Christchurch policy holders enmeshed in the spectacular failure of Queenstown boutique insurer Western Pacific Insurance will get $33 million of their total $40 million owed in earthquake claims.
However, it appears there will be nothing available for non-Christchurch policy claimants owed more than $20 million, with trade creditors owed more than $1 million likely out of pocket.
Western Pacific, which stunned the industry when it was revealed it held global insurance polices with a total $10 billion in exposure, collapsed in late April and was placed in voluntary liquidation; at last count by the liquidators owing $63.4 million.
Reports on Western's debts grew from $6 million in April, to $41 million, $46 million and last month's $63.4 million - offset mainly by the $33 million owed by reinsurers.
Because Western was in liquidation, its liquidators Grant Thornton sought direction from the High Court at Wellington to determine who shared in the $33 million held by the reinsurers which Western had used.
Justice Simon France found the $33 million held by the reinsurers should be paid out to the quake creditors, as it was the earthquakes of September and February which prompted the claims.
"The amount of the liability on the original [Western] policies is a charge on the reinsurance money that has become payable in respect of that liability," Justice France said.
Jared Ormsby,Christchurch-based lawyer with Wynn Williams Lawyers, acted for the group of 183 Christchurch policy claimants.
"We're very pleased with the outcome for the Canterbury policy holders who have already suffered so much because of the earthquakes," he said yesterday.
Western Pacific was incorporated in July 2002 and its directors were Queenstown-based Graham Smolenski and his brother-inlaw, Jeff McNally, of Victoria, Australia.
The company employed 15 staff in offices in Auckland and Queenstown; the latter of which has since closed.
In a receivership update in August, it was estimated Western claims from Christchurch for the September quake were $13.8 million and for February $26.1 million - with the company having a total policy exposure of $476 million for Canterbury.
Mr Ormsby said because the $33 million reinsurance cash fell short of the about $40 million claimed for quake damage, he said it would still take "some time" before payouts were made because the court had to decide on payout levels.
Grant Thornton liquidator Simon Thorn could not be contacted for comment yesterday.
While Mr Ormsby was representing only the group of 183 policy holders, not other claimants, he understood the reinsurance money would go only to Canterbury quake claimants, but there was a possibility of other assets being available to assist with some payments to trade creditors.
Mr Ormsby believed the decision could be a precedent in the Commonwealth.
It would have been "watched with interest by a large number of insurers", in that the issue was about the distribution of payments held by reinsurers, he said.
• One "unusual aspect" noted by Justice France, was that when Western was placed in liquidation its reinsurance premiums were due and its three banks paid the $340,000 in premiums, which were now a priority repayment.
At a glance
Estimate of Western Pacific Insurance debts at November ...
• Total of unsecured claims worth $63.4 million.
• $61.5 million in insurance claims (including $40 million to 183 Chch policy claimants).
• $1.1 million owed to trade creditors.
• $807,000 owed in unexpired premiums.
• Almost $11,000 owed in broker commissions.
