Industry benchmark offers various interpretations

Industry benchmark offers various interpretations | Insurance Business

Industry benchmark offers various interpretations
The total amount of Gross Written Premium for insurer members of the Insurance Council of New Zealand (ICNZ) has hit a new high at $5.26 billion for the year ended 30 September 2014, with a combined ratio of 93.69%.

The figures, which were released in ICNZ’s 2014 Review, were up from $4.77 billion the year before with a combined ratio of 96.27%.

While the figures indicate a more healthy situation for insurers than 2011 when the earthquakes prompted a combined ratio of 146.36%, ICNZ said there was a limit to how one could interpret the statistics.

The breakdown into business categories was as follows:
  • Commercial Material Damage and Business Interruption - $684 million GWP with loss ratio of 63.32%
  • Domestic Buildings and Contents - $1.477 billion GWP with loss ratio of 52.15%
  • Motor Commercial and Private - $1.5 billion GWP with loss ratio of 65.99%
  • Marine Hull and Cargo - $140 million GWP with loss ratio of 47.53%
  • Liability Professional & Defamation, D&O and Public Product & Other - $457 million GWP with loss ratio of 30.96%
  • Earthquake Domestic, Commercial MD, BI and Marine Cargo - $642 million with loss ratio of 108.75%
  • Other Personal Accident, Travel, Livestock and Other - $346 million GWP with loss ratio of 49.40%.
ICNZ operations manager Terry Jordan said while individual companies would find the figures a useful benchmark for their own reference, and for comparing their statistics with their other territories, it was important to remember the figures could be skewed for various reasons.

For instance, as membership fluctuated within ICNZ the amount of GWP would also fluctuate.

Last year, QBE, Provident and CBL Insurance were included but weren’t in the previous year’s, as was Pacific International, which has since dropped out.

Looking at the biggest proportion of GWP, which comes from Domestic Buildings and Contents (excluding earthquake) and Commercial and Private Motor, the loss ratio figures would indicate that insurers were paying out less in claims in 2014 (52.15%) compared to 62.55% in 2010 in the former category and slightly more for motor at 65.99% in 2014 compared to 64.17% in 2010.

However, Jordan says the figures are more meaningful when looked at over a decade rather than year on year to understand various changes.

In the case of Domestic Buildings and Contents the biggest change in the last five years would be the earthquakes.

For example, the industry was inconsistent in the way they identified earthquake premiums prior to the earthquakes so while the GWP for earthquake revealed a huge jump from $220 million in 2010 to $642 million in 2014, Jordan said the 2010 figures probably weren’t reflecting all of the earthquake premium being collected.

Likewise, with premium repricing and with some of the domestic building premium coming across it would only now be a more accurate reflection.

Jordan said: “What it does show you is that New Zealand has been a relatively good market for insurance with loss ratios below 100% and that has encouraged reinsurers to stay in New Zealand following the Canterbury earthquakes.”

With the Reserve Bank now initiating a data collection regime to collect financial data from insurers, analysts could expect expanded information to be reported publicly from mid-2016, he added.