'Premium spike': NZbrokers warns on catastrophe aftermath

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NZbrokers has stressed the importance of policyholders and brokers understanding market trends as premiums begin to soar following the impact of recent severe weather events.

Commentary just released by the AUB-owned broking network says New Zealand insurance markets are under severe pressure following Cyclone Gabrielle, and the North Island floods, with cover availability reduced and premiums rising.

Estimations from Swiss catastrophe data firm Perils have placed insurance costs for the Auckland floods at $NZ1.65 billion ($1.52 billion) while Cyclone Gabrielle tallied at $NZ1.54 billion ($1.42 billion), both of which greatly exceed NZ’s annual record levels for weather events.

NZbrokers says the increased claims costs and inflation pressures have prevented property insurers from achieving profitability levels that would stabilise the market and premium costs.

“The two recent weather events will create another premium spike in regions that, until now, avoided the most significant premium increases after the Canterbury and Kaikoura earthquakes,” NZbrokers said.

“In fact, the recent weather events have highlighted to insurers and reinsurers that any part of New Zealand might be exposed to similar events more regularly in the future.”

The commentary says the added market stresses should prompt insurance buyers to be more mindful of their risk portfolio and what they can do to help secure coverage.

“Information about the factors that are influencing premium and capacity changes is more valuable than trying to forecast what the amount of change might be,” NZbrokers said.

“Understanding these factors is more likely to inform the insurance broker and buyer about the best options to protect their household or business.”

It also highlights the importance for policyholders to act early to renew their policies to allow time to gather information that will ease the process.

“For most business owners this means a preliminary meeting with your broker at least three months before the renewal date and for personal policies, communication at least two months before the renewal date is adequate,” NZbrokers said.

“This will provide enough time to gather the necessary underwriting information, compile it into a presentable form to the insurer and sufficient time to negotiate or consider any coverage changes that are being imposed as well as options available to achieve the best outcome aligned with the client’s needs and objectives.”

The broking group says that insurance buyers and current policyholders who take active steps in understanding ongoing risks and conditions on their insurance are going “a long way towards making the best decisions”.