The New Zealand insurance market is in good health and stable despite a number of challenges such as covid-fuelled cost pressures and weather-related losses last year, Crombie Lockwood says in a market update.

“Capacity is still readily available for most sectors and insurers are very much open for business,” the report said. “Pricing remains firm as insurance companies continue to seek sustainable pricing models.”

The Gallagher-owned broker says since its September update, the Insurance Council of New Zealand has updated the industry’s weather-related losses for last year to $NZ321 million ($299 million) from $NZ197 million ($183 million).

The figure “will no doubt continue to rise” as more claims mature, the report says.

“The West Coast has already experienced additional significant flooding events in 2022 and both

Cyclones Cody and Dovi are expected to result in large insurance payouts.”

Crombie Lockwood says the constant impact of weather-related losses means that insurance alone will not be able to bear the brunt of the problem.

It says the issue needs to be addressed on a wider platform where steps can be taken to build resilient communities and implement risk mitigation initiatives to attempt to reduce losses.

New legislation has already been introduced requiring the insurance industry and other financial institutions to provide mandatory reporting on climate risks.

The broker flagged the Wellington property line as an “interesting” market to watch both in terms of price and capacity availability.

“As the year develops, capacity for Wellington property will make an interesting watch both in price and availability,” the report said.

It says risks impacted by weather events will come under growing scrutiny as climate-based claims continue to cause the biggest single impact to both the global and the New Zealand insurance market.

The broker further provided a breakdown on the following classes of business:

Material Damage & Business Interruption

There has been an unusual amount of large commercial fire losses last year and since the start of this year.

Most losses have occurred in a vast range of businesses and locations and while they are unconnected and not part of any trend, the sudden aggregation of so many in a reasonably short space of time has raised some insurer eyebrows.

Overall this sector is profitable for the New Zealand market and insurers will continue to try to achieve overall premium/rate growth across their portfolio to counter losses and inflationary impacts.

It anticipates rate rises for good risks will be between 2% and 5% depending on the insurance company.

Commercial Motor Vehicle

Fewer numbers of vehicles on the road during the various 2020 and 2021 lockdowns have dramatically altered the claims picture.

Most insurers report their commercial motor books are performing well but all note the increasing costs of claims as a growing concern that will put pressure on pricing.

Business Travel

Insurers continue to review their policy responses to covid as countries reopen their borders.

While insurers generally still provide medical cover where an insured contracts covid while overseas, there are varying approaches to cover provided under other sections of Business Travel policies for claims due to cancellation, loss of deposits or other expenses.

Directors’ & Officers’ (D&O) Liability

The past 12 months has seen the D&O market in Australia become more stable following changes to legislation and corrections in the underwriting of the D&O portfolio. Rates are still rising there but at well below the 300% amount that was seen in 2018/2019.

This is good news for the New Zealand D&O market that was reacting to what was happening in Australia.

Professional Indemnity (PI)

The PI market is stable with good capacity and a number of insurers competing for business.

However, with some uncertainty of where the economy will go next, insurers are expected turn cautious when looking at PI cover.

General Liability

The lack of exposure to bodily injury claims in New Zealand means that capacity is widely available and pricing is generally competitive.

Cyber

Claims continue to rise in New Zealand, leading insurers to increase premiums, restrict coverage and demand more information from clients.

Premiums have increased 20% or more and sub-limits are sometimes being applied for ransomware claims and new exclusionary language being applied to end-of-life software is becoming the norm.

Click here to access the report.