Insurance for Earthquake Prone Buildings

Recent events have highlighted the vulnerability of certain types of buildings to serious damage in the event of a natural catastrophe, particularly un-reinforced masonry buildings built before 1935.

A number of property insurers have pulled out of the market entirely and those who remain have both increased premiums and restricted cover.

Even in Auckland full reinstatement cover for such buildings can be difficult to obtain. The City Council allocates a rating as a percentage of the New Building Standard “NBS” and Insurers then set rates, terms and conditions based on that rating. The result is that many owners are seeing their cover being withdrawn or made subject to onerous conditions such as:

  • A reduction from reinstatement basis to indemnity basis of cover
  • In some cases effectively reducing cover to debris removal only
  • A deductible for natural Disaster perils of 10% of the sum insured

Significantly higher premiums for “earthquake/natural disaster” perils

Some owners and occupiers are choosing not to insure whilst those with mortgages or other financial obligations have no choice but to accept the terms offered in order to meet the lender’s requirements.

A Fresh Approach

Stamford is now able to provide insurance cover with Lloyd’s of London on unreinforced masonry buildings. The sum insured can be based on the re-building cost of the property and cover can also include loss of rent insurance.

The Lloyd’s market has a reputation for stepping in where others fear to tread and has been the world’s leading specialist insurance market for many years. Lloyd’s has an A+ rating from Standard & Poor’s (Very Strong) and will satisfy the most demanding clients in terms of security.

Stamford works with the building owner through a tried and tested process to get cover in place:

  1. Obtain a recent seismic engineer’s report and current valuation. We partner with world class professionals such as Aurecon who can provide expert assessments, backed up by onsite surveys if required.
  2. The future of the building would then be discussed with the owner to determine if it would be cost-effective to implement an agreed programme of improvements and raise the NBS standard.
  3. If such works are found to be cost-effective and the owner commits to these over an agreed timeframe, reinstatement cover will be granted, including a Contract Works extension to cover the remedial works.
  4. If the building cannot be improved, cover can be granted on an indemnity basis on the assumption that at some point it will be demolished, but the decision will have been taken in the light of accurate assessments.
  5. Banks have already confirmed that they will provide project finance to support building owners wishing to strengthen buildings.

So if you have unreinforced masonry as part of your portfolio, or you are involved in such buildings as occupier or mortgagee, let Stamford provide you with a world class alternative.

For further information or to discuss our services please call 0800 927 0100 or Contact Us