Tuesday, 23 July 2013

So, is there any reason EQC shouldn’t shut up shop?

EQC is bankrupt.

There, someone had to say it.

EQC is not some benevolent organisation with bags of money ready to swoop down at times of need to dispense capital. It is an organisation with no capital at all that is just a roadblock to those trying to rebuild after disaster.

Even before the Christchurch earthquake, the Earthquake Commission was skating on thin financial ice. Set up by government after the Napier earthquake to pay for earthquake damage out of government savings, rather than by taxing or borrowing, by the time the ground shook under Canterbury the ambition had been reduced to paying only for the first $100,000 of damage per home (setting up a another layer of confusion through which crippled home-owners have to leap before being able to get their real insurance payout) and its coffers had been so reduced that the EQC had only around $1.5 billion of real assets to call on.

Because it turned out that when the earthquake hit and the spotlight turned on this erstwhile small and dusty corner of the bureaucracy, instead of building up the Natural Disaster Fund, governments had been quietly pilfering from the EQC’s jam jar, leaving behind only little bits of paper IOUs. IOUs payable by you and I.

And after the Christchurch disaster, every real asset in the Fund is now gone. The Fund is done. Finished. Empty. Over. The Prime Minister admitted as much yesterday, saying

_Quote_IdiotWe know that the EQC fund really has nothing in it from the last, from memory, time I looked at it. But
in essence the Government just backs that up.

See what I mean? The EQC fund has nothing in it … in essence you and I (from whom, in the end,  the Government gets all its dosh) just back it up.

Or to put it in its simplest terms, it’s just a Ponzi scheme that you and I are required to pay into.  A bankrupt bureaucracy, an empty tin, that times of need isn’t there with the necessaries—instead it sends around folk hired to hold a clipboard and with the job to say “No.”

So what is it really there for?

And is there any good reason it shouldn’t be closed down forthwith.  Before we have another real natural disaster in which people have to rely on this buggered and bankrupt bureaucracy .


  1. The EQC was set on the course to bankruptcy in 1993 when it withdrew from commercial eq cover and became a first loss eq insurer of domestic house & contents. The premium rate was fixed and no allowance was made for the increase in exposure caused by inflation over the years. Also the premium income raised from levies every year was dwarfed by investment income, even after politicians had raided the pot prior to 93. Obviously that investment income has gone and the tripling of EQC levies that we saw last year cannot replace it.

    At this stage there is capacity from private insurers to insure earthquake from the ground up. They should be left alone to get on with it.

    If the government really wants to put taxpayers on the hook for earthquake losses they should do it as a reinsurer of the private insurers. That way they become a financier of eq losses if the private insurers ever pull away from areas that are uninsurable, but not a frontline claims handler - something government entities have shown they are not good at.

  2. "Or to put it in its simplest terms, it’s just a Ponzi scheme that you and I are required to pay into."

    By "you and I", you mean citizens, right? People who live here are not necessarily citizens.

  3. I mean anyone who pays taxes here of buys insurance for here.


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