800 PER CENT: Insurance cost hike shocks property | Manawatu-Wanganui News | Local News in Manawatu-Wanganui

Some Wanganui building owners are paying as much as 800 per cent more than a year ago to insure heritage buildings against earthquakes, Wanganui Insurance Brokers director Geoff Lott says.

The owner of one building worth $6 million paid about $4000 for earthquake insurance last year - but this year the premium was expected to be close to $40,000.

Wanganui was one of four cities in New Zealand facing the highest increases after the Christchurch earthquakes.

"Anything pre-1935 in brick, the earthquake premium increases have been nothing but horrific.

"A lot of people can't afford that," Mr Lott said.

He predicted some would want to demolish their buildings and put up new ones.

He had some clients with 800 per cent increases, and several with increases of more than 100 per cent. The size of the increase depended on the age and condition of the buildings.

"We've been advising our clients to get a valuation, and get as much information about the age and construction and any previous work that's gone on that might help bring the rates down a bit."

He knew owners who had drastically reduced the size of the premium by presenting their research to insurance companies.

"One client found their building was built in 1950, and the earthquake rate automatically dropped from an 800 per cent increase to a 60 per cent increase."

The increase took most owners by surprise and they were simply paying the extra this year. Owners with mortgages on their commercial buildings were forced to, because having full insurance is a condition of most loans.

Owners with unmortgaged buildings could choose whether or not to insure them against earthquakes - but not insuring was risky.

"We are on the tail of Wellington's fault lines, and there's lots of river silt and reclaimed land that could have liquefaction. Downtown Wanganui would just about be gone if a big one hit us," Mr Lott said.

The premium increases were driven by European reinsurance companies. They provided back-up to New Zealand insurers in case of catastrophes.

Reinsurers such as Swiss Re used to think Australia and New Zealand were at low risk of catastrophe.