AM Best has maintained its stable outlook for New Zealand’s non-life insurance sector, emphasising steady premium growth fuelled by pricing adjustments across key lines, including property, motor, and commercial insurance, despite broader economic pressures.
In its analysis, titled “Market Segment Outlook: New Zealand Non-Life Insurance,” AM Best highlighted the resilience of the sector, citing robust capital buffers that mitigate volatility in claims and strong investment returns linked to elevated domestic interest rates.
These trends provide insurers with a cushion against potential challenges, even as interest rates have recently softened.
The report noted that the country’s exposure to increasingly erratic weather patterns has forced insurers to adopt stricter underwriting practices and rely more heavily on reinsurance.
Although the reinsurance market shows signs of stabilisation, constrained capacity and rising costs could weigh on insurers’ profitability.
AM Best expects that premium growth for non-life insurers will remain in line with prior trends, with gross written premiums (GWP) experiencing annual growth in the mid- to high single digits.
In 2023, premium increases were particularly pronounced following the Auckland Anniversary Weekend floods and Cyclone Gabrielle, two of New Zealand’s most significant non-earthquake disasters in terms of insured losses.
Victoria Ohorodnyk, AM Best’s director and head of analytics for Southeast Asia, Australia, and New Zealand, said rate adjustments have been a major contributor to premium growth, which has consistently outpaced general inflation. Inflation, which peaked at 7.3% in mid-2022, has since declined to 2.2% as of the third quarter of 2024.
She added that the property and motor segments recorded some of the most significant price increases.
“The property and motor segments recorded the largest rate adjustments, reflecting the growing exposure to natural catastrophes and rising repair costs caused by ongoing inflationary pressure and supply chain disruptions,” she said.
According to the report, the financial stability of New Zealand’s non-life insurance market remains strong, underpinned by comprehensive reinsurance protections. These arrangements enabled insurers to absorb the fiscal impact of major 2023 weather events.
Yi Ding, associate director at AM Best, noted that insurers are benefiting from a less active year for catastrophic events in 2024, allowing them to rebuild capital reserves.
“To date, 2024 has been a relatively benign year from a catastrophe risk perspective, with fewer significant weather-related events than in prior years, easing some of the pressure on insurers’ claims expenses and allowing them to build up their capital buffers,” Ding said.
