New Zealand rates are starting to stabilise and large clients with good risk profiles are seeing premium reductions.

The signs are encouraging after 18 months of increases following the Canterbury earthquakes, Marsh Senior VP Placement Services Nathan Richmond says.

London market underwriters have increased their New Zealand business and competition will increase as local insurers fight to hold market share, he says.

But insurers are holding firm on higher earthquake deductibles, aggregation of policy limits and restrictions on covers such as contingent business interruption.

They have also introduced seismic strengthening endorsements, which limit the amount they will pay if a property is damaged and the local council then requires it to be strengthened to more than the previous level.

Insurers say strengthening costs are no longer “sudden and unforeseen”, but clients face a potentially large gap between their cover and the cost of reinstating the property.

“We have not had an earthquake since these came onto the policies, so they are untested as to how they will play out through the claims,” Mr Richmond told insuranceNEWS.com.au.

New Zealand property rates increased up to 10% in the fourth quarter of last year, compared with 20-30% in the previous corresponding period, according to Marsh’s Pacific Insurance Market Report.

Although larger corporate clients are enjoying some relief on rates, Mr Richmond says smaller to mid-sized businesses may face cost pressures for some time.

“The positive news for insurance buyers is that any upward premium pressures will be at a significantly reduced level.”

In a further widening of the Canterbury house insurance market, Marsh has launched a rebuild policy for the region that provides construction cover and an optional 12 months’ home insurance once the property is built.

Mr Richmond says the construction and house policies are linked to avoid transition issues from the contract works to a home policy. They are not tied to a bank.

The policy is available to all brokers, and a number of non-Marsh brokers have sold it, he says. It is offered through Marsh & McLennan Agency, with Vero the lead insurer.