Credit ratings agency Standard & Poor’s (S&P) says recent flood and earthquake damage in the Bay of Plenty region of New Zealand will cost the country’s insurance industry tens of millions of dollars but will mean only a modest fall in insurers’ profitability.

Michael Vine, S&P Director Financial Services Ratings, says the industry will be able to deal with the catastrophe and damages will be comfortably met from industry resources. 

He says the recent spate of floods and earthquakes emphasises New Zealand’s exposure to natural disasters, and confirms the importance of strong insurance industry fundamentals, ownership, and reinsurance support.

Mr Vine says the floods highlight the seriousness of NZ’s underinsurance levels; about half of the people affected by the floods are not insured. He says the country is already showing signs of substantial infrastructure damage and community hardship.

“The effect on insurers from the Bay of Plenty floods is relatively small, because some earthquake and landslip damage is covered by the EQC [Earthquake Commission] – and given the less populated rural location and evidence of underinsurance.”