New Zealand quake will have material impact on domestic insurers
The insured losses from the recent earthquakes in New Zealand will likely have a material impact on some domestic insurance companies, AM Best has warned.
While the impact is still developing and strong aftershocks are being felt, the rating agency said it expects the number of reported insurance claims to continue to increase. More than 30 aftershocks have measured above Magnitude 5.0.
It said claims from the earthquakes are likely to undermine the underwriting performance of some large insurers, especially those with high-risk accumulation in the upper South Island and the lower North Island.
While reinsurance is expected to reduce the overall impact on the sector, the degree of severity to which their underwriting results could be affected will vary by each insurer’s gross exposure, deductibles, retention levels, and adequacy of its reinsurance programmes, AM Best said.
It added that it is too early to determine the exact impact that the earthquake will have on the financial condition of the New Zealand insurance sector as a whole. According to the Insurance Council of New Zealand, total gross written premium of the general insurance industry amounted to around NZ$5.3 billion in 2015.
As such, should insured losses from the quakes and aftershocks total hundreds of millions of dollars, this could result in a moderate impact on the gross claims experience of general insurers.
IAG and Vero Insurance are the major general insurers in the affected regions, such as Kaikoura and Wellington.
At this moment, the majority of gross claims for the New Zealand insurance sector are expected to arise predominantly from commercial property insurance, as well as domestic property insurance.
On the commercial side, in the heart of Wellington, multiple buildings in the central business district have been found to have structural damage after Monday’s 7.8 magnitude earthquake. For domestic property insurance, the Earthquake Commission has received more than 600 claims.
