New Zealand’s financial system is operating amid rising geopolitical risk and energy market disruption, with regulators and industry data indicating that the system has so far absorbed recent shocks. In its Financial Stability Report released on May 6, the Reserve Bank of New Zealand (RBNZ) said the global environment has deteriorated as conflict in the Middle East weighs on energy supply and market confidence.
“The global risk environment has worsened over the past six months, as conflict in the Middle East threatens world energy supply. However, New Zealand’s financial system is resilient and well positioned to support households and businesses even if economic conditions soften,” says Reserve Bank Governor Anna Breman in publishing the Financial Stability Report. The RBNZ noted that the outbreak of conflict and the closure of the Strait of Hormuz have “created significant disruptions to the world’s energy markets,” adding to existing political and trade tensions. As a small, open economy, New Zealand is already seeing these developments pass through to local conditions.
The most immediate impact domestically has been higher fuel and transport costs. “Domestically, we have seen the immediate impacts of the conflict in rising fuel costs for households and businesses. High diesel prices are having the most impact on the transport and logistics sectors, as well as primary industries including forestry and fishing,” Breman said. The RBNZ said economic growth had been recovering before the conflict, but now expects a slower pace, with consequences for employment and debt-servicing capacity across households and firms. For insurers, weaker growth and higher operating costs may influence policy lapses, claims behaviour, and business interruption exposures over time. On the banking side, the central bank reports that institutions are entering this phase with “strong capital and funding buffers,” and recent stress tests indicate banks can withstand sizeable macroeconomic and market shocks, including scenarios linked to the Middle East conflict. Conditions in bank funding and credit markets have implications for both personal and commercial insurance demand.
For insurers specifically, the RBNZ currently assesses the direct impact of the conflict as limited. The most notable developments are in health insurance, where carriers “have needed to raise premiums and adjust policies following several years of high claims costs, and this has improved solvency margins in the sector.” The central bank is also running a stress test of life and health insurers this year, which will examine resilience under adverse claims, asset, and economic conditions. The report provides an overview of general insurance coverage in New Zealand and its link to financial stability, including the role of catastrophe, property, and liability cover in supporting recovery, investment, and credit provision. It also outlines ongoing work to promote an “efficient and resilient banking system,” including more intensive supervision and the recent review of capital settings for deposit takers.
Two special topics in the Financial Stability Report address broader structural issues with relevance for risk transfer and capital formation. The first examines access to credit for smaller businesses and notes that firms are facing elevated borrowing costs. The RBNZ identifies scope to improve pricing transparency so businesses can better assess the cost of finance and compare offers, an area watched by trade credit insurers and intermediaries. The second topic covers global fiscal sustainability, surveying rising public debt levels in major advanced economies and the potential for these to pose global financial stability risks. Any resulting volatility in interest rates, currencies, or asset prices could affect New Zealand insurers’ investment portfolios, capital positions, and asset-liability management.
While the RBNZ focuses on risk and resilience, new industry data from the Financial Services Council of New Zealand (FSC) shows that financial and insurance services have increased their measured contribution to the local economy. In its State of the Sector Report, released on Feb. 27, the FSC found the financial services sector contributed $16.1 billion in GDP in the year ended June 2025, ranking it seventh among all industries and placing it ahead of sectors such as agriculture and wholesale trade.
Over the past five years, sector GDP has risen 9.5% from $14.7 billion to $16.1 billion. Funds under management increased from $244.6 billion in 2022 to $341.0 billion in 2025, an average annual growth rate of about 11.5%. Labour and capital inputs climbed 22% between 2020 and 2024, reflecting workforce expansion and investment in technology, digital platforms, cybersecurity, and regulatory capability. Employment in the sector reached 73,146 filled jobs as at September 2025, an increase of more than 16% since May 2019. The number of businesses operating in financial and insurance services is now around 700, up 27% over the past decade.
The FSC report provides detailed figures on long-term savings, protection, and risk coverage:
The RBNZ’s stability assessment and the FSC’s sector data depict a financial system exposed to external shocks and local challenges around underinsurance, claims trends, and capital deployment, but currently maintaining core functions that underpin New Zealand’s real economy.
