 I'm sure you want to call us to see what All right, well good morning everyone and What I'd like to do is You get assembly Thank you, Mr. Chair and good morning everyone board members of the public Staff here and those listening in on the web. Thanks for joining us this additional meeting of the Seeing governing board a direct governing board or we have really unique opportunity today to hear from a special guest Thank you. I'd like to yell addition to the issue of facilities We are pleased to be here this morning and grateful for your attendance The the focus of today's this morning's discussion is really informational and Educational and an opportunity to engage in issues that sometimes our formal board meeting agenda doesn't allow us to get into Discussion topics as is this the Presentable interests in a moment Indicated very happy to be very informal but entertaining questions for members of the public as we go through this it will be presenting on a really remarkable Event series of events that took place in New Zealand a number of years ago and the tremendous challenges that they've been working through ever since the Earthquakes that struck Christchurch, New Zealand both in the fall of 2010 and 2011 presented not only that country, but really our Conrad and our arms organization the New Zealand earthquake that insurance commission with extraordinary series of challenges and We will benefit from we have been benefiting from and we will benefit today from hearing from the first-hand accounts of how they've been dealing with those challenges the First of the two major events that struck Christchurch was in August September And it was a couple months after that that a few of us had an opportunity to travel to New Zealand be hosted for a Incredibly educational week by dr. Kohn our guests today and others of the earthquake Commission To get a in-depth look at how this organization was gearing up to respond to this massive earthquake That's where we could produce massive damages I've just included here just a couple screenshots that photos that I took While we were there in November that year showing up home badly damaged Granite put up the picture of the coffee club for you that was owned by the sister of a woman who worked in the trainer's office and and He told us to look up who we were there and we had a cup of coffee at that At that place in the downtown business district that business was destroyed in the earthquake that would come a couple months later and On the bottom you see Tim engaging in the mayor invited us on our last evening there by this to attend a town hall meeting series of meetings such as which were taking place throughout several one period of time is as the officials were gaining input from the affected homeowners and Concert about that how the recovery is going to take place And this was just a subgroup that was getting in puts and they put all the input together and and better informed Themselves in terms of the pulse of the how the community was feeling the mayor and that as a town hall meeting was winding down He invited me to say a few words a hundred or so that were in attendance and introducing me to them these citizens of Christ Church who Most of whom had homes have been badly damaged But who did have financial protection as a result of the program that the doctor home will be describing The mayor introducing me indicated that we came from the state of California Home with this similar earthquake risk, but a place in which only 10% of the Residents have their homes protected by earthquake insurance and there was an audible Collective gasp in the room. I'm gonna forget it as people there tried to just imagine for a moment what their life would have been like and they've not had earthquake protection in place to deal with the challenges they were facing so there was a Very impactful trip for I know Danny and Tim and I and and a couple of the colleagues who have had a chance to engage in similar opportunities later And our intent here today or hope is to help you sort of gain a first-time insight in terms of the Challenges they've experienced and the ways in which they've been dealing with it the New Zealand earthquake Commission Really is our closest counterpart in the world similar in some respects different in in many others and those similarities and differences will be described to you by our guests and dr. Hugh Cohen a PhD who's who's studied and worked around the world in the field of earthquake science is bio is before you he has asked me not to Embarrassing by reading it also But suffice it to say that You were very gracious very grateful for your time. He's day one of a long Global trip you arrived in San Francisco yesterday. I got up to Sacramento last night and his body clock is not quite on our time zone but but he was very happy to be a part of this Presentation this morning. So with that, let me just turn it over to you and Invite all of us to listen and participate and ask whatever questions come to mind when he's when he is through with the presentation we've got a couple of questions from our individual perspectives of communications and and mitigation and interest transfer that we might ask by way of sort of Opening it up to a broader question. That's a period but that throughout the time and then after Absolutely welcome So that you the four tears welcome that please dr. Hugh Cohen Good morning, everyone Lucia Working for the day, perhaps As ground described we have been on Quite a journey over the last few years since the onset And hopefully sequence in the southern part of New Zealand September 2010 and over a 14 month period we experienced 10,000 Outshocks some of which were large enough to reduce significant additional damage the losses the plan witnessed with his team November 2010 were We're compounded and exceeded by the earthquakes that followed in 2011 Which there was significant loss of life and and which We're also grateful to acknowledge looking back the support we received from many international teams including an urban search rescue team from California And We are now well into what we want to reconstruction phase. That's a period of recovery or Read statement that's probably going to span about 15 to 20 years but here in our fifth year of Recovery following those losses I thought I would share with you first of all a Reflective series of images from the the earthquakes themselves Post-last environment and then move on in the second part of presentation to talk about Recovery itself what our role role of my organization is and indeed Complementarity of roles and range of private sector organizations and then touch on some of the lessons learned