Before the Christchurch earthquakes even began, Canterbury’s network of stopbanks, river control assets, and many of its bridges were wholly uninsured. From Thursday however, every part of the rest of Canterbury’s council-controlled infrastructure (and much of it around the rest of the country) will also be wholly uninsured—about $4.7 billion worth of above-ground and underground infrastructure in Canterbury alone that isn’t already damaged.
Turns out councils’ own insurance organisation, Civic Assurance (who have already paid out several hundred-million), can’t get reinsurance for the now-risky services.
So it turns out taxpayers and ratepayers will be directly on the hook for the multi-billion dollar risk.
So it looks like those who thought insurance payouts might be like a free lunch—like the stimulus a Krugman or Keynes might dream about—were wrong.
Turns out there really is no such thing as a free lunch, and the Broken Window Fallacy really is true: there really are no blessings from destruction. None. At. All.
UPDATE: Just to update the insurance situation then post-earthquake:
- reinsurers across the world are staying away from NZ
- council infrastructure around the country is likely to be uninsured—with the risk picked up by taxpayers
- one of the largest insurance companies in the country fails—and is bailed out half-a-billion dollars by taxpayers
- the government has begun a process whereby it will be nationalising virtually every damaged home in Christchurch—with taxpayers picking up the tab that should have been picked up by insurance companies
- it is revealed that the government’s antediluvian Earthquake Commission (who have been slowing down the Canterbury re-building) has more than two-thirds of its “investments” in government bonds—meaning little more than a “promise to pay” by taxpayers.
- Bill English continues to borrow $380 million more each week.
Lucky taxpayers have deep pockets, eh.