AN INSURANCE SCHEME

Press, Volume LXX, Issue 21146, 23 April 1934, Page 7

AN INSURANCE SCHEME

THE EARTHQUAKE RISK

IHR J. AV. MAWSON'S PROPOSALS

A scheme for the establishment, of a national mutual earthquake insurance fund in New Zealand is explained by Mr J. W. Mawson in "Community Planning." It was submitted to the Government and the New Zealand Fire Underwriters' Association in 1931, but was rejected by the Government. However, it was well received by the council of the Fire Underwriters' Asicciation.

The premises are that no part of New Zealand can be said to be free from the liability to earthquake shocks at any time, and earthquake insurance is outside the legitimate field of Are insurance companies. If the legitimate « insurance companies operating in •w Zealand were to underwrite the wiole of the earthquake risks offering % would be flirting with bankruptcy. Fire insurance underwriters »ould be glad to avail themselves of 'jy scheme which would relieve them ot the risks now being carried, so long « it guaranteed them freedom of Wion and legitimate competition in Mher fields of insurance. As certain districts in New Zealand ■re more liable t.o earthquake shocks fan- others, and the stability of buildf?s is largely dependent upon the fure of the foundations on which *ey are built and the design and l51 «nod of construction, any scheme of nsurance which failed to differentiate ,-etween the nature of the risks would * unsound and inequitable. The es'Wishment of a national earthquake •France fund would relieve the Govsnment and local bodies of liability in W event of disaster and stimulate in'Ktraent in new building.".

The Proposals Jhe proposals arc as follows: j "That there should be established taiT atute a national mutual earth- , p R . e insurance fund to be adrninisi. 7 by trustees or commissioners en•'eiy free from political control. ■ '> That all outstanding earthquake W?i Ce P° licics should be cancelled tom • date on which the scheme , ™es into operation and the pre;;ums on the unexpired portion of refunded to the policy rJ' That earthquake insurance be , npulsory on all privately owned i«n&s and their contents. «.,.„ /hat the insurance of publicly sm buildings and utilities be at ,' e discretion of the Government and '7. bodies. I J,', /hat all buildings and utilities and 1 classified by engineering 1 ini ,. ge °logical experts and the insur- ! t'a«:A rates graded according to that 'fi'lcation. ow„,That the insurance on privately HI, 1 ? 0 buildings should be two-thirds rateable value, should u a * tne Collte nts of buildings iisur«j valued bv the owners and &(*, V or two-thirds of that value, be graded according to v ti* *v? lfication of the buildings in «th. ey are housed and the nature iff foods themselves. %TeH th(J insurance rates be cal?atean° as to Produce in the aggrei»t. r rj annual sum sufficient to cover the fu,, and sinking fund charges on !i %§u amount which the commission •<atinn orisec l 1° borrow, plus adminisNo£ e ?P ense «- ff9chpH~it' and when, the fund by Pa,,. lhe maximum amount fixed Wd i! arnent - the premium rates <»anL l reduced so as to produce ml Unt sufficient to meet adminis- ,») TW P 7£ Ses 'OfttnT L ne trustees or commisWte t? authorised to borrow from Hlil: n T 1 e as ma y be necessary up v stat, * excee di"g an amount fixed ' on the security of the in%tp Premiums. to XihT wo uld only ~c necessary **llifli,u a , loan in lh e event of the ""Mated fund being insufficient

to meet the liabilities imposed by a major disaster such as that which occurred in Hawke's Bay in 1931. <10) Assuming that the amount the trustees or commissioners were authorised to borrow was £5,000,000, then the insurance premiums in the aggregate required to provide interest at 4 per cent., sinking fund at 1 per cent., and administrative expenses 1 per cent., or 6 per cent, in all, would be £300,000 a year. If the total insurable value of privately owned .property in New Zealand amounted to £500,000,000, the annual sum of £300,000 would be met by an average premium rate of Is 2.4 d per cent. If the Government and local authorities took advantage of the scheme to insure publically owned buildings and utilitjes. then the average premium rate would bo substantially reduced.