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The Earthquake Commission (EQC) will receive $50 million under the Crown Guarantee, following the depletion of the Natural Disaster Fund that covers the commission’s operations.
The government has long expected the fund to run out, Minister responsible for EQC Megan Woods said. However, she noted, this has happened earlier than originally forecast due to “faster than expected settlement of claims, EQC’s land settlement with LINZ being finalised earlier than expected, as well as reinsurance payments being due.”
This is the first time the Crown Guarantee has had to be used. The first payment will be given to EQC on November 01.
“The payment to EQC is an operating grant and provides additional financial support to EQC alongside the Natural Disaster Fund and EQC’s reinsurance programme,” Woods said. “It provides a buffer so EQC can continue to pay claimants.”
The minister mentioned the latest cashflow forecasts, which indicate that EQC may need Crown funding of less than $100 million (including this first payment) over the remainder of the year ending in June 2019. In 2019/20, an estimated further Crown funding of around $170 million may be required.
“It’s not yet possible to say with certainty what the total Crown funding requirements for EQC will be,” Woods explained. “There are inherent uncertainties when estimating the outstanding claims liabilities from the Canterbury and Kaikōura earthquakes. Estimates will continue to adjust as new information comes to light regarding the inflow of new remedial claims, litigation outcomes and other factors.
She added EQC will continue to operate as normal and that EQC claimants can have confidence their claims will be sorted.
The Crown Guarantee has been in place since 1944 as part of the risk management arrangement between the Crown and EQC. EQC has paid $300 million over the last 25 years to the Crown for the guarantee.
