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Recipe for disaster

25 Jan 2018

A policy think tank, The New Zealand Initiative, says New Zealanders know a lot about earthquake preparedness; but the government needs to attend to its own earthquake preparedness.

The Christchurch earthquakes provided a few more important lessons for policy. Government must plan ahead to make post-disaster recovery simpler. And it must avoid creating the prolonged policy and regulatory uncertainty that hindered Christchurch’s recovery.

Though the government responded quickly, and achieved much that was important, shortcomings became increasingly evident during the recovery phase. The over-riding Canterbury Earthquake Recovery Act 2011 had more virtues than weaknesses, but the latter damaged recovery.

The Act gave the planners too much power to egregiously impair private property rights, without compensation. The elitist presumption was that government needed to build major downtown projects if the business confidence for downtown recovery were to return.

Yet, in the event, the government lacked rebuild competence, and worsened downtown outcomes. It is telling that the most substantial downtown recovery has happened outside of the main areas of government control.

Meanwhile insurers and many households were mired in many complexities. The ground did not stop shaking, causing multiple insurance claim events. There were unprecedented liquification issues. There were EQC/insurer interface issues, and some serious legal uncertainties. The industry had to scale up massively; staff training was a challenge.

Much has been learned from the insurance difficulties. Insurance arrangements are improving, and we expect more satisfactory experiences for claimants and providers in future.

Recommendations relating to insurance suggest the Government should:

  • implement the proposed EQC changes, if supported by the Kaikoura earthquake experience.
  • consider mechanisms like the Reserve Bank’s Open Banking Resolution framework for failed insurers.
  • quickly seek declaratory judgments in key test cases arising after a major disaster

 

 

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