The question of whether New Zealand can sustain broad access to insurance over the coming decade dominated discussion at the Insurance Council of New Zealand (ICNZ) annual conference in Auckland, where economists and industry executives said the country is approaching a point at which inaction carries a measurable cost.
The panel – comprising Simplicity chief economist Shamubeel Eaqub, FMG chief executive and ICNZ chair Adam Heath, Insurance Council of Australia (ICA) general manager of regulatory and consumer policy Alexandra Hordern, and The Post political, business, and economics editor Luke Malpass – centred their discussion on whether the current model of insurance as a risk transfer mechanism remains viable as climate-related hazards intensify and premiums climb.
Eaqub argued that New Zealand has been operating on the assumption that insurance can absorb the consequences of poor risk decisions indefinitely – and that assumption no longer holds. “The reality is that we’ve run out of runway to simply use insurance as ‘it’s somebody else’s problem. I’m going to keep making stupid decisions and somebody else should take the risk away.’ That risk is becoming very expensively priced, and I think it’s going to be very hard for us to do that,” Eaqub said, as reported by Interest.co.nz.
Without a shift in approach, Eaqub said the market trajectory points toward one in which coverage becomes concentrated among higher-income households. “Or we keep on as we are, and we find ourselves stuck in a cul-de-sac where we only have rich people who can afford insurance,” he said. He also questioned the political will to act, saying he sees very little appetite for decisions that are strong or courageous when it comes to risk and insurance policy.
A recurring point across the panel was that deferring investment in risk reduction does not eliminate the eventual expense – it transfers it, typically to those with less capacity to absorb it. Since 2010, approximately $64 billion has been spent responding to natural disasters in New Zealand – averaging roughly $5.5 billion per year after adjusting for inflation, according to an IAG-Sapere report. Heath acknowledged the fiscal constraints articulated by Finance Minister Nicola Willis around debt, but noted that figure could grow substantially if underlying hazard exposure is not addressed.
Eaqub was direct about where that trajectory leads. “When people say that we don’t have money now to invest in things that will cost us less in the future, it’s wood for the trees. You are storing up this cost for future generations. We all know that money that’s not spent on fixing insurance today is going to be more [costly for] our children and grandchildren,” Eaqub said. He said a credible path forward requires capital investment and a mechanism that spreads costs broadly rather than concentrating them on individuals in higher-risk locations. “The people of New Zealand will pay one way or the other, either it will be done individually and unfairly, or it’ll be done collectively and fairly, and I suspect the latter will be a hell of a lot cheaper and a lot better,” he said.
Heath drew a distinction that he said is becoming more consequential in New Zealand’s relationship with global reinsurance markets: the difference between recovering from events and preventing them. “Global reinsurers are well and truly alive to the fact that we’re getting wetter, we’re getting more cyclonic weather patterns and so they are looking to us as a country to say ‘what are you doing about mitigating the risk,’” Heath said, as reported by Interest.co.nz. He described the country’s current standing as strong on post-event recovery but weaker on prevention – “that is I think the nexus and the crossroads that we’re at.”
The practical consequences of that dynamic played out for FMG following the reinsurance market disruptions of 2023, which Heath described as the most significant shift in 40 years. The mutual insurer, founded to provide coverage to farmers and growers who lacked access to affordable insurance, implemented its largest-ever rate increases as a result. Cancellations rose by roughly 50%, and FMG observed what it assessed as a substantial increase in self-insurance among its policyholders.
That customer base generates approximately 80% of New Zealand’s export earnings. Heath said the risk implications extend well beyond the insurance sector itself. “I think it’s an issue for all of New Zealand society. We have a highly functioning insurance market that is the envy of most other jurisdictions on the planet, and we are the second riskiest jurisdiction on the planet, so we have something that should be treasured and preserved for as long as possible,” Heath said.
Hordern said the panel’s core argument is not whether the cost of risk will be borne – it will – but when and by whom. “The question has to be, do we take the hit now and pay the big ticket stuff that may make a difference down the track now or do we wait and wait and wait and hope that somehow it’s just going to disappear and the climate is going to get better. I mean, that’s a great dream, but I’m not sure that it’s really effective,” Hordern said, as reported by Interest.co.nz.
Asked by MC Miriama Kamo who carries the risk if insurance becomes unaffordable for a growing share of New Zealanders, Heath said the answer is straightforward: “We all do.” Eaqub framed it in terms of what would be lost if collective action fails. New Zealand’s insurance market remains accessible and of high quality relative to global peers – a position he said is not guaranteed to persist. “We are very lucky to be in this tiny population at the arse end of nowhere to have access to this high-quality stuff, and I would really, really be disappointed if, through our lack of action, we lost access,” Eaqub said.
The RBNZ’s May 2026 Financial Stability Report provides quantitative context for the risks the panellists described. Residential property insurance coverage sits at approximately 90% or higher across New Zealand’s roughly two million domestic dwellings. The central bank estimated the total sum insured at around $1.5 trillion for 2024/25, and put the national average annual premium for domestic buildings cover at approximately $2,900 – a figure that has risen considerably faster than the Consumer Price Index since around 2009.
The RBNZ identified three structural pressures – affordability, underinsurance, and geographic retreat from high-hazard areas – as risks that could widen over time even if aggregate coverage remains stable in the near term. The bank also mapped several channels through which those pressures could reach the banking sector, including collateral impairment on uninsured properties, reduced household debt-servicing capacity, and potential lender decisions to restrict credit in areas where insurance availability is uncertain.
The RBNZ noted that general insurers have operated in a more favourable environment recently, with fewer large claims events and easing conditions in reinsurance markets. The health insurance sector, by contrast, spent the past two years managing elevated claims cost inflation and rising utilization, and has responded with premium increases and policy changes. The regulator said improvements in solvency margins are visible, though not uniformly across the sector. The central bank said it will continue to monitor developments across both the insurance and banking sectors and will maintain dialogue with industry and other regulators through mechanisms including the Council of Financial Regulators’ Insurance Affordability Review.
