Dom Post on bail outs

The Dominon Post editorial:

Poor old Bill . All the finance wants to do is sell things and all he ends up doing is bailing out failed private businesses.

Poor old taxpayers. They end up paying bills that run into the billions for those failures. …

Ideally, the company would be left to face the consequences of not reinsuring sufficiently and it would be allowed to fail.

However, that is simply not possible. AMI has more than 85,000 policyholders with 225,000 policies in Christchurch – about 35 per cent of the residential market in the city.

Ambiguity over whether claims on those policies would be fully paid out would make decisions on the rebuilding of the city difficult, and cause delay till AMI's financial situation was clearer.

That, Mr English acknowledged, could have been several months away. Delays of that order would have disastrous consequences for the whole country, which needs to have the city functioning as normally it can again as soon as possible.

Sadly, I don't think the Government had much choice.

I think there are lessons to be learnt here from both the SCF and the AMI collapses. They both were primarily based in one region, and with AMI especially, this has proven to be very unwise. People like to go with “local” companiees, but that means you are vulnerable to local shocks (literally). If your customer base is spread more evenly nation-wide, then you are better placed to survive.

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