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New Zealand Insurance Report Q1 2012
Business Monitor International, Dec 2011, Pages: 55
New Zealand’s insurance sector would stand out as being unusual even in the absence of the effects of the earthquake on February 22 2011 in Christchurch. This was the second of three earthquakes in the area in less than a year. The others occurred on September 4 2010 and June 13 2011.
The competitive landscape is dominated by the local subsidiaries of Australian firms whose corporate histories typically reflect past deal making in Australia (and, to a lesser extent, multinationals such as AIA or Zurich). Both segments are underdeveloped by most metrics. This is because the government has provided insurance cover for many risks. The Earthquake Commission covers the first NZD100,000 of damage to houses from earthquakes and other disasters. (The commission also covers home contents, to a specified limit.) The Accident Compensation Corporation (ACC) covers many medical expenses, rehabilitation and loss of income (within limits).
In the life segment, two main trends continue to stand out. First, premium growth is sluggish. This may be because of the recent compression in real incomes. A more fundamental problem, which the Investment Savings and Insurance Association (ISI) hopes to address is that New Zealanders tend not to see the need for life insurance products and/or begrudge having to pay premiums. Second, the assets under management (AUM) of the KiwiSaver schemes have been growing rapidly. However, the latest data indicates that the pace of expansion is slowing, as almost all New Zealanders who are likely to sign up voluntarily have already done so. We believe life density will still be low by the standards of developed countries at the end of the forecast period.
In the non-life segment, the main challenges pertain to reinsurance. Virtually all the major non-life firms, and the Earthquake Commission (EQC), had adequate arrangements in place to cover their losses from the Christchurch earthquake(s) and other catastrophes. The latest estimates suggest that global reinsurers will be paying US$16bn or so to Australian and New Zealand insurance companies in relation to catastrophes in 2010 and 2011. As of late 2011, it appears that the various New Zealand non-life companies are securing reinsurance on a year-to-year basis. Also, they appear confident that they can pass on the higher costs to their clients. However, a lack of confidence on the part of households and businesses in relation to the economy means that non-life premiums will not grow rapidly.
Business Monitor International's New Zealand Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on New Zealand's insurance industry.
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