Policyholders of failed Queenstown insurer Western Pacific are being promised a partial payout on claims.
Speaking exclusively to Mountain Scene, liquidator Simon Thorn confirms he’s secured $30 million worth of reinsurance which will be paid out.
After obtaining funding of $350,000, Thorn says he was able to pay the first quarterly reinsurance premium last week.
While $30m reinsurance won’t be enough to meet 100 per cent of claims, Thorn’s announcement is nevertheless the first good news for policyholders after several bleak weeks following Western’s April 4 failure.
“We expect claims will be higher than that – especially for the February earthquake – so there’ll be a shortfall on reinsurance versus total claims,” he warns.
“There are still huge unknowns around when we can pay [claims] and how much.”
The liquidators will have to go to court for directions on how the reinsurance money should be allocated when it arrives, Thorn says.
Finalising claims will also take an unknown period of time – that’s his next priority.
Until now, any payout at all looked unlikely.
As Mountain Scene revealed last week, Treasury and Reserve Bank reports had indicated the 14 foreign reinsurers would duck for cover – and Western co-owner Jeff McNally expressed similar doubts in a begging letter to finance minister Bill English.
While Thorn won’t speculate on how far the $30m will go, the Reserve Bank has previously said that if reinsurance was secured then the likely shortfall is $10m – meaning a 75 per cent claims payout.
Western began selling business insurance from Queenstown in 2005 via a broker network and – despite a Standard & Poors rating of “weak” – ended up with 7000 policyholders.
Co-owners McNally and brother-in-law Graham Smolenski, a prominent local businessman, blamed Western’s collapse on the Christchurch earthquakes – particularly February’s.
However, a March 17 Reserve Bank report branded Western as “illiquid and insolvent” and a March 31 Treasury report said: “The underlying cause of its probable failure is not considered to be the Christchurch earthquakes but more its under-capitalisation and its cashflow business model.”
Asked this week if concerns were surfacing over the stewardship of Western, liquidator Thorn says: “I won’t speak to that right now but clearly there are issues.”