New Zealand commercial rates are showing “clear signs” of softening as new capacity enters the market, broker Gallagher says in a July update.

In recent months the market has seen increased capacity from underwriting agencies for commercial fire and commercial motor risks, along with business travel and liability insurance. 

Stabilisation in the reinsurance market has also helped eased the pressure on commercial prices. 

Gallagher says underwriting agencies – also known as managing general agencies (MGA) – is an area of growth in the New Zealand market, adding to more competition for business. 

“As a tried and tested platform, the MGA model is an efficient way to create competition in a market that is small by global standards,” Gallagher Insurance chief broking officer Mark Jones said in the update. 

For large international insurers that do not want to establish a New Zealand office, they opt for the MGA route to deploy their capacity and expand their market presence. 

“It is encouraging to see signs of a positive market change for commercial risks … there should be more options available going forward that will put downward pressure on pricing,” Mr Jones said. “We are now seeing clear signs the insurance market for commercial business is moving towards a softer phase.” 

But it’s a different story for personal lines, Gallagher says.  

The broker expects insurers to continue raising rates for the remainder of the year, noting the home and motor markets are dominated by IAG, Suncorp and Tower. 

Domestic buildings and contents insurers bore the brunt of the losses from the 2023 natural disasters, with around 81,000 claims out of the 117,000 total falling into these categories. 

“The marketplace for home, contents and personal motor insurance in New Zealand is reasonably limited … with restricted competition in this sector, pricing has trended upwards for a number of years,” Gallagher said.

“Unfortunately, we expect that further premium increases will be pushed through by insurers in the personal lines space.”

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