In the latest Insurance Market Update, Gallagher Insurance has noted emerging trends in the New Zealand insurance industry.
Mark Jones (pictured), the company’s chief broking officer, discussed the evolving landscape, particularly in commercial insurance.
Gallagher’s report highlighted potential changes in the commercial insurance market, which has seen price increases and reduced coverage capacities over the past few years. This trend has been driven by several factors, including:
These influences have collectively led to higher costs for insurers, which were subsequently passed on to customers.
According to Jones, the “insurance clock” concept describes the cyclical nature of the insurance market, alternating between hard and soft phases.
New Zealand has been in a hard market phase, characterised by limited capacity and rising premiums. However, recent indicators suggest that the market may be transitioning towards a softer phase, with a slowdown in the rate of premium increases and an improved claims environment.
Notably, since the first quarter of 2023, there have been no major catastrophic losses impacting the market.
“In 2023, the New Zealand market took a huge hit with the Auckland Anniversary floods and Cyclone Gabrielle. Thankfully, we have not experienced another large catastrophic loss since the first quarter of 2023,” Jones said. “While weather-related claims globally are still at very high levels, the reinsurance market has stabilised, and increased capacity has become available, easing pricing pressure on the direct insurers.
“We are also now starting to see new capacity enter the New Zealand insurance market. This doesn’t mean that we are likely to see the appearance of a new major player in the market like another NZI or Vero, but it does mean there should be more options available going forward that will put downward pressure on pricing.”
The report also pointed to the growing role of managing general agencies (MGAs) in the market.
MGAs function as intermediaries, underwriting policies on behalf of insurers without holding any risk themselves. This model allows international insurers to enter the New Zealand market without setting up a local office, thus increasing competition.
Recently, there has been an expansion in MGA capacity for various coverages, including commercial fire, motor risks, business travel, and liability insurance.
“It is encouraging to see signs of a positive market change for commercial risks. As always, there will be exceptions to the rule, and clients with higher risk profiles may see less obvious change in their situation,” Jones said.
While the commercial market shows signs of potential relief, the personal lines insurance market remains under pressure.
Consequently, further premium hikes are anticipated in the personal lines sector as insurers continue to manage their exposure.
“The domestic buildings and contents market bore the brunt of the losses arising from the 2023 natural disasters, with around 81,000 claims out of the 117,000 total falling into these categories,” Jones said. “Unfortunately, we expect that further premium increases will be pushed through by insurers in the personal lines space.”
