For some twenty years Adolf operated on the periphery of the fire and general insurance business so I claim no serious specialist knowledge.
When the word came out last week of AMI's difficulties, my immediate thought was "Why should anyone be surprised?"
You see, AMI had a reputation for being one of the 'cheapest' house contents and car insurers in the market. Now one finds out how they managed that. They tried to cheat the system.
Essentially, they took on too much risk themselves by taking a minimal reinsurance position, using the reinsurance cost savings to subsidise lower premiums . Further, they made the cardinal error of 'being too big in one market' namely, Christchurch.
Their management ought to be shot.
They took a huge actuarial gamble and they lost the bet big time.
I believe the gummint has acted correctly in giving policy holders some limited reassurance vis a vis current claims but if the company is unable to recapitalise itself in the short to medium term, it should be allowed to fold and its book to be sold to a more prudent insurer. (It remains to be seen how long it take Labour's fiscal genius Cunliffe to shout from the rooftops that the gummint should have let the policy holders carry the can. Cunliffe has demonstrated he knows nothing about buying and selling finance companies and as far as I'm aware, he knows less about insurance.)
I sincerely hope the directors have issued an instruction that for the time being, no new policies will be sold. There seems to be no public comment on this.