There have been dramatic scenes at the America's cup in Bermuda with Team New Zealand capsizing at the start of its second race of the day against the Bristish team Ben Ainslie Racing. Our America's Cup correspondent Todd Niall was at the Team New Zealand base. Transport Minister Simon Bridges has been caught trying to block an Official Information request for details about a proposed new 50 million dollar Auckland railway line. Kiwirail argued it was legally required to release the information, but the idea of releasing that information was making Mr Bridges 'extremely uncomfortable.' A man believed to be an Algerian student has attacked a police officer with a hammer outside Notre-Dame Cathedral in Paris. Our correspondent Peter Allen says there is still a heavy police presence. The Labour Party says the government is short changing the health sector to the tune of $2.3 billion. The party's leader Andrew Little says funding hasn't kept up with the growing population and changing demographic. The United States secretary of state Rex Tillerson used a fleeting visit to Wellington yesterday to emphasise the importance of the Asia Pacific region and denying the US is stepping back from involvement here. Foreign affairs minister Gerry Brownlee says the US pulling out of the TPP doesn't prove anything. The immediate aftermath of the devastating 2011 Christchurch earthquake and its ongoing impact on residents' mental health is being described as a recovery of two halves. The latest wellbeing survey from the Canterbury District Health Board shows that one in five people, predominantly those living in the eastern suburbs, say they experience stress most or all of the time. Nicky Wagner, the Minister supporting Greater Christchurch Regeneration, says the city has a good quality of life when compared to the rest of the country, despite a new survey showing one in five people say they experience stress most or all of the time. Ms Wagner, says 82 per cent have a good or very good quality of life in Christchurch, which compares with 81 percent nationwide. She says the east side of the city is very low lying and suffered the most damage and work is still being down in that area.
In September 2010 and February 2011, the Canterbury region experienced devastating earthquakes with an estimated economic cost of over NZ$40 billion (Parker and Steenkamp, 2012; Timar et al., 2014; Potter et al., 2015). The insurance market played an important role in rebuilding the Canterbury region after the earthquakes. Homeowners, insurance and reinsurance markets and New Zealand government agencies faced a difficult task to manage the rebuild process. From an empirical and theoretic research viewpoint, the Christchurch disaster calls for an assessment of how the insurance market deals with such disasters in the future. Previous studies have investigated market responses to losses in global catastrophes by focusing on the insurance supply-side. This study investigates both demand-side and supply-side insurance market responses to the Christchurch earthquakes. Despite the fact that New Zealand is prone to seismic activities, there are scant previous studies in the area of earthquake insurance. This study does offer a unique opportunity to examine and document the New Zealand insurance market response to catastrophe risk, providing results critical for understanding market responses after major loss events in general. A review of previous studies shows higher premiums suppress demand, but how higher premiums and a higher probability of risk affect demand is still largely unknown. According to previous studies, the supply of disaster coverage is curtailed unless the market is subsidised, however, there is still unsettled discussion on why demand decreases with time from the previous disaster even when the supply of coverage is subsidised by the government. Natural disaster risks pose a set of challenges for insurance market players because of substantial ambiguity associated with the probability of such events occurring and high spatial correlation of catastrophe losses. Private insurance market inefficiencies due to high premiums and spatially concentrated risks calls for government intervention in the provision of natural disaster insurance to avert situations of noninsurance and underinsurance. Political economy considerations make it more likely for government support to be called for if many people are uninsured than if few people are uninsured. However, emergency assistance for property owners after catastrophe events can encourage most property owners to not buy insurance against natural disaster and develop adverse selection behaviour, generating larger future risks for homeowners and governments. On the demand-side, this study has developed an intertemporal model to examine how demand for insurance changes post-catastrophe, and how to model it theoretically. In this intertemporal model, insurance can be sought in two sequential periods of time, and at the second period, it is known whether or not a loss event happened in period one. The results show that period one demand for insurance increases relative to the standard single period model when the second period is taken into consideration, period two insurance demand is higher post-loss, higher than both the period one demand and the period two demand without a period one loss. To investigate policyholders experience from the demand-side perspective, a total of 1600 survey questionnaires were administered, and responses from 254 participants received representing a 16 percent response rate. Survey data was gathered from four institutions in Canterbury and is probably not representative of the entire population. The results of the survey show that the change from full replacement value policy to nominated replacement value policy is a key determinant of the direction of change in the level of insurance coverage after the earthquakes. The earthquakes also highlighted the plight of those who were underinsured, prompting policyholders to update their insurance coverage to reflect the estimated cost of re-building their property. The survey has added further evidence to the existing literature, such as those who have had a recent experience with disaster loss report increased risk perception if a similar event happens in future with females reporting a higher risk perception than males. Of the demographic variables, only gender has a relationship with changes in household cover. On the supply-side, this study has built a risk-based pricing model suitable to generate a competitive premium rate for natural disaster insurance cover. Using illustrative data from the Christchurch Red-zone suburbs, the model generates competitive premium rates for catastrophe risk. When the proposed model incorporates the new RMS high-definition New Zealand Earthquake Model, for example, insurers can find the model useful to identify losses at a granular level so as to calculate the competitive premium. This study observes that the key to the success of the New Zealand dual insurance system despite the high prevalence of catastrophe losses are; firstly the EQC’s flat-rate pricing structure keeps private insurance premiums affordable and very high nationwide homeowner take-up rates of natural disaster insurance. Secondly, private insurers and the EQC have an elaborate reinsurance arrangement in place. By efficiently transferring risk to the reinsurer, the cost of writing primary insurance is considerably reduced ultimately expanding primary insurance capacity and supply of insurance coverage.
