The Reserve Bank of New Zealand (RBNZ) says local insurers could be affected by court rulings on business interruption (BI) claims in other jurisdictions, despite similar issues not having been raised in the country.

The central bank’s Financial Stability Report says that in New Zealand there are no class actions or legal challenges over COVID-19 business interruption claims like those seen in the UK or Australia.

“Insurers believe the definition and interpretation issues assessed by courts overseas are not applicable for most New Zealand BI policies,” it says.

But the report warns there could still be a knock-on impact if parent companies in other jurisdictions are badly affected.

“Multiple court rulings (in particular in the UK and Australia, which are the closest jurisdictional analogues to New Zealand) have now determined that many ... policy exclusions are not robust enough to deny cover for losses sustained from COVID-19 lockdowns,” the report says.

“The Insurance Council of Australia estimates that the cost to the insurance industry in Australia alone may be AU$10 billion, and many insurers there have raised additional capital or increased provisions to cover an expected influx of claims.

“There is a risk that as the size of overseas claim costs becomes clearer, overseas parent insurers may look to reduce financial support for their New Zealand businesses or seek higher dividends to shore up their financial positions.”

RBNZ says it is obtaining information from insurers to assess the “size and scope” of BI policies that could be affected if similar court rulings applied in New Zealand.