INSURANCE MARKET SUMMARY
The reality of New Zealand’s risk profile as a country exposed to earthquakes and severe storms is beginning to have a significant impact on the insurance markets across all commercial and residential property related products.
- The current inflationary environment caused by the increasing cost of materials to repair or replace property and cars. Legal fees and settlements paid for liability claims and any other fees that need to be paid to assess an insurance claim..
- Additional resources and expenses to achieve compliance with regulations, particularly the new regulations affecting the insurance sector; and additional costs required to respond to larger than expected events.
- It was forecasted in April 2023 that claims associated with the Auckland storm and Cyclone Gabrielle would exceed $1.5 billion. This forecast easily exceeded the weather event claims paid in New Zealand for a full year: $274m in 2020, $324m in 2021 and $355 (estimated) in 2022. Repair and reconstruction delays are a significant part of the forecast costs.
- Reinsurance premiums, paid by our local insurers to protect themselves from catastrophic events, have been increasing for several years. The reinsurance the sector is experiencing a 40 year-high inflation, costly natural disaster events, the war in Ukraine and reducing availability of capital or investment.
- Inflation also presents a significant challenge for commercial and residential Construction Risk policies. Contractors are becoming more inclined to incorporate costs for possible delays, cost over-runs and unexpected shortages.
- There will be increasing pressure on commercial motor premiums. The pressure will be aligned to inflation, accident records for individual accounts and the portfolio results for the insurer(s).Large or industrial fleets have a smaller market available therefore the opportunity to generate competitive interest from new insurers will be difficult unless good fleet risk management practices exist.
- Brokers will regularly remind their import and export client that inflation is affecting the prices for commodities and raw materials. Therefore, a regular review of the maximum shipment sum insured on an Annual Marine Cargo policy is essential.
We believe the difficult property insurance market will persist and may deteriorate further over the next two years. Your insurance broker is in the best position to help you determine how to prioritise the risks that should be insured compared to the cost of insurance you can accept.
Businesses and organisations can mitigate some of the consequences of the insurance market conditions by exercising sound loss prevention or reduction measures and working with an experienced broker who will convey those positive elements of the risk profile to senior decision makers at financially secure insurers.
The full market summary is available here