As New Zealand’s insurance sector moves into the third quarter after two difficult periods, the question arises as to how the industry is coping?
Insurance Business spoke to Mark Legge, S&P Global Ratings insurance senior director and credit analyst, who pointed out that the residential/household sector, which includes motor, house and contents insurance, is growing quite solidly in terms of premium but that this growth has been somewhat offset by the soft pricing environment of the commercial sector.
“The commercial side is showing some signs of turning and is mirroring Australia to some extent, which is a bit further advanced in the cycle with rates generally firming in recent times,” said Legge.
“In this regard, however, the prospective trend in New Zealand commercial rates still remains a bit of a question mark. However, the entities that S&P Global covers continue to report solid underlying earnings.”
Legge highlighted that last year’s Kaikoura earthquake adversely impacted earnings. However, despite this Legge said ongoing business has been quite solid.
“We have been seeing good returns on equity – pretty sound from our perspective,” he said.
He added that there is no doubt that New Zealand has had a difficult time in terms of the natural disasters recently, not to mention the Canterbury quake six years ago.
“The Canterbury quake constituted 16 separate events,” he explained. “It was a very complicated event to assess. For instance, some disaster zones were difficult to access for a period of time. Insurers had their work cut out trying to get a view on claims in terms of what damage related to which event.
“That really complicated the issue and made things difficult. And at the end of the day no-one would want to replicate the experience of still having some claims outstanding, keeping in mind that 95% of the Canterbury claims have been resolved.”
Legge elaborated that, before the Canterbury quake,
EQC was a small organisation that suddenly had to manage the biggest claim on record.
“The issue of overcap claims affected the entire industry and there is consensus that some change to the claims management process is required. It looks promising as a recent Government proposal has come to the fore that from 2020 policyholders will claim directly to the insurer for house damage, which should assist in preventing overcap claims coming through,” concluded Legge.
Related stories:
Global premiums rising – outlook positive
Insurer Vero hits $5 billion in Canterbury claim payouts
.jpg)
