New Zealand insurers profitable despite nat cats
September 24 2021 by InsuranceAsia News
New Zealand’s insurance industry remains profitable despite several large weather-related events, according to a September market outlook by broker Crombie Lockwood.
The insurance sector is in good health and stable, with capacity readily available for most sectors and insurers “very much open for business”, the report said.
According to Crombie Lockwood, wildfires have contributed to major claims and not just heavy rainfall causing floods. The October 2020 Lake Ohau fire resulted in NZ$35.18 million in claims, 93% of which came from domestic home and contents insurance.
Pricing remains firm with insurers seeking sustainable pricing models, the broker said. However, because the New Zealand market relies heavily on reinsurance, pricing models have to allow for reinsurance costs, which all insurance companies reported “are still increasing,” according to the broker’s report.
While Covid-19 does not have a direct impact on claims as infectious disease exclusions were removed from business interruption policies, commercial motor vehicle insurance has been “most directly affected by the pandemic”, the report pointed out.
Most insurers reported their commercial motor books were performing well but all noted the increasing costs of claims as a growing concern. Fewer numbers of vehicles on the road during the 2020 and 2021 lockdowns have dramatically altered the claims picture, which has had an impact on fleet insurance at the time of renewal. Insurers have had to factor in a distorted 2020 and 2021 claims view and then overlay this with other dynamics impacting claims, the report explained.
Cyber was identified as another area of concern being the most volatile class of insurance and the fastest growing by both policy count and premium volume, according to the report.
Globally, the frequency and severity of losses such as those resulting from ransomware attacks have had a huge impact on the financial results of insurance companies. Despite increasing premiums, the AM Best Market Segment Report published in June 2021 noted that 14 of the top 20 cyber insurers’ loss ratios had worsened in 2020, Crombie Lockwood said in its report.
Cyber insurance pricing has hardened aggressively over the past year across the globe as the number of attacks has increased, InsuranceAsia News reported.
As a result, many insurers are increasing premiums, restricting coverage and demanding much more information from insureds, the report pointed out. In New Zealand, premiums have increased from 20% upwards, while sub limits are sometimes being applied for ransomware claims and new exclusionary language for end-of-life software is becoming the norm.
Crombie Lockwood added that it expects insurers to achieve overall premium/rate growth across their portfolio of between 2% and 5% depending on the insurance company.
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