The Earthquake Commission has more than doubled its original estimate of the cost of damage from the Canterbury quakes from $3.05 billion to $7.07 billion.
Most of the cost of the earthquake claims will be met from the EQC's Natural Disaster Fund which held about $6 billion a year ago.
Finance Minister Bill English says the fund will be run down to zero over the next couple of years and the Government will pick up the shortfall.
Mr English says the new EQC estimate is based on available field assessments of damage claims, including those from the 13 June quake and other aftershocks, at a cost of $1.4 billion.
The estimate for the devastating 22 February earthquake in Christchurch has risen by more than $2 billion, he says.
Earthquake Recovery Minister Gerry Brownlee says the increased cost to the commission will not delay rebuilding in Christchurch, nor affect homeowner's claims.
EQC chief executive Ian Simpson says the commission will have a much better idea of its total liabilities for the quakes by the end of the year.
Mr Simpson told Checkpoint the final figure will be known only when the rebuilding is finished, in three to five years, depending on the amount of labour.
Disaster fund wiped out
The Earthquake Commission's nest egg, the Natural Disaster Fund, held about $6 billion before the first big quake on 4 September last year.
That fund will not be enough, however, and Finance Minister Bill English says there will be an impact on the Government's books, pushing out the operating deficit by $1.3 billion taking it to $18 billion in the June 2011 financial year.
Mr English says the Government accounts remain on track to return to surplus in 2014/15, and net debt is still expected to stay under the Government's target of 30% of gross domestic product.
The estimated earthquake liability will be partially offset by higher than forecast tax revenue and lower-than-expected costs, he says.
Mr English says the Natural Disaster Fund will run down to zero, and if there are further significant natural disasters, the cost will have to be met by the Crown and the commission's re-insurance.
There will be consideration at a later stage of how to rebuild the fund, including whether there should be levy increases, he says.