The Canterbury earthquakes led to a dramatic rise in insurance premiums and insurers reinstating more comprehensive and costly reinsurance arrangements. Now, the Kaikoura earthquakes too look set to shake the industry - though not as severely, re/insurers have indicated.
According to a Fairfax Media report, in the wake of the magnitude 7.8 Kaikoura quake, insurers have been increasing home insurance premiums as they reassess the disaster risk in New Zealand. Reinsurers, on the other hand, have indicated their intention to renegotiate rates.
Tim Grafton, Insurance Council of New Zealand (ICNZ) chief executive, said some international reinsurers he’d spoken to were “mildly interested but not deeply disturbed” by the damages wrought by the November 14 quakes.
“There was no balking at providing our insurance cover, but that’s not to say we haven’t had signals that reinsurers might want to renegotiate price,” Grafton told Fairfax.
The ICNZ boss said increases in reinsurance costs would be felt by home insurance policyholders.
Want the latest insurance industry news first? Sign up for our completely free newsletter service now.
He said one insurer had found reinsurers planned to renegotiate their rates post-Kaikoura, but said that was not surprising given the rise in seismic activity and the billions of earthquake damages over the past six years, the report said.
“That’s not something you would prudently look at and ignore,” Grafton said of the increasing risk of earthquakes.
He added that the Kaikoura quake damages, which AIR WorldWide initially predicted to be in the range of $1.2 billion and $5.3 billion, was insignificant compared to the global reinsurance capacity estimated at $580 billion and the $33 billion insured losses of the Canterbury quakes.
Meanwhile, Karl Armstrong, IAG chief risk officer, said that it was unlikely that home premiums would see the “knee-jerk reaction” to the Canterbury quakes that came with the cost of reinstating reinsurance programs and higher reinsurance rates, Fairfax reported.
Armstrong said only a small number of reinsurers have indicated that they were still uncertain whether or not they wanted to be involved in NZ coverage.
ICNZ rejects quake claim criticism
There’s still time to file a Kaikoura quake claim - EQC
Insurance bills from Kaikoura quake expected to reach billions