Prepare our community for whatever the next so just Moving into the into what I think is a bit of a recap of the earthquake experience, I thought we'd share this because Only on the eve of This earthquake sequence we were dealing with a community that perhaps not unlike yours had little personal experience Yes, we had experienced local events events affecting small parts of Of our communities But it was 70 years since the previous significant Loss in the old center So our community was not particularly well attuned to the complexities that would arise from a major So even now Five four and a half five years into the recovery those those acute memories or experiences are beginning to debate in our community and in the anticipation of some future loss It's worse Just reminding oneself of what and obviously the the in this case the natural peril is a great and We as in California Experience from time to time damaging damaging quakes associated with on various breaks in the earth's crust Nevermind, I think we'll leave it to your minds eye to See how the palace the road that once was Was straight across the candidate planes not unlike the terrain around here You can see there's shifted horizontally that was the event that land was describing early 2010 That caused very extensive liquefaction Saturated soils lose their strength and with the water pressures of all large volumes of sediment surface structures built on those soils In some cases we're very badly affected they settle the foundation settle unevenly the floors stress and strain and You can see it's a Quite a mess to clean up In this case a gas station or city underground tank that has floated to the surface as a result of the actions this was the most spectacular catastrophic experience of the faction in urban setting that we can see 1964 so again and thinking about that 50 year period in which One of the science of earthquake risk and the You know the risk financing arrangements and the insurance markets all mature Here was an event whose attributes Presented some truly unique challenges in terms of the Again a nervous setting you're dealing with You know high concentration of people in the case of the September earthquake It happened in the early hours of the morning. There was no loss of life Although it was extensive property damage But the earthquake that occurred in February of the following year Could not have occurred in the worst place in the worst time. It was busy busiest time of Day in the middle of a working day Central City was full of workers shoppers travelers and The earthquake was centered Almost directly beneath the city the losses were very easy Both to all their unreinforced masonry Buildings constructed in the 19th century by the early settlers as well as a number of new when you were a lot of facades of parapets A lot of what you might call non structural Damage that compounded the difficulties that the community faced in extracting itself from from the Central Business District and In many cases preventing the Reoccupation of all those businesses the impacts in the in the residential Environment it's a suburban setting where our structures are very similar in many respects to California like Timberclad timber frame dwellings Brown motions were strong enough in some areas to See many homes lose their room lose their cladding. I mentioned the ground effects where large Sections of soft soil spread towards waterways and down the slope literally tearing And and on the hills suburbs around Christchurch where the homes are built on rock essentially on a good strong foundation the local amplification of the shaking was so great that Many of the contents of homes and many of their roots Homes themselves Accelerations just the way that scientists as long as engineers measure ground motion exceeded Literally coming out of many buildings that did not collapse of course posed a very significant risk To have subsequently being bought. I think the relevance of many of these images To your communities this is Evident enough in the sense that much of the development that we have seen in Christchurch spans the last hundred sixty hundred seventy years It's a common period of practice and design did so to the last to the last occupant but This building is clearly and I mentioned loss of life and there were a hundred eighty five Eighteen six lives were lost most And 1960s reinforced complete frame Building there were other large modern buildings that Did not collapse but the damage was such that they posed a threat to the surrounding commercial district and We presented with unique challenges associated with the contingent business interruption and business continuity where Home already a business might not have suffered any material loss directly as a result of the earthquake but as a result of Damage to neighboring structures and particularly tall ones such as this entire blocks Limits of a month So there were there were pounding Factors that that really introduced a lot of complexity into the into the recovery an example of a large commercial building that achieved what engineers might have good points technically repairable in terms of the experience it yielded all the right places as it were to preserve life safety, but in the wake of the loss the appetite of the community to reoccupy not to store buildings was so So seriously affected And within months building such as this was surrounded by Overground we're all other buildings that we've moved so economically and socially And come back to it later, but it was At this point will be discovered as did many of the private insurance companies the complexities that arise policy terms and conditions when you're trying to when you're trying to assess the residual capacity or the future performance of the building that has been through a serious and is potentially repairable But at what point does building with his experience such a point isn't no longer as new terms of the insurance response tremendous rising from unique attributes of the loss and The challenge of recognizing policies and and societal expectations with Demolition of course Was the very and there was still a number even five years four or five years on there's still a number of buildings that have yet to be Ground performance in those areas where the water table is close to the service Was a unique Defining feature of these of these events And of course for all the damage that occurred above ground Imagine what was happening to pipes to wastewater bridge structures or structures levees Railways and here's just a comparison Oh an image on the top left Which I took from an Air Force Helicopter in Me days meeting the following February