RADAR FY2024 New Zealand Snapshot

Impacts of benign weather  

The cascading effects of benign weather in FY2024, following particularly severe natural perils in 2023, include large premium hikes and substantial insurer profits.

Reinsurance a major driver

Reinsurance costs are a major factor driving the volatile environment, with reinsurers reacting to the previous year’s losses by raising premiums – and the limits at which reinsurance cover starts – effectively passing on their overheads to insurers.

The expectation is for reinsurance rates for property risks to remain at current levels, given the 2024 US hurricane season resulted in two significant events. For New Zealand policyholders, this suggests no substantial relief from insurance premiums due to international factors such as reinsurance costs, for the foreseeable future.

Affordability and transparency top of mind

As prices rise, affordability continues to exert pressure on New Zealanders – premiums are up 20 per cent for all personal insurance lines over the past year, leading to calls from consumer advocates for more transparency on how insurance premium prices are calculated. Home and contents policies have been hit hardest, with the overall percentage rise for personal lines in addition to earlier increases of 15% for home and 10% for contents in 2023.

Adaptation key

These challenges highlight the need to improve adaptation responses to the risks arising from natural disasters, particularly as the impact of climate change exacerbates the risks. Efforts are already underway to advance progress. The Climate Change Commission and New Zealand’s Parliament have released reports to variously address areas requiring urgent action in managing costs, providing appropriate resources and ensuring market ability to contain risk. The insurance industry will play a part, but significant input from government is vital.

Regulators focus on customer treatment

Regulators are increasingly focusing on insurers and the fair treatment of customers. Among a raft of changes, the RBNZ is currently revising the Insurance (Prudential Supervision) Act 2010 (IPSA). Industry expects the revised IPSA will enable the RBNZ to undertake more proactive and intensive supervision of insurers. In this environment, it will be crucial for insurers to continue placing policyholders front of mind in every decision they make for their business.

In this environment, it will be crucial for insurers to continue placing policyholders front of mind in every decision they make for their business.

Cyber growing, but take-up slow

On cyber, while New Zealand shares only a fraction of the global cyber insurance market – about NZD $45 million of a total NZD $26 billion in gross written premium – the local cyber market is growing, albeit slowly. Only 8 to 10 per cent of New Zealand businesses are estimated to hold cyber policies, significantly less than peer countries, and this figure is even lower for small and medium-size enterprises.

Cyber risk continues to be a focus for regulators and policymakers in New Zealand – the RBNZ and the New Zealand Government among entities implementing new rules with implications for all general insurers.

We unpack all these key movements, trends and more in RADAR New Zealand FY2024 Snapshot, as the industry seeks solutions not only to meet its challenges head on but to bolster resilience and thrive.