Download - Insurance Council of New Zealand

“Cantabrians and New Zealanders have
been courageous, resilient, patient and
strong. We understand and share many
of their current frustrations, and as an
industry are committed to doing all we
can to help make progress.”
The impact of the earthquakes is that there has been
a fundamental and permanent shift in the insurance
market. The way in which earthquake risks are insured
has changed forever. An example of this is the approach
to older buildings, particularly those with unreinforced
masonry, which are now more difficult to insure for
replacement cover throughout New Zealand. Many risks
will be unable to attract full insurance cover, and this
development will require collective dialogue between
banks, government, insurers and business groups, to
ensure that economic growth continues in earthquake
prone regions.
A major challenge going forward is to find a good balance
between building standards and cost effectiveness.
Excessive standards will lead to restricted development,
whereas inadequate standards will simply perpetuate
the challenges we have faced in Canterbury where
many buildings and houses have been shown to have
inadequate foundations or design for the conditions.
The cost of insurance has risen dramatically and is likely
to continue increasing as the costs of the earthquake
claims rise. Residential properties have not been impacted
as severely as Commercial but, in general, insurers
are charging significantly more, and the Earthquake
Commission levy tripled from 1 February 2012.
Most insurers appear to be moving away from
percentage of loss deductibles to percentage of insured
value deductibles for earthquake, and the levels of
deductibles on many commercial properties have risen.
The impact on the cost and availability of reinsurance
is major. Catastrophe reinsurers around the world have
experienced an abnormally costly 2011 with significant
floods in Brisbane, the Canterbury earthquakes, Japan’s
tsunami and earthquake, and the Thai floods. The
catastrophe reinsurance modellers are likely to begin
to review their models for New Zealand risk in the
next year or two. This could see a further round of
earthquake insurance cost increases.
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There will be other changes which will impact the
market as we learn the lessons from Canterbury. These
include issues of under-insurance, open-ended covers,
outdated valuations, insufficient Business Interruption
indemnity periods and insufficient business continuity
planning. We, as an industry, will be looking to our
broker colleagues to assist us in the Insurance Council
highlighting the increased need for scrutiny in these areas.
Despite the challenges of the earthquake, the Insurance
Council and the insurance industry have been required
to carry out their normal daily work. In New Zealand
the Insurance Council has again been leading the
debate on insurance and has continued creating a better
understanding of the economic and social value of our
industry to a successful New Zealand.
The Council has maintained a strong and positive
relationship with the government throughout the
catastrophe recovery period, and also has seen
its relationship with the Opposition, particularly
local Canterbury MPs, built to a very positive
level. Where there are clear differences of opinion
between the government and the Council, we have
sought to engage constructively in expressing
our concerns. However, looking towards the
remainder of 2012 and beyond, we will continue
to build and maintain a strong, constructive and
open relationship with the government on issues
of wider concern to our members, and also in the
continued recovery of the Canterbury region.