Performance of Nonstructural Elements in our Buildings What
Performance of Non-structural Elements in our Buildings What is the Value Proposition? 3 rd International SPONSE Workshop John Lucas - Insurance Council of New Zealand 31 March 2016
ICNZ – Who Are We. What is Our Interest in Earthquake Resilience ? • 28 members covering 95% of all General Insurance • provides insurance coverage for about NZ$600 b of assets • premiums paid to protect these assets $5. 26 b with claims incurred of $2. 3 b in any normal year. • Total cost of Canterbury earthquakes $41 billion – approximately $21 billion from private insurers – approximately $12 billion from EQC – Balance self insured – 20% of gross Domestic Product – Commercial Losses $10. 3 billion
SPEAKER LOGO The ICNZ 15 Point Resilience Plan • Publication Statement on the Required Steps to Make New Zealand more Resilient to Natural Hazards • We point out that currently there are no controls requiring compliant seismic non-structural design in our buildings and this need to change • We recommend that NZS 4219 must always be followed both for new and retrofits. • Recommend Included in Annual Building Warrant of Fitness Inspections
SPEAKER LOGO What a Seismic Non –structural Failure could Cost a Business • Building Not Habitable • Someone being injured • Cost of Repairs • Loss of Rents for Building Owners • Business Loss of Profit & Relocation Expenses • Potential Work safe Liabilities for Directors.
SPEAKER LOGO New Health & Safety at Work Act on 4 April 2016 • Employers face increased fines for Heath & Safety Breaches. • Personal Liability for Directors. • Cannot Insure for Fines but can for Court Ordered Reparations. • Safety of the Work Environment would include working environment earthquake hazards and the risk of injury to employees. • Employers will likely demand work places with state of the art Seismic non structural Performance.
SPEAKER LOGO Case Study – Wellington Building July 2013 • New 6 Level Building completed in 2009 • Modern Seismic compliant Structure • 21 July 6. 5 Earth Quake Event 151 km from Wellington • 0. 16 PGA in Wellington City • Internal fit-out & Services damaged on 2 top floors • Potential Losses $12 million • Estimated Cost on NZS 4219 Compliance 1. 6% of Construction price • $1. 3 million
SPEAKER LOGO Seismic Resilience is Paramount • New Zealand has a 90 to 95 % Earthquake Insurance take up Rate • Japan & California have much lower rates. • Insurance Costs are high and cover availability is restricted • International Reinsurers Cant fully support Japan & California • New Zealand's Earthquake maximum Loss limits are Manageable • For New Zealand Earthquake Reinsurance Rates are reducing • California & Japan tend to build in better resilience • Reinsurers may not continue to support New Zealand on easy terms
SPEAKER LOGO New Zealand indebted to the Global Reinsurance Market • The Canterbury 2010/2011 Earthquake 2 nd largest Natural Catastrophe event for global Reinsurers @ US$28 billion • Japans Tohoku Insured losses were US$40 billion (total Cost estimated to be US$210 million) • New Zealand Earthquake Catastrophe premiums contribute to 0. 1 % of the Global Premium Pool. • Japan will repay its Reinsurers in 5 years • New Zealand will repay its reinsurers in 35 years.
SPEAKER LOGO Fortunes From an Economic Cycle • Historically Low Bond & Interest Rates • Global Pension Fund Capital looking for better returns • Reinsurance is providing higher returns • Large amounts of capital flooding into Reinsurance markets • Cheap capital has driven Catastrophe Insurance rates to record lows • New Zealand is riding on that fortune • What will happen when rates rise and another large Catastrophe event occurs?
SPEAKER LOGO Nothing Lasts Forever • The World Economy will improve and interest rates will rise • A large insured earthquake event will occur • Pension fund investors will loose some money • Available capital to reinsurers will decrease • Catastrophe reinsurance costs will increase. • Insurance may become less affordable for most New Zealanders • Insurance may become unavailable for those risks that are not resilient.
SPEAKER LOGO The Value Proposition for Earthquake Resilience? • I am sure tomorrow better performance of Non-structural building design it will be valuable! Thankyou
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