TEXT-S&P: various NZ sector ratings unaffected by govt package

(The following was released by the rating agency)

MELBOURNE (Standard & Poor's) June 24 - Standard & Poor's Ratings Services said today that the New Zealand government's announced support package for residential home owners who have been most affected by the Christchurch earthquakes has broadly no rating impact across the banking, insurance, infrastructure, and government sectors.

This is because the estimated cost of between NZ$485 million and NZ$635 million to the New Zealand government to purchase the circa 5,000 properties currently in the residential red zone appears to be met from the government's already fully provisioned NZ$5.5 billion Canterbury Earthquake Recovery Fund.

For financial institutions, we view the package as being supportive to affected borrowers, as it mitigates the adverse financial impact of property-value decline and the more limited prospects that badly affected Christchurch home owners faced in recouping value from their properties (see below).

For insurers, the result is close to neutral, with the government assuming the existing ability of policyholders to claim on property insurance. However, uncertainty remains around the ultimate cost to the insurance sector, given continued seismic activity, a lack of access to and capacity for claims assessment, and the division of exposures between insurers, reinsurers, and the Earthquake Commission (see below).

With this fluidity in exposure and ongoing incidence of natural disasters, Standard & Poor's continues to actively monitor all sectors in the region.