9 Jun 2011

AMI says new reinsurance deals will cost it more

7:44 am on 9 June 2011

The Government-backed insurer, AMI, says it remains hopeful it will secure new reinsurance deals but is preparing to pay substantially higher prices.

In April, the Government agreed to a $500 million financial backstop package for the Canterbury-based insurer after it admitted it might not have enough in reserves to pay insurance claims from February's quake in Christchurch.

Like other insurers, AMI has been renegotiating its reinsurance arrangements ahead of the start of the new financial year on 1 July.

Chief executive John Balmforth has just returned from negotiations in Sydney, Bermuda, Europe and Britain, where he made presentations to 46 reinsurance companies.

He says the process has two or three weeks to go but he is hopeful of increasing reinsurance. However he expects reinsurance prices to increase substantially and says AMI's home, contents and motor insurance premiums will go up from 1 July to reflect that.

Home insurance premiums will go up by about 20%, contents cover by 15% and motor insurance by up to 5%, he says.

Meanwhile, AMI's credit outlook has improved, after ratings firm AM Best confirmed its A- rating with a stable outlook.

Previously, AMI had been assigned a negative outlook, because of uncertainty about the effects of the February earthquake.