Brokers have said that a major challenge facing big insurance firms in New Zealand can be the small economy and the high proportion of mum and dad style SME businesses. Bigger firms can find it difficult to get traction.
Some large insurers have tried and failed to gain a local foothold.
NTI entered the local market about 15 years ago and withdrew after two years. The firm ceased offering transport related coverages in 2012.
Global Transport and Automotive (GT Insurance), underwritten by Allianz and a big player in the heavy truck and transport space in Australia, also made efforts. According to the Allianz website, GT Insurance ceased operating in New Zealand as an underwriting agency in 2017.
So, how are big brokerages faring?
Lockton New Zealand set up operations in 2021. The firm, headquartered in Kansas City, Missouri, describes itself as the largest privately owned global brokerage in the world.
“We agree that the relatively small size of New Zealand’s market particularly impacts the SME and small commercial sectors, which often do not align with the appetite of the global insurance market,” said Lockton’s New Zealand CEO Craig Buckle (pictured above, left)
However, there was also another more fundamental issue for his firm.
“The primary challenge we faced was that most people had not heard of Lockton,” said Buckle.
However, despite the challenge, he said his global firm is focusing on corporate business.
“Our current focus is on corporate businesses, where we believe we can add value through innovative placement solutions,” said Buckle.
He suggested that a diversity of clients could be the way to foster local corporate success.
“We serve a broad variety of clients in New Zealand across various specialisms, including primary industries such as agriculture, forestry, and energy production,” said Buckle. “Additionally, Lockton’s expertise extends to sectors like property management, investment firms, power and energy, hotels and hospitality, infrastructure, manufacturing, pharmaceuticals, and film production.”
Three years down the track and Lockton seems to be doing well.
“Our team has doubled in size,” said the CEO.
Buckle suggested that New Zealand’s challenging insurance market and “stagnant broking market” may have played to his firm’s advantage.
“Prospective clients were looking for a firm to disrupt the status quo, especially after several years of challenging market conditions,” he said.
The global networks of Allianz and NTI weren’t enough to keep them in business locally. However, so far, things have played out differently for Lockton.
“As a global firm, our extensive network and resources also play a significant role in our success,” he said. “It’s important to focus our resources on the right opportunities and maintain our differentiation by engaging the right people.”
He suggested that his firm’s “individual and consultative approach” had also been an ingredient in business success thus far.
Community efforts may also have played a small part. For example, he said, the donation of 700 trees and also voluntary work by Lockton’s Niall Martin raising awareness around Cystic Fibrosis resulting in the firm donating $40,000 to this cause.
However, Buckle said familiar challenges remain.
“The ongoing insurability issue due to climatic change, particularly in the domestic market, poses a significant challenge for the insurance industry in New Zealand,” he said. “The increasing frequency and severity of extreme weather events make it harder to provide affordable and comprehensive coverage for households.”
Buckle also said low gross written premiums (GWP) relative to risk exposure and an over-reliance on international reinsurance were other issues.
“There is a limited opportunity for local insurers to diversify their portfolios,” he said, warning that this can concentrate risk and reduce the resilience of the insurance market.
Steadfast Group established its brokerage operation locally in 2015. The firm is Australasia’s largest brokerage network and recently acquired a significant broker network in the United States.
“We’ve now got 66 brokers in that [New Zealand] network [and] GWP of about $800 million at the end of calendar year 23,” said Samantha Hollman (pictured top, right). Hollman is Steadfast’s CEO of International and was speaking at her firm’s Investor Day last week.
Rather than a diversity of clients or a corporate focus, Hollman focused on technology and Steadfast’s trapped capital broker network model as some of the reasons for local success.
She mentioned the Steadfast Client Trading Platform (SCTP) which consists of automated products for Steadfast brokers. Hollman said, apart from her firm’s brokers, five “partners” are also using this offering.
“SCTP is crucial for ongoing success in New Zealand,” she said.
Hollman mentioned another technology platform used to manage agencies as making good headway. “We have 57 out of the 66 brokers in New Zealand, utilizing that platform,” she said.
Hollman said Steadfast has six equity investments in brokers and suggested their trapped capital approach to broker networks was being well received.
However, like Buckle, she acknowledged local challenges and reframed them as opportunities.
“We definitely want to develop new capacity and markets,” said Hollman. “New Zealand has been experiencing a little bit of a shrinking of certain markets and certain products and we see that as a real opportunity for MGAs of Steadfast to come into that market.”
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