1. What is the Value Proposition? 3rd International SPONSE Workshop
Performance of Non-structural Elements in our Buildings
What is the Value Proposition?
3rd International SPONSE Workshop
John Lucas - Insurance Council of New Zealand
31 March 2016

2. ICNZ – Who Are We. What is Our Interest in Earthquake Resilience ?
28 members covering 95% of all General Insurance
provides insurance coverage for about NZ$600b of assets
premiums paid to protect these assets $5.26b with claims incurred of $2.3b in any normal year.
Total cost of Canterbury earthquakes $41 billion
approximately $21 billion from private insurers
approximately $12 billion from EQC
Balance self insured
20% of gross Domestic Product
Commercial Losses $10.3 billion

3. The ICNZ 15 Point Resilience Plan
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Publication Statement on the Required Steps to Make New Zealand more Resilient to Natural Hazards
We point out that currently there are no controls requiring compliant seismic non-structural design in our buildings and this need to change
We recommend that NZS4219 must always be followed both for new and retrofits.
Recommend Included in Annual Building Warrant of Fitness Inspections

4. What a Seismic Non –structural Failure could Cost a Business
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Building Not Habitable
Someone being injured
Cost of Repairs
Loss of Rents for Building Owners
Business Loss of Profit & Relocation Expenses
Potential Work safe Liabilities for Directors.

5. New Health & Safety at Work Act on 4 April 2016
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Employers face increased fines for Heath & Safety Breaches.
Personal Liability for Directors.
Cannot Insure for Fines but can for Court Ordered Reparations.
Safety of the Work Environment would include working environment earthquake hazards and the risk of injury to employees.
Employers will likely demand work places with state of the art Seismic non structural Performance.

6. Case Study – Wellington Building July 2013
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New 6 Level Building completed in 2009
Modern Seismic compliant Structure
21 July 6.5 Earth Quake Event 151km from Wellington
0.16 PGA in Wellington City
Internal fit-out & Services damaged on 2 top floors
Potential Losses $12 million
Estimated Cost on NZS4219 Compliance 1.6% of Construction price
$1.3 million

7. Seismic Resilience is Paramount
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New Zealand has a 90 to 95 % Earthquake Insurance take up Rate
Japan & California have much lower rates.
Insurance Costs are high and cover availability is restricted
International Reinsurers Cant fully support Japan & California
New Zealand's Earthquake maximum Loss limits are Manageable
For New Zealand Earthquake Reinsurance Rates are reducing
California & Japan tend to build in better resilience
Reinsurers may not continue to support New Zealand on easy terms

8. New Zealand indebted to the Global Reinsurance Market
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The Canterbury 2010/2011 Earthquake 2nd largest Natural Catastrophe event for global US$28 billion
Japans Tohoku Insured losses were US$40 billion (total Cost estimated to be US$210 million)
New Zealand Earthquake Catastrophe premiums contribute to 0.1 % of the Global Premium Pool.
Japan will repay its Reinsurers in 5 years
New Zealand will repay its reinsurers in 35 years .

9. Fortunes From an Economic Cycle
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Historically Low Bond & Interest Rates
Global Pension Fund Capital looking for better returns
Reinsurance is providing higher returns
Large amounts of capital flooding into Reinsurance markets
Cheap capital has driven Catastrophe Insurance rates to record lows
New Zealand is riding on that fortune
What will happen when rates rise and another large Catastrophe event occurs?

10. Nothing Lasts Forever
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The World Economy will improve and interest rates will rise
A large insured earthquake event will occur
Pension fund investors will loose some money
Available capital to reinsurers will decrease
Catastrophe reinsurance costs will increase.
Insurance may become less affordable for most New Zealanders
Insurance may become unavailable for those risks that are not resilient.

11. Thankyou The Value Proposition for Earthquake Resilience?
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I am sure tomorrow better performance of Non-structural building design it will be valuable!
Thankyou