Public Inquiry into the Earthquake Commission

12 November 2018

Background and status as a ‘matter of public importance’

The Commission is a Crown entity established under the Earthquake Commission
Act 1993 (the Act). Originally established in 1945 as the Earthquake and War
Damages Commission following the 1942 Wairarapa earthquake, the Commission’s
role has changed significantly over time.

The Commission’s statutory functions are set out in section 5 of the Act. It –

  • provides natural disaster insurance for residential property (contents, dwellings,
    and some coverage of land):
  • administers the Natural Disaster Fund, including its investments and reinsurance:
  • funds research and education on natural disasters and ways of reducing their

During 2010 and 2011, New Zealand experienced its most significant earthquake
event sequence in recent times in the Canterbury region. This resulted in over
583,000 claims to the Commission for damage to approximately 168,000 residential

While the majority of claims have been addressed, multiple issues have
arisen in relation to the Commission’s operational practices.
There are still approximately 3,000 unresolved residential property claims.

These mainly relate to land claims or remedial repair claims, such as repair claims that have
been reopened due to poor workmanship, incomplete repair scope, or damage not
identified in initial assessments. These unresolved claims have a significant impact
on affected Canterbury residents as well as on continued confidence, including of the
global insurance market, in New Zealand’s ability to respond quickly and
comprehensively to future natural disaster events.

Since the Canterbury earthquake events, the Commission has had to deal with a
number of other events. These include –

  • the 2013 earthquakes in Seddon and the Cook Strait:
  • the Eketahuna earthquake in 2014:
  • the Edgecumbe flooding in 2017:
  • the November 2016 earthquake in the Kaikoura region.

The Commission’s practices have evolved in response to each of these events, with
a significantly different approach taken in responding to the Kaikoura event. This saw
a Memorandum of Understanding signed with insurers allowing them to act as the
Commission’s agents in settling most building and contents claims. This different
approach will provide a reference point for the inquiry, with its overall effectiveness
not yet fully known.

Insurance, both public and private, makes a major contribution to the economic and social recovery from a natural disaster. The Commission plays a critical role in underpinning the New Zealand residential dwellings insurance market.

As a result, the public needs to be confident that the Commission has the capability and systems to meet its key responsibilities. It is a matter of public importance that the Commission, the wider industry, and the Government learn from the experience of dealing with claims from the Canterbury earthquake events to help ensure that the Commission is well placed to deliver in the future.

Order of reference

The inquiry will investigate and report on the lessons that can be learned from the application of the Commission’s operational practices and the Commission’s approaches to claims outcomes in relation to the Canterbury earthquake events and subsequent events. It will make recommendations to improve the Commission’s readiness to respond to future events.

The inquiry’s purpose is to ensure that lessons are learnt from these past
experiences and that the Commission has the appropriate policies and operating structures in place for improved operational practices in the future.
The inquiry’s scope includes the following:

  • Canterbury operational practice experiences 
  • the Commission’s operational practices both before and after the Canterbury
    earthquake events, including the Commission’s performance in scaling up
    appropriate resourcing to deal with these significant events:
  • the Commission’s customers’ experience of its operational practices and claims outcomes:
  • the interplay between the Commission and the other insurers with regard to
    operational practices including, as relevant to the performance of the
    Commission, the experiences of those other insurers:
    Comparative experiences
  • the benefits and shortcomings of the Commission’s different approaches to
    claims outcomes such as cash settlement versus repair and rebuild:
  • the Commission’s application of learnings from its Canterbury experience to
    subsequent events:
  • the key process differences between the operational processes used in
    Canterbury and the Kaikoura pilot approach, taking into account the different
    economic impact of the events:
    Future strategies
  • operational practices that have now been put in place by the Commission, or
    which are being implemented, to help ensure improved experiences and
  • any further improvements that can be made for any future events.
    Inquiry matters requiring recommendations
    The inquiry will make recommendations on –
  • lessons that can be learned from the Canterbury earthquake events and
    subsequent events relating to the management of operational practices. This
    should include contingency planning, preparedness, and the Commission’s
    responsiveness (and, as relevant to the Commission’s performance, the
    responsiveness of other insurers):
  • any changes or additions to operational practices as a result:
  • any other matter which the inquiry believes may promote improved operational
    practices for future events and/or minimise the recurrence of any inadequacies in
    claims handling identified by the inquiry.

Exclusions from the inquiry

The inquiry is not to investigate, determine, or report on, in an interim or final way, or
otherwise prejudice, any of the following matters:

  • in accordance with section 11 of the Inquiries Act 2013, questions of civil,
    criminal, or disciplinary liability:
  • the structural arrangements for central or local government:
  • the Commission’s funding structure (including levies):
  • the resolution of actual claims that remain unresolved:
  • specific cases that are subject to current mediation, litigation, or arbitration
  • the reopening of settled claims:
  • legal precedents (with regard to actual insurance claims) that have been
    established by the courts:
  • issues relating to insurance contract law, the Limitation Act 1950, the Limitation
    Act 2010, the Earthquake Commission Act 1993, other insurers, and reinsurers
    that are unrelated to the Commission’s claims management operational practices
    and claims outcomes. 

Consideration of other investigations by the inquiry

The inquiry may take account of the outcome of any other investigations into related
matters (including, for example, the Ministry of Business, Innovation, and
Employment’s Review of Insurance Contract Law, which is considering whether there
is a need for greater regulation of insurers’ conduct including claims management
and handling, and the Report of the Independent Ministerial Advisor to the Minister
Responsible for the Earthquake Commission).

However, the inquiry is not bound in any way by the conclusions or recommendations
of any such investigation.


The inquiry is to report its findings and recommendations by 30 June 2019.


Download a PDF version of the Terms of Reference: Terms of Reference [PDF, 124 KB]

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