nother $250 million of taxpayers' money has been set aside for Southern Response, as the bill heads towards $1.25 billion.
After it was found AMI didn't have enough reinsurance to cover its 2010/11 Canterbury earthquake claims, AMI's non quake-related business was sold to IAG, leaving the taxpayer with Southern Response, which is responsible for settling outstanding quake claims.
At the time of the quakes, AMI was the country's second largest residential insurer and had a 35% share of Christchurch's residential insurance market.
A document released under the Official Information Act reveals that in March 2012, Treasury's "best estimate of the likely cost of the AMI support package over its life" was only $98m. While the Government in April 2011 subscribed to $500m of convertible preference shares in AMI, Treasury thought it would only need to cough up for $98m of these.
Yet the cost to the taxpayer is ballooning, as Southern Response’s estimated gross cost of settling claims before reinsurance (including project management and claim management costs) has increased from $1.86b in June 2011, to $3.03b in March this year.
The government in its latest Budget allocated an additional $250m to go towards helping Southern Response settle its outstanding quake claims.
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