap is EQC playing its part, and now we’d like to see the Government and insurers recognise that this is also a major issue for commercial building owners, and that buildings that are seismically resilient present a lower risk than other buildings.
“Owners are playing their part through strengthening their buildings, and the City Council is about to release a new District Plan that recognises the risk of natural hazards, yet insurers base their premiums on an annual amount that bears no correlation to the substantial resilience investment in the city.
“Building owners and developers regularly tell me how frustrating it is that even the most modern, resilient buildings do not see appropriate recognition in reduced premiums. This is a very significant impost on the economy of our Capital City, with – I am advised - commercial insurance rates up to ten times the equivalent cost of a building in Auckland, despite the investment made in resilient technologies.
“I believe it is a reasonable expectation to have on commercial insurers that they will reduce their premiums in light of the uptake in risk by EQC. It is also heartening to see the Government will continue to monitor insurance pricing and consider a competition study to ensure consumers benefit from these changes.
“The Government knows this aspect of the market is broken, and I call on the Government and the market to address it – and soon.
“Insurance is one of the tools in our risk management package and we will continue to work with building owners on a range of other initiatives like quake-prone building strengthening and general household information to reduce our risks.
“I am now working to convene a follow up leadership group with the Government in order progress other ideas expressed in the Taskforce report,” said Mayor Foster.
You can read the Government announcement here https://bit.ly/3D1ULa8