What the minister told EQC’s board chair

Strongly worded letters exchanged by Megan Woods and Sir Maarten Wevers show irritation and combativeness on both sides and a huge gulf between their perceptions of the Earthquake Commission’s work in Canterbury. David Williams reports.

A board shake-up is on the way for the Earthquake Commission, it’s revealed in the ministerial letter which prompted last week’s resignation of Sir Maarten Wevers.

At a press conference last Friday, the Minister Responsible for EQC Megan Woods focused on the appointment of a ministerial adviser into EQC – an announcement about which is expected to be made today.

But letters exchanged between Woods and Wevers, released to Newsroom by Woods’ office, reveal the minister’s intentions to make fresh appointments to the EQC board of people “with strong operational experience”. Woods’ letter also makes clear that advice from Treasury, as EQC’s monitoring agency, as well as private insurers, helped convince her the commission isn’t up to the job. The nub of the issue appears to be whether outstanding claims are what’s called over-cap – over the $100,000 plus GST point at which claims pass from EQC responsibility to private insurers.

Woods’ letter says Treasury suggested an independent team – presumably working within EQC – give the Government and insurers greater certainty about “the remaining liabilities and responsibilities” from the Canterbury earthquakes.

180222 Woods Letter by David Williams on Scribd

Private insurers, meanwhile, told Woods there’s a lack of accurate and reliable claims data with EQC to track, manage and identify “with any certainty” customers who have the potential to stay with EQC or pass to private insurers. “They see this as a critical risk and barrier to closing out claims in Canterbury,” the letter says. “As I said in our meeting [last Wednesday], there is no confidence from any of the insurers that EQC has the ability to lead, coordinate or do this themselves.”

Adding to criticism earlier in the letter that EQC had not moved fast enough or with enough urgency, Woods says EQC needs help to close the outstanding 2600 claims because she think it’s “unable to respond quickly and effectively to the challenges”. She then sets out her intentions to: make new board appointments; appoint a senior public servant, reporting directly to her, to “form a view on a workable way forward”; and ask Treasury to lead an “independent, accelerated audit of claims”.

Wevers’ written response to Woods’ letter closely follows his press statement last Friday.

The senior mandarin’s tone varies from combative to apologetic, saying he chose to step aside so the minister could appoint someone she assesses will be able to do a better job. Starting with a snippy “Dear Minister”, Wevers’ letter accuses Woods of seeming to be “unable to recognise the enormous progress that successive commissioners, senior managers, staff, contractors and other partners” have made in response to the quakes – a response that is “unprecedented internationally”.

“I should not have to remind you that repairing houses is not, and never has been, part of the Earthquake Commission’s role, and we embarked on that pressing national need from a standing start.”

180223 Wevers Letter by David Williams on Scribd

He calls out the minister for being a fierce critic, saying EQC’s mistakes have been “well documented, and often remarked upon by you personally”. While Wevers admits mistakes have been made, and he apologises to claimants, he says resolving outstanding claims as quickly and as best as it could “has been the focus of every board meeting I have chaired”.

Wevers underlines his resignation letter with a warning to the minister that his disgruntlement with be made public – that after EQC staff are advised of his departure “a statement will then be issued”.

In an interview with Newsroom yesterday, Wevers – who worked with three prime ministers: David Lange, Helen Clark and Sir John Key – says he had never seen a letter like Woods’ in his career. Given its tone and criticism, he felt it was time to move on. The minister’s letter was sent on February 22, the seventh anniversary of the February 2011 quake, in which 185 people died.

“I just found that extraordinary, to be criticising the staff of our organisation on a day when some of the members of our staff had had family members impacted by the quake, I just didn’t think that was appropriate.”

He says Woods had not asked to be briefed by EQC on the outstanding claims or whether the concerns raised by private insurers were valid.

“We have no knowledge of Treasury, as the monitoring agency, raising the need for there to be a deeper understanding about outstanding claims – that viewpoint has never been made clear to the board; and I’ve checked with the secretary of the Treasury.

“We report on outstanding claims to the Treasury every six months and in between that as well. We have New Zealand’s finest actuarial valuation company reporting to the board all the time. We are audited by our own auditors, the Office of the Auditor-General and by Treasury. I just don’t know where that comes from.”

Announcements expected today

Woods is expected to make several important announcements today, including naming EQC’s interim chair and a new ministerial adviser. The terms of reference of the adviser’s work will be made public. Woods will also signal her intention to appoint new EQC board members. The terms of two members, Roger Bell and Dr Alison O’Connell, expire at the end of June.

Since becoming minister, Woods has been blunt about wanting changes at EQC. Her February 15th column in local paper Christchurch Star was headlined “Fighting for people stuck in EQC limbo”. In December, she attended the annual general meeting of Government-owned insurance company Southern Response – the old AMI Insurance. She told The Press at the time: “I want to see momentum in terms of settlement of claims, but I don’t think we can keep doing the same thing and magically expect a different outcome.” The minister has been consulting the public on the terms of reference for an independent inquiry into quake claims.

The minister’s intervention has sparked glee in insurance circles. In a statement last week, Tower boss Richard Harding, whose company has fewer than 300 open Canterbury quake claims, said: “For a number of years now, Tower has said that the EQC model is fundamentally broken. Seven years on from the event, insurers and our customers still do not have complete clarity on outstanding EQC claims.” Not that anyone in the insurance industry has a moral high ground – most, including EQC, are embroiled in court actions over supposedly bungled claims or policies.

Treasury prepared a briefing for Woods about EQC’s governance and oversight, dated October 30 last year. Some of it is redacted. The publicly available portion doesn’t overtly criticise EQC’s board or performance. But it notes Treasury’s independent perspective “is an important element” of EQC’s governance structure. EQC is key to managing the Crown’s financial risk, the briefing says, through managing the natural disaster fund and the purchase of reinsurance. “Decisions on EQC’s risk management activities have historically been made by the EQC Board without explicit input from the Crown”.

Last week, EQC boss Sid Miller said that from next month a dedicated business unit would handle all outstanding Canterbury quake claims.

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