New Zealand’s general insurers could be set for an underwriting-led improvement in profits as they recover from the Christchurch earthquakes, according to a report by AM Best.

“While overall reported profits have yet to return to levels recorded before the quakes, newly underwritten business shows significant improvement,” the ratings agency says.

Gross non-life premiums have grown across almost all segments and incurred loss ratios are close to or better than in 2010.

“This suggests underwriting profitability of new business is not only a result of post-catastrophe rate hikes on property lines but is also supported by pockets of strength in New Zealand’s economy.

“The larger size and new business profitability across all segments helps to maintain interest from incumbents but could also attract interest from mid-size or smaller new entrants.”

General insurance pre-tax profits last financial year included a significant drag from adverse prior-year adjustments to net claims, likely related to the earthquakes, the report says.

Low interest rates and a relatively low earnings buffer from investment results are adding to the focus on restoring post-catastrophe underwriting profitability.

Reinsurers providing capacity to New Zealand have also made strong underwriting improvements, which should increase the market’s attractiveness, AM Best says.

Data suggests new entrants without outstanding Christchurch claims would have achieved gross loss ratios below 40% in 2012 and last year.