earthquake looking back into the central business district and here's a Similar image With with one structure Remaining and link deficit Context and you can see that was about so 12 months is almost exactly 12 months 15 months later the amount of open ground the amount of Central business district that had already been demolished same photo taken the same image taken today would show even more open ground, but it would also show the appearance of cranes and other heavy equipment associated with the region which is now getting under work starting with some of the public funded anchor projects justice And we anticipate in the next few years Renewed investment on the bank insurance So hopefully that We trolled through some of the images from those earthquakes shaped context for for balance of Discussions day in which I'd really like to to share some of the You know some of the contextual background to We are what the earthquake Commission does how we face in the private market What our role is in both deliberate outcomes for social policy and political economy as well as underpinning the risk financing arrangements for so There's just a bit of narrative To describe where we are we're like California. We're on the On a major plate boundary. We live on the front line as it were We experience sizing events for the time challenge for us is that in terms of managing risk is that the geological assets in New Zealand is Delivers very perfect signals. It's a it's a it's a very volatile Environment in which to try to price risk because we have very few centers of population So earthquakes the outcome of an earthquake is binary It's either zero because the earthquake is out in the middle of nowhere. There are just sheep and cows and national parks Effected or Strikes an urban center and if it's one of our larger urban centers That we're looking at a significant fraction of our gross domestic product and risk So if we've got that volatility that we have to manage and as net importers of capital small population less than five million We we have to not only understand what it is. We're living with we need to understand the cost of which we can transfer some In order to help sustainable sustainable basis for so we found over the years that a mixed private public Approach has served us well and these recent earthquakes are the most significant in the history of our organization which began at the end of the Second World War, which was also a period period in which New Zealand Communities had been affected by a series of natural disasters from the late 1920s to the early 1940s Different parts of New Zealand were were struck repeatedly by shallow destructive earthquakes and It coincided with a period of economic depression global depression and world war also and Our parliament a government at the time was Conscious of the level of under insurance And lack of access to Construction there were some communities which many years after the particular earthquake had not been able to rebuild So at the end of the Second World War the earthquake Commission was established and It entailed the introduction of a living on fire insurance premiums such that Any homeowner purchase the fire policy they would automatically receive The earthquake commission cover and they would pulse really So solidarity principle it was easy enough to reduce at that time today But it was a flat rated premium and it allowed a fund to be established and with one or two other provisions Set out to ensure that in the event of natural disaster earthquake volcanic eruption tsunami landslip activity will fire from any of those perils that The citizens would receive enough of the title insurance entitlement to be able to get back into the modest home So it's a first-last scheme. It's a first-last insurer and We so we're providing basic cover round up for the dwelling and modest contribution And through this arrangement We're effectively providing a deductible for the private market who come in on top providing affordable top-up cover to ensure that our home owners Are effectively sure for these natural parents. We have our scheme operating only in the residential market so We ensure the first hundred thousand dollars of the dwelling loss first twenty thousand dollars of last contents and we have we also have Protection for land under a complex rules, but nevertheless this this $120,000 deductible has allowed private market to offer top up cover on a voluntary basis That has ensured we Enjoy 90% market penetration. I think from Glens comments earlier you you experience around 10% We probably have one of the highest Penetration rates will why I think maybe in the Netherlands Seeds our cover With 5% of our housing stock Provided through social housing, which is self-insured. We believe we only have about 5% So that's a that's a significant level of protection non-residential property commercial property infrastructure that is entirely with the private market or in the case of public infrastructure In some cases it is insured in some cases Okay, so I described the loss of life with the that was probably the That was probably the defining a defining moment of In which public awareness of our experience of earthquake changed with the September 2010 earthquake Although it was a larger earthquake Because no lives were lost. There was a sense in which we dodged it most of the losses And it drove the economic losses those economic losses now estimated around 40 billion Significant loss and because of the high-level insurance protections Insurance was something like 80% Perhaps Year We received So this this We The liability The most significant Managed to be a program Sure that the reconstruction capital would be used would be deployed to reinstall They did that for several reasons one was to manage a patient Small and tight we used to say an earthquake in California occurs in ocean resources That's great. It's even because we were looking at having to significantly Slail up our spots, and we believe that had we cash Wanted to avoid two-tier Construction Scarlet The other thing that was Fertuitous about the government's direction to establish such a program Was that we had scaled up and had the contract resources in place at the time of the February 2011 Immediately redeployed Delivery of the emergency So the focus there was to ensure that homes were safe Sanitary and secure And to ensure that every home had at least one source of heating reinstated to the onset Which can be 50,000 more than 50,000 emergency repairs Period during which the earth continued to so That was something we had never done before We knew that it would be just over 65,000 So how well were we prepared for this