Vero New Zealand’s new CEO Gary Dransfield says questions need to be raised over the structure and conduct of the NZ general insurance industry following the earthquakes and “difficulties” of some insurers.

He told Suncorp’s investor meeting that Vero will review its risk appetite and how it deploys capital in New Zealand.

“It is clear now that New Zealanders have not paid enough in the past for the earthquake risk component of their premiums,” he said.

He says the market is hardening in property classes and Vero is tightening its risk acceptance guidelines. “We are achieving solid rate increases within our constrained risk profile.”

Suncorp’s 68%-owned AA Insurance is taking the lead on pricing for direct home insurance.

Mr Dransfield says that as a result of the quakes, Vero NZ has put back by a year the commitment made last year to double net profit after tax by June 2013.

Suncorp has revised its loss from the three major earthquakes since September 2010 to $NZ120 million ($91 million), net of reinsurance. Estimated gross costs are $500 million from the September event and $1.6 billion from February. The insurer has reinstated cover and reduced exposure to another event to $NZ20 million ($15 million). 

Mr Dransfield says the Earthquake Commission’s reserves of nearly $NZ7 billion ($5.3 billion) have probably been halved. Total industry losses easily exceed – and could be double – the annual general insurance premium pool.

He says the New Zealand industry has suffered in the quakes, with major Christchurch-based insurer AMI being bailed out by the Government and Western Pacific Insurance failing.

“Brand reputations in the aftermath will be an asset or a potential drag on an insurance business,” he says.

He told the briefing that, excluding the earthquakes, Suncorp’s New Zealand business has been producing good loss ratios from relatively benign hazards.

Vero NZ holds about one-fifth of the country’s private premium pool for intermediated personal, commercial corporate and SME business.

Mr Dransfield says AA Insurance, the third-largest direct player, can leverage off the phenomenal brand loyalty of the AA motoring organisation, which is second only to the All Blacks rugby team in loved New Zealand brands.