Sources tell me that insurance chiefs from the biggest reinsurers in the world are now pricing Wellington as “ground Zero for earthquake reinsurance risk” in the world. Not the Asia-Pacific. Not the ring of fire. The world.
And as a result practically speaking earthquake reinsurance cover is not practically available for commercial property in Wellington.
Yes some policies are being written on some buildings (usually ones which are up to code and have blue chip tenants) for 400% to 600% premium increases.
My apartment’s building insurance has already doubled and off memory it is at 80% of code!
In the Wellington commercial property market full insurance is a condition of all the mortgage business. Full replacement earthquake insurance is a standard term and condition.
In NZ most companies which carry business interruption insurance also need to have earthquake interruption cover to satisfy the conditions of the bank credit facilities. These often include warrantees around the quality of the building that business is being conducted out of – including the existence of earthquake insurance cover.
So what does this mean?
It means that the Wellington CBD property market is frozen. The only purchasers are ones which are buying with cash. There are hundreds, possibly thousands, of distressed mortgaged unit title and company share owners in the city.
It means rentals are falling and landlords are getting creative.
A good description of the problem.