in terms of the scope of scenario planning You know, I think one lesson that's worth sharing is that an adaptive response is An adaptive response is what you need to be able to do need to plan, but the plan itself May be a very resemblance to the reality We there you can see in terms of the scale of losses the largest historical events in under who the 1968 is from 2007 We're really consequential compared to those that we We're just in 2010-2011 We commissioned in 2009 a review an independent review of our catastrophe response People with international experience in logistics management Response and they assess that we should be planning for response in the major event at the level of about 80,000 names and they were comfortable with our expectation of 150,000. What we experienced was In financial terms, the canterbury boxes, our liability, is comparable to probably the maximum loss we're running to at about 90% So You think about how you're modeling your potential financial exposure We all understand that we tend to work with millions of millions This type of Peril that we face is very rare by consequence You really need to be telling the tale of the distribution Not bad, but it could possibly be What is it that we really find? And we were certainly very thankful to find the financially least of the macro level We had the resources that we needed, but we only had it because The other thing that we've discovered is tremendous has been of tremendous value is our ability to Leverage a range in order to inform we have a mandate which I'll touch on shortly a statutory mandate to facilitate research so that in the quiet times between these Risks that it faces And incrementally over time So we when these earthquakes occur we have mature Relationships and arrangements in place in the science and engineering of our private public sector and We've made extensive use of and technologies spatial mapping tools Etc in order to acquire evidence-based The losses and of course we're using those to inform insurance To ensure that as we or others reach a determination around insurance entitlements that we can offer a transparent Explanation a lot of what we do In between the events is focused on trying to do research Public education is equal to building and maintaining public awareness and particularly in periods between events Prior to these losses The New Zealand community probably about as aware as maybe the California Memories very much here to run priorities are very much set by the issues of the day I think in your community here, but something must have been happening recently Well for us, it's the same earthquakes. It's tomorrow's problem Through our public education program. We're also building awareness of the role. It's a contribution to community most of those Insurance protection In the absence of a loss If we wait for these losses through our research program, we've made in the last two decades some quite old investments Older the sense that Research and education is not tied in a sense to residential housing related to our explicitly to our Although we leverage various wards of our commission have over years sort to position DQC's Investment in such a way that would build the overall society. This geo-connected is a national hazard monitoring system So it's a definition of racialism Active volcano something and tsunami detection The things that we have realized through the investment in GMM have been Really quite incredible. We've and even within the context of the kind of earthquakes We Auditory observations of how the buildings were styled and how the grounds that most other jurisdictions and those Observations rather than merely informing academic understanding or scientific Right of the heart ability To quantify the performance of buildings to form the vision the revision of the construction practice and indeed to inform an assessment of insurance and for the public themselves to understand What was going on? the demand for information that is growing almost exponentially since since that period and For those of you interested in understanding the local requirements that we've made All of this of course is possessive on the web the popularity of our web presence has Allow us to reach out It's not just science Etc. We're finding that these connections Through into the insurance Well, yes, I think the at the macro level these conversations of course round into Our engagement with you help us to provide more transparent understanding We're finding that It's equally important for us to explain to our own communities how we Land mentioned at the beginning of a much longer trip Reinsurance markets Reinsurance collections And our continuing access to those markets is The role that they play Reconstruction, but it also reflects the confidence that they have in our approach And I think we are having Managed this exposure those who have Be those So thanks very much So miss sure the floors wide open we have a fair question. Maybe to kick things off. That's okay Or if you've got questions you'd like to go into right away. That's fine, too. What's your pleasure? You go where I have questions Well, just a couple of Points of first of all, thank you so much for being here and sharing this experience with us and certainly have many commonalities and One significant to you and I'm very appreciative of that Sure, a couple of questions I have Population Population affected by the earthquake would be around 300,000 350,000 perhaps regionally It's our second largest city And what percentage we talked about the loss of commercial in the downtown overall What percentage of loss was there based upon? Well one measure we could one measure that our treasury and central bank have Have reported is 15 to 20 percent of GDP 15 to 20 percent GDP loss Just Pretty pretty significant if you compare that to about 4% for to go to Japan and paradise. I'm not sure The central business district I think was affected in two ways one of course clearly material losses Encouraged where buildings were damaged or destroyed but There was effective loss of economic livelihood arising from The fact that the entire central business district remained locked down for months In fact for more than six seven seven months Due to the fear of aftershocks triggering further collapses Collapses of damaged buildings and that there was a very controversial move that decision that Central government through the our office the emergency services or civil defense emergency management made It was very difficult to maintain or to uphold that commitment, but of course some Whenever there was a significant aftershock, of course people reminded why Why they kept out so the the