New Zealand’s national hazard insurance scheme has retained the international reinsurance community’s support and confidence even amid the challenging market conditions, Toka Tū Ake EQC chief executive Tina Mitchell said.
Mitchell recently attended a series of meetings with leading reinsurers in Europe to start securing the annual reinsurance placement supporting the EQC scheme. She came home with renewed confidence in the ongoing support for the scheme, following its record placement of $7.2 billion in 2022 to 2023.
“The core purpose of our scheme is affordable insurance which enables over 90% of New Zealanders access to home insurance, which is unheard of in other high-risk countries,” said Mitchell.
Catastrophe insurance for homeowners in other high-risk countries could cost thousands of dollars a year compared to the annual $480 a Kiwi would pay for EQCover even with the EQC cap doubled to $300,000. Because the cost of catastrophe insurance was prohibitively high in other countries, there was a much lower insurance uptake overseas than in New Zealand.
Mitchell said Toka Tū Ake EQC had a strong international reputation owing to its history of investing in science and research to understand the risk New Zealand’s location and geography posed, as well as the steps the country has taken to reduce the impact of natural hazards.
Reinsurers recognised that the EQC’s broad coverage of different perils created a wider appreciation among Kiwis of home insurance, which helped spread the risk for reinsurers. Reinsurers also understood the importance of Toka Tū Ake EQC coordinating with other government agencies during major events, which supported the “enormous scientific understanding” developed from New Zealand’s recent events. They felt that the changes to the EQC Act pending before Parliament had been carefully researched and well-communicated to them.
Mitchell said that Toka Tū Ake EQC’s reinsurance carried an excess of $1.75 billion, meaning means most natural hazard events were paid out by the natural disaster fund that underpinned the EQC scheme and was funded entirely by homeowners’ EQC levies from their home insurance.
“Our risk level may be significant when we are confronted with a major event like the Canterbury earthquakes, but the occasions when we need reinsurance are more infrequent compared to other countries that are affected regularly,” Mitchell said. Since it started buying reinsurance in the late 1980s, Toka Tū Ake EQC has only had to call on the reinsurers twice.
Commenting further on the Europe meetings, Mitchell said that it was crucial for her to meet key reinsurer personnel face-to-face. “They want to see what you stand for and find out what’s going on in each country,” she said. “Equally, we gain a deeper understanding of our reinsurance partners and the strategy behind the decisions they are making to support Toka Tū Ake EQC.”
In London, Mitchell met some Lloyd’s syndicates that supported the scheme, Lloyd’s market being a long-term supporter of the Toka Tū Ake EQC. After the London stop, Mitchell attended an annual industry conference in Monaco to meet other major reinsurers in the industry.
“Some firms have indicated that their investors in the current climate have less appetite to invest in natural catastrophe, but some reinsurers have signalled they will increase their involvement, so I am pretty confident as we start the renewal planning for next year,” Mitchell said.
Toka Tū Ake EQC will be dedicating the next months on putting together a modelling and information briefing pack to guide reinsurers through the 2023 to 2024 renewal, including an assessment of housing growth in New Zealand and the likely impacts of inflation. Negotiations will then start in February and March and are typically finalised in May.
“It was really good to hear that our briefing packs are highly regarded and some of the biggest reinsurers even use them to train new underwriters,” Mitchell said. “They clearly trust our expertise and our people. [It] made me feel really proud of New Zealand and our EQC scheme….”
