I live in a country that is deeply in debt and has had a series of disasters. In this situation, some businesses will be stressed and some will fail.

The Government is closely watching AMI Insurance which reportedly has had its $1 billion of capital and reinsurance cover wiped out by the two Canterbury earthquakes.The Dominion Post said today that it was feared AMI would not be able to afford to pay out on new insurance claims if it could not raise extra money.

via Report: AMI Insurance in trouble – Business – NZ Herald News.

Put simply, we can no longer afford to support the financial sector. AMI needs to find reinsurance — which will be difficult because it had a lot of business in Christchurch. It may fail, and the government should let this happen.

The government may be the lender of last resort, but it is close to bankrupt. It is better for AMI to fail than the government to default. AMI is too big to rescue. It should stand alone, or fail.

UPDATE.

The size of the problem has lead to gov’t intervention. Bernard Hickey has the details.