economic losses were both material and and Contention in terms of loss of loss of trade. Yeah, was the government primarily responsible? I mean, how did you deal with the temporary housing of the There was actually very little demand for temporary housing Principally because and this was an accident of timing because we had been directed to contract a construction firm to organize a home repair program at the time of the February 2011 earthquake Which did the most extensive damage to both commercial and residential communities We had a workforce already in place and we deployed them to affect emergency repairs to keep the population In place to ensure that they could continue to live in their home. So we repaired We have broken glazing damaged hot water cylinders, you know Damage rules etc to keep the population in place to actually to avoid the need for Extensive temporary housing Yes, I mean there were many other Agents involved both government and non-governmental You know there was a with an extensive network of welfare coordination services dealing with both material financial and social needs health mental health etc and The challenge Challenger many of the lessons learned of course arise from the Unfamiliarity of interaction and coordination Well, then our GeoNet monitoring system is Is a modern it is a system that that would provide the the underpinnings for any such Early warning tsunami early early detection and warning of tsunami is the most compelling case that That we have for early warning Or that and volcano surveillance So we we are already organized in such a way as to provide The aviation sector with the warnings of actually dangerous and this kind of thing problem with earthquake early warning is That it's only effective if the earthquake source is is that some distance from You know the communities at risk and in many in many cases we sit right on top of them so that rather limits the you know the scope for earthquake early warning, but certainly We're big on an investment in in the underpinning science And its connection to social application and Thank you so much for being here. It's really interesting and one of things one observation two questions something that I find very interesting is every disaster is an opportunity for learning and so we haven't since this organization has been in existence there and in the same learning opportunities And very great to give you but you know just your observations about how long the company is going to take This pretty consummative modeling in terms of Plans turned out to be That's interesting and good for us to hear Couple questions that I have since the California earthquake authority One of the questions that they get quite a bit is they'll they be strong enough to spot an after a big event and I think we've answered that question obviously You see it's still in existence, so I'd be curious to know is that a question that you thought of over at the time And then the other one is just our perennial question that we Might tackle look at release the head is the take-up rate in California. I just wondered if you had the insights Is there something in the history? Insurance is voluntary Do you have any insights in why you're taking a break so significantly higher? Okay First question Solvency we are technically insolvent If we were an insurance company we would be technically insolvent Because on a curved basis Fund is fully allocated to the canister losses With a short for possibly half a million dollars Which the for which the the reinsurance develop the reinsurance will not be sufficient Why is this not an issue? For us well We we also enjoy a government guarantee So standing behind EQC in terms of the legislation under which we operate Is a government guarantee to meet our abilities For this reason we are we're able to We have always been able to To organize the scheme And offer a little protection Which is helpful not only to the homeowner, but to the continuing viability of the private market That You know I guess in some sense it's unique so we are still we still exist and we expect to continue to exist because We enjoy that that financial backstop now This is the first time in our history that we have come anywhere close to possibly calling on that guarantee We may it may be touch and go they're based in mind that They're sorry bearing in mind that our expectations are currently formed by natural forecast not not the claims development as such but That is clearly an important component of our Sustainability in terms of take-up rate Although two things one is In New Zealand for most folk their home is there Is there a major asset and I think culturally Speaking whether or not there's any bank lending involved. We have always had We've always had a strong insurance culture But having said that if you buy a private fire policy from any provider and that is entirely Free choice You will compulsorily receive our cover. We don't issue policies We provide cover in the form of a living on private policies So we have to take your risk and you have to take our cover it's flat rated and For that reason it is affordable so let's say it's too affordable And one of the reforms of our act or our legislation that we anticipate over the next year or two We will be looking to adjust Structure of the scheme But we will be doing so with with with with close attention to the impact of such reform on the underlying policy so Picture affordability or insurability and the affordability of insurance is is is a is an objective of We are an instrument of social policy using the insurance model. We are very business-like But we are not for business and yet the private market Would be unlikely to offer affordable cover where it not for the $120,000 deductible we provide in the form of our first loss protection. So really it's that it's the compulsion With the scheme And it's universal application and the fact that that facilitates its price at a level that facilitates wide spread uptake of insurance And I think just one note to maybe finish my point on is that From a government perspective the government understands of course that in the absence of such a scheme It would be brought into play through through welfare and emergency Funding arrangements the beauty of the scheme the earthquake commission scheme is that it allows the government to define To impose some discipline on the context and extent to which it's Liabilities will will Take shape in the wake of The government expects that in the absence of such a scheme It would be expected to provide such relief, but it would be unmodeled and and possibly a Lot more difficult to manage in terms of expectations Give me just