With the Auckland Anniversary floods and Cyclone Gabrielle having dominated the headlines of late, one might be forgiven for having missed the news of a non-damaging magnitude 6.3 earthquake right after those two weather events. With a depth of about 50km, the quake didn’t prove disastrous but was of substantial size to be examined by Bounce Insurance managing director Paul Barton (pictured).
Speaking with Insurance Business, Barton said: “It was deep, which took a lot of intensity out of the earthquake, but it was certainly big enough for me to check the statistics. And for me, in Wellington, I do recall a loud noise, a bit of a roar coming through, but I think the noise was more than the shaking itself. It was more noise than there was damage.”
What Barton does following earthquakes is check whether the shaking intensity, or what’s known as peak ground velocity, reached Bounce’s policy trigger of 20cm per second. In the case of the Kāpiti Coast quake in the middle of February, the shaking intensity was nowhere near the threshold.
“Thankfully [the] earthquake was a deep one, and that mitigated much of the force that you might expect to see out of a M6.3 quake,” noted the managing director previously. “The largest peak ground velocity movement was about 4cm per second, and this was recorded by the GeoNet strong motion sensor at Foxton Beach – not enough to trigger our policy.”
Dependent on a pre-set trigger, the “shake and pay” policy offered by Bounce falls within the realm of parametric cover, which Barton believes is one answer to insurance gaps.
For the Bounce boss, there is a need for alternatives when it comes to the provision of coverage.
“I think it’s good to have another option on the table, aside from just traditional insurance,” he told Insurance Business. “And I think insurance companies and global reinsurers might be looking at New Zealand in a slightly different light. That might force insurance companies and brokers to think about non-traditional ways of closing insurance gaps. So, yes, I’m quite excited about what this brings.
“I know there’s a lot of pressure on insurance companies to meet customer expectations, for sure. Fingers crossed we don’t have an earthquake to top it all off… It just adds on to the level of anxiety that people might have around the natural perils that are happening around New Zealand.”
While there has not yet been an event damaging enough to trigger a Bounce policy, already the Lloyd’s coverholder is exploring the idea of expanding into other areas where parametric insurance might be a good fit.
“Our plans for this year are to continue to raise awareness of parametric insurance, to strengthen our distribution capabilities with insurance brokers, and to also look at opportunities to broaden our product range to other perils, with an eye towards climate change-related events,” he shared with Insurance Business.
“The first reason [for the latter] is feedback from insurance brokers and their customers, which is: ‘It’s great that you’ve got an earthquake product, but do you have other products to close other gaps around weather-related perils?’
“And the second reason is my observation from the recent flood events. For example, we are seeing a real need for a cash flow product in the market to support households and small businesses. I think there’s a gap there, and I’d like to be able to explore how to close it.”
Designed to provide immediate cash flow to help kickstart financial recovery following damage from earthquakes, Bounce’s current offering was rolled out by Lloyd’s in 2021.
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