In a recent assessment of New Zealand's non-life insurance sector, AM Best projected a stable outlook, highlighted by an anticipated solid premium growth, and rooted in the continued rate improvements, especially in property and motor insurance segments.
In a report titled “Market Segment Outlook: New Zealand Non-Life Insurance” by Best’s Market Segment, the credit agency outlined several key aspects contributing to this positive forecast. Among these are the resilient performance of the primary non-life market, despite challenges such as significant weather-related claims and high inflation rates.
The report also underscores the sector's robust risk-adjusted capital buffer and the efficacy of New Zealand's regulatory framework in supporting the industry.
However, the outlook is not without its challenges. Factors such as New Zealand's increasingly unpredictable weather patterns, along with a tightening in reinsurance capacity and rising reinsurance rates, are expected to introduce greater volatility in the earnings of primary insurers.
The non-life insurers in New Zealand typically opt for catastrophe excess-of-loss reinsurance with coverage limits that surpass global norms, often covering up to a 1-in-1,000-year loss event. This approach, influenced by the country's regulatory capital requirements, offers a unique insight into the market's risk management strategies.
The non-life insurance market in New Zealand has seen moderate growth in gross written premiums (GWP) following a period of stagnation during the COVID-19 pandemic. Data from the Reserve Bank of New Zealand (RBNZ) shows a 6% increase in non-life GWP in 2021 and a 10% rise in 2022. This upward trajectory is expected to continue into 2024, propelled by record-high inflation and sustained rate adjustments.
“Earnings in 2023 are expected to be materially impacted by significant weather-related claims, owing to January’s Auckland Anniversary Weekend floods and February’s Cyclone Gabrielle. These two events, considered New Zealand’s most significant weather events of the century thus far, are expected to have a significant impact on the industry’s bottom line in 2023,” said Victoria Ohorodnyk, AM Best director and head of analytics for Southeast Asia, Australia, and New Zealand.
AM Best is also set to discuss the insurance industry in New Zealand during its Insurance Market Briefing – Auckland later this week.
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