a quick follow that if I could it's really compulsory mandatory Protection offered by the use is not a policy, but basically a program Prior to the price church event the cost for that Layer was about Maybe sort of 60 or 80 dollars. Yeah a year. Yeah, you are on seven seventy dollars a year. It's gone up to just over 200 So there was a three-fold increase in the living post post loss, but Nothing so far has Happened to the camps And these are matters that the government will be considering through the treasury as As we progress a review of the scheme If I could This was the area that I was interested in more conversation about the the combination of the mandatory requirement Coupling that with the ultimately the guarantee provided by the crown but National alongside that the re-insurance protection that's gained in the private sector seems like to me all Those factors combined to place the community of prices in a position where 90% of the world we have You have some awareness of we've over time explored ways Diversifying our risk transfer by it by obtaining some fashion of some sort of Guarantee the federal government which politically Did not feel like it happened We've explored ways of providing some sort of state-based layer of all the protection and the time does not appear right to be Pursuing any specific role in that area. We're not quite there yet. I don't think But we're not given up and we continue to explore my if I could just ask you sort of generally Knowing that we rely very heavily on the insurance the the And as a result 40% of what are possible to be us To our re-insurance been the Basically touch on the the benefits that you see of a blended approach whereby you retain important re-insurance Protection which you always have and I believe we always will but the benefits that you get when you are able to play alongside that a Bit more risk transfer of team in some sort of mechanism that would be Distributed on a portion of these well, it's Thanks, it's a it's really it's a trade-off and effectively we are providing protection for his income balance sheet and over the years we have had conversations with Treasury and the private market regarding where we should sit Loss, it's it's a challenge of course to develop a truly holistic understanding of balance sheet risk I could say that our government is interested in trying to achieve this today than perhaps in any time with us Mindful of the experience of the global financial crisis some debt crisis fluctuations in their off and of course in the way bastards, I Don't think we have any approach other than an understanding that by that we're trying to retain Risk to the point where we can optimize the cost of transferring So when our fund years ago when our fund natural disaster fund was very small We the attachment point for our re-insurance program was also proportionally low much lower than That is today. So as a fund grew We pushed we purchased re-insurance for the run terms of a potential loss and since the category earthquakes with the fund Allocated to those losses on an incurred basis at least We've simply tried to buy as much insurance protection as possible We've yet to have that explicit Conversation with the government about the trade-offs between fund size and re-insurance protection I would anticipate that this will be a feature of Of the review of our arrangements, but one thing is for sure. We are net importers of capital We are always trying to need to transfer a component of our risk. The question really is What is What is the government? What is the community's appetite for mention? It's a judgment or it's it's one You more question that aren't if that's all right, Chris Red dots, and I thought that's slide said that Oh, yes I just didn't refer adequately to I Yes, that's a good point The worst affected areas there are about 7,000 homes In areas where the liquid faction or the physical effects of the earthquakes was so severe that the government took a decision Purchase those properties to offer Residents a way out Recognizing not only that the cost of reinstating housing and related infrastructure would be very Significant, but the time required to do it would be disproportionately long for those affected and so this was really seen as a way of Bringing resolution to to communities To local communities who really lost Including the service connections. So yes government Purchased purchased both land and dwellings and under an arrangement that actually allowed home owners to Negotiate an outcome with their private insurance company if they prefer to do that and all by the handful of those households have now moved on Rebuilt elsewhere Are there areas in New Zealand Disfactor, but they're still subject to the 70 or $200 a year. How's that handled? How does that work out politically in New York? right, so Yeah, so our levy is a Tax on private fire policies for our program is flat rated throughout the country There is given that we cover a number of perils and including fire following There is probably no community in New Zealand that has zero risk Given that we even those areas that are remote from say seismic or volcanic effect Still subject to landslip during high-tensity rainstorms and so forth. So No one has a zero risk exposure. Certainly some have a greater risk then Then others but the value of the scheme given it is first-last by its very nature Is that it it it mitigates against adverse selection it mitigates the risk that that only people in Relatively low risk areas will be able to attain come over conversely the people who really need it can't get it so And of course the the premium It's rather affordable. It has it has low earthquake risk. It has some and it has volcanic risk Yes, yes, they are and of course they are they periodically experience you know extra tropical cyclones that Dump a lot of rain and produce slope failures and so forth and we end up by them for those losses So our attrition losses historically have been highest in naturally Rated Yes, everybody plays the same Right, what's our time kind of it's a private insurance company here as we see it You could magically turn back time I mean so having a look at your communication strategies and techniques Preparations prior to a big event Based on your experiences after the question How would those communication strategy They would be very different. We would know who our customers were for example For a start. I mean I have emphasized to guess in the presentation so far those attributes of recovery And I think have worked pretty well and which are probably greatest interest to the global community the macro risk funding at a micro level Some people would