The New Zealand Society of Actuaries (NZSA) says reputational risks may emerge for insurers from the red zoning of areas following the storms and floods earlier this year. 

A particular area of concern is where householders are unable to return to their properties, although the houses may have sustained little to no damage, and in only rare cases full damage. 

“As such the payout from insurance will be well less than the value of the house which can now not be occupied. This is clearly a poor outcome for the insured, albeit the insurance policy is responding as designed and priced,” a NZSA paper says.

“Reputational risks for insurers are significant. As managed retreat is enacted more fully, some insureds may expect insurance policies to respond in a way that isn’t viable.”  

The NZSA Enterprise Risk Management Committee has published a follow-up article that revisits the “top of mind” risks identified in a 2021/22 survey 

The top risks at the time of the survey were covid, regulatory change, economic uncertainty and high inflation, climate change, cyber and digitalisation, people and resources and supply chain disruption. 

“Most of these key risks are still dominating the global enterprise risk landscape,” the paper says. 

In the regulatory area, issues also include the Conduct of Financial Institutions (CoFI) regime, which takes effect from March 31 2025 and which will involves the issue of licences by the Financial Markets Authority (FMA). 

Most insurers have established sizeable programs to prepare for the CoFI legislation, which sets out principles rather than prescribing requirements. 

“This has led to some concerns as to how the FMA will approach monitoring and enforcement,” it says. 

The FMA has published guidance, including what needs to be included in a “fair conduct program”, which is the set of activities an organisation undertakes to ensure it delivers good customer outcomes. 

“The CoFI regime also has significant implications for sales remuneration,” the paper says. “Essentially volume-based bonuses or remuneration will not be allowed. The implications of this for existing intermediated distribution channels is a key consideration for institutions.” 

The NZSA ERM committee says it is looking to undertake another survey regarding insurers in New Zealand next year.