Brownlee Gerry: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Text is incorporated into the Bound Volume 
Brownlee Gerry: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Sitting date: 26 June 2012. Volume:681;Page:3331. Text is incorporated into the Bound Volume.] 
Hon GERRY BROWNLEE (Minister for Canterbury Earthquake Recovery) 
: 
 I just want to make a couple of comments mainly in response to some of the offerings this evening from Denis O’Rourke a new member of Parliament for New Zealand First. I appreciate that he wanted to say that EQC the Earthquake Commission had sort of done OK but he could not give it a full pass mark. I think one of the interesting things is that since its modern inception in 1994 where it followed on from the Earthquake and War Damage Commission the Earthquake Commission has come up for review repeatedly in the House and MPs from all sides of the House have quietly let it slide through without too much attention. It is not until you have a big disaster like this that an organisation like that becomes tested. 
As the previous speaker Nicky Wagner said it is dealing with some 680000 claims. Those are each individual exposure across the land damage the built-property damage and the contents. When you aggregate those per household it is still over 400000 household claims. It is huge. There is no other insurance company in the world that has ever dealt with anything quite so big from one event. The only one that comes close is State Farm an insurer in the United States that dealt with the very big claims that came out of the Hurricane Katrina event some years ago. The difference though between the Earthquake Commission and State Farm in the United States was that the Earthquake Commission had a staff of 21 people on the day of the 4 September earthquake in Christchurch; State Farm had a standing staff of over 77000 when it dealt with its big hurricane event in the United States. So from 21 people dealing with the huge number of rolling claims coming through it has gone up to I think round about 1200 people now. So it is still a pretty lean machine. It has tried to do as much by contract as it can because we do not expect to have these events occur with the sort of regularity that would justify a staff of some 77000 as was the case with its counterpart in the United States. So I think it has done a pretty good job. 
It is often forgotten that we have had a series of earthquakes there. There have been over 11000 shakes in total over 2000 shakes that have been of a very substantial nature and five events that have been of such a magnitude that they have triggered a series of Earthquake Commission claims from those events. As the previous speaker said it has repaired through the project management office 16000 homes now and at any one time there are 2000 homes in Christchurch under repair. 
I noted the comment from Mr O’Rourke where he said that there were some homes that needed to be demolished and rebuilt. The Earthquake Commission does none of those. Once you go over the $100000 cap it is in the hands of the private insurers. So the Earthquake Commission is dealing with those repairs under $100000 and over $10000. The idea is simply that we will be able to put a brand on those repairs that will see the value of the real estate that is repaired maintained through the years ahead. Had we been in a situation where the Earthquake Commission simply cashed up those who have got damage firstly you are relying very much on the Earthquake Commission assessor getting it right first time—there is no second opinion. But under the project management office arrangement when the builder turns up to do the work he does the work. I think that is a very important distinction. 
The other thing is that the Earthquake Commission does cover land damage and that is totally unique in the world. I think it is a great thing that we have got it and we must do whatever we can to preserve it because it has allowed us to put together a programme to do the proper geological survey that is required of many many parts of Canterbury to determine where the best areas are—or the appropriate areas are—for residential occupation. It is that process that allowed us to be able to say sadly to about 9000 households: “You need to move on because where you are living is no longer suitable for residential occupation. The crust under your house has thinned. The depth to bearing is now a long way below you. You may have slumped. The land may have moved’’—in some areas in Christchurch it has dropped by up to 1.8 metres—“and it is ideal that you do look for some other opportunity for your residential occupation.” We came up with the two offers that have gone out to people and people can choose one of those: either deal with your private insurer or sell the land to the Government and the Government will then negotiate with the Earthquake Commission about what the repair payment might be. There will be a very large net cost in this whole thing to the Crown; there is no question about that. 
But to go back to my key point without the Earthquake Commission we would have had no basis to start a land assessment and no basis in fact to engage with the private insurers about where the liability stopped and started. There is a bit of concern out there at the moment over apportionment and continuity of assessment methods for damage. They are being worked through in a constructive way. None of this is easy. If it was it would have all been fixed quite some time ago. But anyone who comes to Christchurch will see the huge amount of effort that is going in down there. I am not going to stand here and say that everything is perfect with the Earthquake Commission but by the same token I cannot accept that we should determine in this process that it has come anywhere near a position that would say it has done less than its best. I think it has done very very well in difficult circumstances. 
The payments that are being made into the local economy through the Earthquake Commission are no doubt contributing to some of the very good and positive figures that we are seeing around population stability and around the local economic growth as well. That will continue for a few years to come. We are just seeing the thin end of the wedge of what will eventually be invested in Canterbury in the rebuild. That simply puts an onus on all of us to ensure that there is sufficient economic activity coming in behind that big rebuild over the next decade to ensure that the prosperity in that province continues and that is certainly a commitment that I make. 
There was mention made of the Natural Disaster Fund and how it is somewhat depleted at the present time. Some people have proposed a levy on people’s earnings to try to top it up. The reality is that it takes many many years to build up a fund of $5 billion. A Government of course is always in the sovereign position of being able to strike a levy or strike a tax if it thinks that is appropriate. Our strong view is that it is not required at the present time and that we can stand as guarantor behind the scheme. One of the positive things I can report is that when the Earthquake Commission went into the reinsurance market recently to buy cover for the exposures that it has to prepare for going forward it was able to get that cover and the terms were reasonable given the circumstances. 
I want to conclude by just saying that as a major player in the home insurance industry in New Zealand the Earthquake Commission performs an exceptional service. If the $100000 cap is too low it is because this House has allowed it to stay at that level for the last 18 or 19 years. At some point we will need to look at it. I want to acknowledge that Mr O’Rourke has raised the good issue about whether the Earthquake Commission should continue to cover contents. Well I think that in the difficult insurance market at the present time you would not want to be mandating from this House a lack of cover or a withdrawal of cover for the whole of New Zealand. So there is going to be a transition period that will come after we have had the review of the Earthquake Commission which should commence later this year. 
I think that in very difficult circumstances this organisation has served the country well. I know that there will be people who listen to this who perhaps want to scoff at it but really I think the question is: how could it have been done better? There was no way that you could have had a standing army of 10000 15000 or 20000 people hanging around waiting for the day that there was the big one somewhere in New Zealand to go in there and fix it. When you are dealing with the sorts of volumes that it is dealing with there will always be ups and downs. There is no question about that. But overall it has done a very very good job. I think it does deserve a commendation from the House. Also just a little note that all of us as members of Parliament—particularly those of us from Canterbury who are also I might say in most cases claimants—will be watching that progress over the next however long it takes to get the job done with the intention of ensuring that it is done to the very highest quality. 
Report noted.