characterize their experience as be of their insurance company or of doing VQC as far worse than the earthquake themselves In some cases because the sheer scale of The loss and time required to deliver entitlements to to assess and just parents We're dealing with a community that that had was experiencing a loss of control Lots of agency as it were for the first time ever And we were dealing with folk with whom we had No knowledge of or no prior connection to because we don't sell policies and The commercial providers the private insurance companies did not historically have not provided Portfolio information to us prior to event We were receiving claims from people we had no We ended up no knowledge of And and through claim enlargement and various other Aspects of claims handling Involving the interface between the earthquake commission and private market that was far from ideal Reflecting You know that historical complacency The absence of a loss where there was no need to interact Was no need very few claims historically went through the cap. So we had private market private insurance market was Had very little experience of dealing with earthquake losses We had very little experience in needing to deal with large numbers of claims all at once So what would we do differently? We would know who our customers were We would have far better Arrangements for the coordination response with the private market be that technically in terms of loss adjustment or Or socially in terms of A joined-up approach to communications By that We're well on the way to Developing material in those arrangements, but certainly certainly that would be one area that we would do very differently I thought you wanted this back Well, first of all, thank you for that presentation and also thank you California homeowners have already benefited from the QC in the recovery and then I had the privilege of spending a week there and I think my This group certainly knows that dr. Cohen put me in contact with all different aspects of the recovery and Was able to bring that back and a lot of it is is informing our mitigation program I'm glad this slide is up because you know data is just so key to so much of what we're doing and as an engineer So much of the data that we get is it's really skim Because it's it's fire information. I mean, we're getting it from a different industry than an engineering industry so you have amazing data for the the soil failure in in the earthquake sequences and That we can definitely learn from you have your your t2 and t3 t1 and the various levels of Reinforcement of the soil and foundation that you had to do We don't have quite the water problem Park is a huge water program, but it actually serves the earthquake community Because we don't have the high water table In terms of ground shaking I would imagine that because you've managed the construction you also have a lot of data on How various types of houses performed in the earthquake so do you have any plans right now to to Know you're you're almost there, but to kind of call through that and to get lessons and to get information Yeah, absolutely. Well, actually better than that. We're sharing that data with anyone qualified to work with it themselves. I mean, we're doing a bunch of stuff with the data We were never playing a monopoly wisdom or insight when it comes to working with such information and Already now for some months we have been sharing information In aggregate but in aggregate at a level that is detailed enough to inform a lot of different modeling applications While preserving or upholding commitments and privacy legislation and so forth that Reaching Anyone's privacy That information whether it be from Plain repair portfolio or from the data that you see here Is it is available in terms of a very simple non-disclosure agreement? So we've been providing this to both research institutions re-insurance companies modeling entities uses of the end-of-the-models And and if it would be of interest to you or others in this community We're only two having to to share and we do so through our mandate to facilitate research and education It's part of that board of mandate one Thanks you for the presentation. Very good job. Let me ask you a question about the legal setting in New Zealand System and a little bit of comparison You're in this country recovery from natural disasters Stands over a substantial period Of course getting up to victims very important short-term long-term et cetera But it's very common that there are Tracted and extremely expensive steps where participants and victims deal with the legal ramifications of the events that victims are often legally represented They may be leading insurance companies or governments insurance companies themselves even reinsurance companies Are involved in wrangling over who has to pay and when and what How does the insurance respond if at all? Really heard from you that the Christchurch earthquake sequence took New Zealand society Far beyond the stories of just individuals It really was a question of is canterbury a place to live What are what are society's hopes and fears about being in that place Continuing earthquakes over a period of 16 months Continue to cause damage certainly contributed to that In your view how has New Zealand's legal system and the actions of various participants in the recovery Influenced the Christchurch recovery and Related to that. Are there any changes in the legal system that you think might be advisable Thinking about how the QC and the government might approach the next Christchurch question think the question as to whether There might be refinements world legal system or to or to the way in which parties to the recovery Coordinate, I'm sure these things will be addressed in Indeed, they are being addressed through a number of reviews that are underway with regard to performance buildings in case of the virus that followed the commercial building collapses and the implications for Mitigation practices and building act. I think there are questions perhaps as to how we change my ability in the Context of business as usual Viability, I think in most jurisdictions is channeled to in terms of consumer protections Is channeled to economic agents and own branders and producers Who are expected warrant performance of the good or the service and I think that works pretty well for vacuum cleaners and washing machines TVs It doesn't necessarily work so well for a foundation That takes into account variations in soil natural soil from one side a lot to another And what we are seeing is a degree of conservatism being The inverse form of past the parcel when music stops you find that