Press Release – Green Party
The Green Party is raising concerns over the sale of AMI to Australian–owned insurance giant IAG, saying it will result in greater foreign ownership of the New Zealand insurance sector and will see a reduction in competition.15 December 2011
Greens raise foreign ownership concerns over AMI sale
The Green Party is raising concerns over the sale of AMI to Australian–owned insurance giant IAG, saying it will result in greater foreign ownership of the New Zealand insurance sector and will see a reduction in competition.
“The sale of AMI to IAG means that IAG will own 40 percent of the New Zealand insurance industry. The dominance of the insurance industry by one foreign owned company is bad for our economy and bad for competition,” said Green Party Co-leader Dr Russel Norman.
“Greater foreign ownership of the insurance industry will make it resemble the banking industry where huge profits are sent back to Australia ever year.
“Foreign ownership of the insurance industry is currently a problem, as AMI’s own website points out when it says; “Today, we are the largest wholly New Zealand owned fire and general insurer, in a market otherwise made up of overseas owned insurance companies”.
“Our cross-–party inquiry into banking in 2009 showed that lack of competition in the banking industry had cost customers up to $2 billion in additional interest rate expenses. We don’t want to see the same happen with insurance premiums.
“It isn’t clear why the Government had to sell AMI, or that the deal is particularly favourable to taxpayers.
“It looks like a sweetheart deal for IAG. Kiwi taxpayers will still cover the full cost of AMI’s earthquake liabilities while IAG picks up the more secure parts of the business.
“The tax payer is carrying the same earthquake liabilities under this deal as it would if the Government continued to underwrite AMI and sought a better deal that didn’t hand the company over to Australian owners”
The IAG purchase of AMI is subject to regulatory approval from the Reserve Bank, the Overseas Investment Office and the Commerce Commission.
“The Commerce Commission must address concerns about IAGs concentration of ownership in the insurance sector and how this concentration will impact on competition,” said Dr Norman.
“Adequate competition leading to affordable insurance must be a key consideration for the regulators.
“We also believe the Reserve Bank should play a more hands on role as prudential supervisor of the industry. The AMI collapse happened under its watch despite the fact they were exposed to significant risk through their concentration of policies in one city.”