Queenstown businessman Graham Smolenski says he and his brother-in-law lost “several hundred thousand dollars” when their insurance company crashed this week.
Smolenski, Jeff McNally and their wives co-owned Western Pacific Insurance – which they put into liquidation on Monday.
Smolenski says five jobs will go with the closure of its Shotover Street offices.
A week earlier, McNally had told the Herald On Sunday the business-insurance company was “swamped” by claims from Christchurch’s February 22 earthquake.
Even before that, on January 8, Western Pacific scored only B – “weak” – in a new financial stability rating from Standard & Poors.
Smolenksi won’t ballpark the number and dollar value of quake claims but liquidators David Ruscoe and Simon Thorn of Grant Thornton Christchurch say there are about 7000 New Zealand policy holders, with 78 claims from September’s quake and 77 from February’s.
Fresh claims are still being taken.
Present claims aren’t “huge” in number, Smolenski says.
“It’s what coming down the line”.
Will Western Pacific’s quake liability top $1 million?
“It’ll be more than that but not much more,” he says.
Smolenski maintains the firm is “very heavily reinsured” and liable for only the first $500,000 of total quake claims.
So you had to liquidate because you couldn’t find that $500,000?
“Oh no, that’s not the problem. The problem always centres on your level of reinsurance to cover the sheer volume of it all and the pressure on your organisation.”
As required by law, Western Pacific has $500,000 of government bonds with the Public Trustee – the liquidators can call on those, Smolenski says.
Mountain Scene wanted to discuss Smolenski’s contention that $500,000 would be Western Pacific’s total exposure to February 22 claims – but questions drew a polite refusal.
“You’re getting into the detail and I’ve been told I’m not to discuss that.”
The latest accounts filed – to June 30, 2009 – show after-tax profit of $241,091.
Net assets are $611,335, down from $962,687, and paid-up share capital is $43,285.
A statement in the accounts saying 2009’s reinsurance meant Western Pacific could “comfortably handle larger risk in catastrophe-affected locations” was correct at the time, Smolenski says.
When it’s pointed out the accounts show a $1m reduction in reinsurance in 2009 compared with 2008, he says he’s not sure but doesn’t want to get into these details because “it’s not helpful”.
On January 25, Western Pacific advised brokers of a capital raising “to further strengthen our balance sheet and explore growth opportunities”.
Smolenski, 58, says capital raising was going “fantastic” until February 22 – funds were “pretty much committed”.
Smolenski is a well-known Queenstown business identity – a long-time former boss of Millbrook Resort and current NZSki shareholder and director.