Insurer Tower has called on the New Zealand government to legislate final time limits on Canterbury earthquake claims, to provide certainty and “bring about closure”.

Chairman Michael Stiassny says the group recently received 15 new or reopened claims and made a $NZ6.2 million ($5.72 million) Canterbury-related charge in the half-year to March.

“I did not think that almost 15 years later we would still be making provisions for the Canterbury earthquakes,” he said.

“Not only is the never-ending tail of Canterbury earthquake claims imposing huge costs on the government and insurers, customers are getting a raw deal.”

The insurer has also cautioned against a proposed 50% increase in the Natural Hazards Commission levy. Levies already make up a significant portion of premiums; for Tower, they could rise to 56% of an average premium under the proposal, the insurer says.

Mr Stiassny says there is “no knowing how long a claim will take to be managed by NHC”, which pays the first $NZ100,000 ($92,199) of each Canterbury quake claim before it becomes a private insurer’s responsibility.  

“A Canterbury earthquake claim transferred from the NHC today could still have years to run before the final costs are known ... Today’s policyholders are continuing to pay for Canterbury earthquake claim costs.”  

Mr Stiassny says time limits would “put a stop to the peripheral industry that has created a self-perpetuating gravy train. For example, lawyers and advocates prolonging disputes, while contractors actively seek ... damage in the hope of pinning it to the earthquake and getting more work. This practice is egregious.”

The devastating earthquakes struck the Canterbury region in 2011.

Tower says the current operating model, whereby private insurers manage a claim end to end, is working well for customers, with claims relating to the more recent Kaikoura earthquake and 2023 weather catastrophes settled quickly and with relatively few complaints.  

“But the Canterbury earthquakes remain an albatross, as the EQC Act did not set a time limit for reopening historic claims, and claims continue to be reopened,” Mr Stiassny said.

“We need to find a way to balance the ongoing needs of those with historical claims with the needs of future claimants.”

Tower is “actively encouraging” the government to reconsider a proposed increase to the NHC cap, to avoid the government taking on “even more of New Zealand’s natural hazard risk and other unintended consequences”.  

“Because the levy is applied uniformly, an increased NHC cap would lead to higher insurance costs for everyone, but those who will suffer the most are lower-income homeowners.”

The insurer also cautions against disrupting risk-based pricing “by sending the wrong price signals” and says the NHC changes would be “a direct slap in the face for homeowners who live in less hazard-prone areas”.  

“We must avoid the situation we have witnessed in California and Florida where insurers have withdrawn and the state governments have been left with a huge fiscal risk,” Mr Stiassny said.