24 Dec 2014

Quake payout costs soar

5:53 am on 24 December 2014

The complexity of the Canterbury earthquakes led to a massive blowout in payout costs for major insurer Insurance Australia Group (IAG), its New Zealand chief executive says.

Earthquake-damaged home in Sumner, Christchurch.

Earthquake-damaged home in Sumner, Christchurch. Photo: RNZ / Diego Opatowski

The company's previous estimate of total claims costs was $3.25 billion but it has now announced the final cost could be as much as $4 billion.

IAG New Zealand's chief executive Jackie Johnson said one major reason for the cost blow-out is the complications involved in the disaster.

Ms Johnson said the knowledge of land damage, science, and engineering is ever changing, meaning insuring those affected by the disaster has been very difficult.

The figure had been revised because of higher-than-forecast repair and rebuild costs; the continued notification of new household claims which exceeded the Earthquake Commission's $100,000 limit; and a series of adverse court judgements that have impacted the insurance industry, the company said.

A formal assessment of its costs position would be finalised in conjunction with its 2015 first half results, due for release on 18 February.

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