Property insurance premium rates in the first quarter of 2024 continued the rising trend recorded from the previous year but at a slower pace, a report by Marsh found.
In a report titled “Property Insurance Market Highlights,” Marsh found that a number of reasons contributed to the notable increases recorded, one of them being natural catastrophes like the floods in Auckland last January and Cyclone Gabrielle.
On a global scale, reinsurance capacity was significantly affected by the rising cost of insured natural catastrophe events. The response of many insurers was to increase their reinsurance retentions, which the report said was effective in retaining more risk within the local insurance market.
In January, there was also a notable increase in the property insurance renewals’ capacity as well as a more stable condition compared to the previous year. Marsh’s Fast Track facility also gave clients exclusive access to additional capacity, which helped in driving the competition in the market right as new participants entered the New Zealand market.
The previous year saw an increased focus on flood risk, which contributed to the changes in rates, coverage restrictions, and increased deductibles for clients that had a significant risk exposure. Underwriters began to be more concerned about the assets that had significant claims as well as those that were vulnerable to repeat flood events. As such, insurers continued to develop their flood modelling capabilities, with flood now considered as a natural hazard.
Many clients have also adopted insurance buying strategies that were based on the restraints of their budgets. Larger organisations were also showing more interest in alternative risk transfer options like captive insurance and parametric solutions.
Inflationary pressures were still impacting premium rates, which also included the effect of ongoing claims cost escalation. Insurer capacity constraints were still challenging, especially in areas that were considered as high natural catastrophe zones. Meanwhile, competition and stability were slowly returning to the New Zealand property insurance market.
Even with the trends surrounding weather-related natural catastrophes, the reinsurance market is showing signs of stability with premium rate increases recorded at the start of 2024 expected to moderate as time goes on.
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