somebody's put an extra rap on it rather than Taking the rap off. So I mean that's perhaps a nice problem to have You know, I think that in our community, it's it's not so much Changes that would enhance protections as changes that might help optimize or improve the evidence base for For legal determination, I'd have to say our experience of dealing with the courts has been in context of insurance Insurance liability has been very positive We have approached the courts twice during the approach to the courts with the trans council in New Zealand in order to seek declaratory judgements Judicial ruling on how certain provisions of our legislation might be best interpreted to bring clarity to To the outcome rather than contention Yeah, the council is the the organization that represents the private market all those licensed rules So We approached the the courts for for a ruling on the read statement provisions of our policy We approached them again more recently for ruling on On some aspects of our of our legislation that concerns the Defines damage to land and how Our insurance liability related social provisions might be applied and Translated into a settlement pathway in both cases the courts have provided clarity and And have facilitated recovery rather than being so I can't really I can't please I can't think of any any to mention to the to to to the recovery experience in which Legal issues have been a problem. I mentioned earlier with respect to the forms of buildings the difficulty that we and And actually in particular private market Have in reconciling policy terms and conditions with the attribute with the physical attributes of a loss You know how many cycles of motion does a building go through before it is no longer as new There have been a number of buildings written off for Judgely in a total losses on the basis that folk are unwilling to accept Performance could be sure in the future. So I think if there's as we go back into the modeling of risk and Managing of expectations. I think there will be greater attention paid in underwriting to The wording of policies Not to sharpen up the exclusions but simply to To deal with the complexities and confusion that arises when When when languages It's simply to general Sure, you don't mind that on your behalf Now be a time to ask members of public You see cover all of them forgive me In fact, it's that it's done about the you see covering fire policy, but they could buy additional earthquake coverage. That's so so generally speaking Private carriers offer natural disaster protection excess of the EQC protection now those they will exclude it below our cap and And offered about the cap so it is a well according to fire policy But in fact it is it's a It's effectively what is It just like a follow-up in that last response So to clarify Girl a homeowner you will have earthquake coverage up to the limit that you purchase in all instances Yes, you when I understood your question correctly, you will have Typical homeowner will have the EQC cover up to the EQC limit and above that limit will have Additional cover through their through the private through the private market now at the time of the category losses Most homeowners in New Zealand enjoyed the benefit of privilege of open-ended replacement policies new for all Since the losses The New Zealand insurance market has moved Almost all policy holders to some insured policies It is still possible to get full replacement through a couple of carriers a Unique footprint in our community, but the the majority of Policy holders homeowner policy policies now are some insured can't some insure Then just one quick follow-up question. What happened to the cost of the earthquake coverage in private sector after the losses? It went up and it stood out Reflecting also the increase in the hotel market, but it is still Love and thank you for that great presentation. It's been fascinating. I I'm curious. I believe one of the earlier slides mentioned that Private insurances is the coverage that's available for non-residential buildings in New Zealand that the non-residential buildings are not under the coverage of umbrella coverage of EQC have you found in the aftermath of Christchurch that they had sufficient coverage and In the instances where you were discussing the fact that people do not want to return to some of those buildings for fear that they weren't quite Sufficiently repaired Did the government choose to become involved in any of that demolition or purchasing of those properties? Or how do you see that playing out in the future in terms of such a catastrophic loss in the business sector that does have Ripple effects into the committee Right, so You're right The EQC scheme is confined to since the since the early 1990s. It has been confined to residential property only Post-loss commercial commercial losses Generally speaking Commercial property owners were able to there was a there was a period when When insurers were many insurers were not writing new business Bearing in mind that the earth was still shaking say the house was still on fire But the market had settled down pretty quickly and there was a new entrance to the New Zealand market that That picked up Introduced new product offerings for those who were unable to temporarily unable to obtain cover from some traditional Providers so that was particularly owners of pre 1935 unreinforced masonry buildings in in some of our centers But They are the price of the price of the insurance cover of course is much higher now than it was Previously, but there are not aware of of any Significant withdrawal of terms or coverage and certainly we have not experienced that in terms of our insurance protection So I think it's people are certainly paying more for for the for the cover And it's given a new respectability to mitigation in some cases because people can consider more explicitly the trade-offs in the cost of Rising premiums versus the cost of investing in in some strengthening work or possibly Moving to to to to another side Mr. Chairman the I would say it's it's tomorrow morning in New Zealand as we sit here today and And to the guy who's had few hours sleep for the last 48 hours on behalf of the city I would like to say thank you very much To the Senate presentation take the board for your willingness to be here for your great questions and to members of the public And I would turn it back over to you for any final questions or or wrap up of the year meeting What I echo glintz comments. Thank you so much for being here and it's been some time with us and Look forward for our continued partnership with you. So That I think we'll bring it close to the special meeting