New Zealand insurance market stable but with difficult pockets, says broker

The New Zealand insurance market remains stable despite a somewhat uncertain economy, according to broker Crombie Lockwood’s New Zealand Insurance Market Outlook – February 2022, although there are pockets where the market is more difficult, particularly cyber and weather-related risks.

The broker says, for example, that as the year develops, capacity for Wellington property “will make an interesting watch both in price and availability”. It says there will be growing scrutiny of risks impacted by weather events: “We expect that material damage insurers will pay close attention to a property’s exposure to flood and coastal erosion, and marine insurers will be cautious around exposed assets such as marinas and swing moorings.”

The report highlights figures from the Insurance Council of New Zealand that show the cost of weather-related losses in New Zealand has risen to $321m for 2021. It says the constant impact of weather-related losses means that insurance alone will not be able to bear the brunt of the problem. “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,” it states.

However, Crombie Lockwood says that despite these challenges, overall the New Zealand insurance market is in good health and stable. Capacity is still readily available for most sectors and insurers are very much open for business, while pricing remains firm as insurance companies continue to seek sustainable pricing models.

Looking at specific lines of business, the report says that for material damage and business interruption, there is still some pricing pressure on certain areas of the market, such as buildings containing insulated panel construction, and risks that are involved with the recycling and waste management industries. For general liability, capacity is widely available and pricing is generally competitive, except where risks have exposure in the US.

The New Zealand D&O market remains stable and insurers are willing to look at writing new business and extending existing policy limits, the broker says. Insurers are generally seeking modest pricing increases for private companies, but larger increases for public companies. The professional indemnity market is stable with good capacity and a number of insurers competing for business. However, the report adds that for construction-related risks and financial institutions, the market conditions remain challenging, with insurers still remediating their portfolios through a combination of rate increases, capacity reductions, higher excesses and coverage limitations.

New Zealand, as elsewhere in the world, has continued to see an increase in the frequency and severity of ransomware claims, with many insurers seeking to tighten coverage terms and conditions, increase premiums, restrict coverage and demand much more information, the broker says.

“In New Zealand, premiums have been increasing anywhere from 20% upwards. Sub-limits are sometimes being applied for ransomware claims and new exclusionary language being applied to end-of-life software is becoming the norm. Nearly every insurer will require verification of at least some preventative controls, which will likely include multifactor authentication, remote desktop protocol, data backup practices, segregation of networks, encryption, patch management, privileged account management, employee training and a host of others,” the report states.

The broker report concludes that to mitigate premium increases, “early engagement with the insurer is recommended and it is vital that all pertinent information is supplied to present a risk in the best light possible”, adding: “The old industry adage that ‘insurers fill gaps in information with premium dollars’ has never been more appropriate in a market where insurers want to take a more granular look at each risk.”