Toka Tū Ake EQC, the Earthquake Commission of New Zealand, has secured a record level of reinsurance amounting to just under $8.2 billion, marking an increase from $7.4 billion in the previous year.
This achievement provides enhanced protection for homeowners in New Zealand.
The portfolio now includes reinsurance via catastrophe bonds, marking the first time that Toka Tū Ake EQC has secured such bonds.
Tina Mitchell, chief executive of Toka Tū Ake EQC, expressed pride in the reputation and scientific investments of the scheme, which enabled the commission to secure substantial reinsurance cover for major events.
“We are extremely proud [of] the global reputation of our scheme, and the science we invest in, has enabled us to secure significant reinsurance cover for major events. We have been able to increase our reinsurance cover for the year ahead despite the reinsurance market hardening," Mitchell said. "Global markets have experienced considerable losses over the past five years from a range of hurricanes, typhoons, floods, storms and wildfires, alongside the Covid pandemic and the war in Ukraine."
In a move to expand and diversify risk capital sources and protect the Crown balance sheet, Toka Tū Ake EQC has entered the catastrophe bond market for the first time.
The initial entry into the market yielded $225 million, representing a small part of the overall reinsurance portfolio.
Mitchell explained that this step holds significance in securing long-term assurance for New Zealand homeowners. She also emphasised the importance of a diverse risk transfer portfolio and the benefits of exploring catastrophe bonds.
“It is important that we have a diverse portfolio for risk transfer. By exploring catastrophe bonds now, we can access other reinsurance arrangements to complement the long relationships we have had with traditional reinsurers," she said. "This gives Toka Tū Ake EQC more options in the future, in terms of new risk capital markets and the duration of the contracts."
With the inclusion of catastrophe bonds, Toka Tū Ake EQC now possesses an additional form of protection to supplement their traditional reinsurance contracts.
Catastrophe bonds are funded by institutional investors, who receive a refund if the funds are not required over the bond's lifetime.
Mitchell also commended the support received from advisors throughout the reinsurance program and the catastrophe bond transaction and expressed pride in New Zealand's reputation in the reinsurance world, despite the rising number of severe and costly natural hazard events globally.
"The global reinsurance industry recognizes the world-leading work Toka Tū Ake EQC undertakes to understand and quantify natural hazard risks and the steps we are taking to reduce the impact of those hazards for New Zealanders," Mitchell said.
Have something to say about this story? Let us know in the comments below.
