Revealed – legal trends in the NZ insurance market

Wotton + Kearney, an insurance and risk law firm in Australasia, has released its annual NZ Insurance Market Trends Update for the year 2023, delving into legal and claims trends, legislative changes, and recent impactful decisions affecting insurers, underwriters, brokers, and corporations operating in New Zealand.

Comprising over 30 articles, the report covers trends, evolutions, and noteworthy cases in financial lines, liability, property, healthcare, and cyber & technology sectors.

The report brings attention to emerging trends in long-standing issues, such as D&O claims driven by financial difficulties, claims related to natural disasters, product liability recalls, and cybercrimes. It also sheds light on emerging concerns like modern slavery within the construction industry, ESG issues, and the rise in derivative and representative actions.

Key insights

In its report, Wotton + Kearney outlined several notable trends in the space, including:

• Financial distress driving D&O claims – The economic strain observed since late 2022 persists unabated, heightening the likelihood of financial challenges, especially for companies in construction and investment sectors. Consequently, accusations of violating directors’ duties during a company’s financial difficulty are expected to remain the main catalyst for D&O claims.
• Rise in director accountability for ESG issues – Around 200 major financial institutions are presently mandated to initiate climate-related financial disclosures. Furthermore, stakeholders across various industries are expected to intensify their demands for ESG disclosures from companies, emphasising the need for thorough and accurate reporting.
• Increase in natural disaster claims against construction professionals – The insurance sector is progressively processing the multitude of claims filed in the aftermath of the January 2023 floods and Cyclone Gabrielle. Expectations for 2024 include a surge in flood and storm damage claims, specifically targeting construction professionals, including structural engineers, architects, and geotechnical engineers.
• Expected hikes in claims against mortgage brokers and advisers – The likelihood of claims against mortgage brokers due to unfavourable changes in terms is notably elevated given the current market dynamics. Over the past 18 months, rates have nearly doubled, and specific areas of the property market have experienced a decline of approximately 16% since late 2021. Consequently, an increase in claims against mortgage brokers is anticipated, especially if they have provided advice on affordability.
• Climb in recovery claims against third parties for property damage – Over the upcoming 12 months, a rise in third-party property damage claims stemming from weather-related incidents is anticipated. This includes an expectation of an upswing in claims against local authorities for insufficient maintenance of drainage and roading, as well as an increase in group actions related to permitting developments in flood-prone regions.
• Growth in regulatory investigations and prosecutions – In one of its final acts before the election, Parliament approved the significant Natural and Built Environment Act 2023, aimed at replacing the Resource Management Act and establishing a fresh framework for environmental management in New Zealand. Should it endure the election process, this Act is poised to carry extensive implications for businesses and their insurers.

“As active market participants and close watchers of insurance trends in New Zealand and around the world, we’ve looked at the significant legal decisions over the past year and drawn on our market insights and experiences to identify the areas to watch in this space,” Wotton + Kearney NZ managing partner Antony Holden said.

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