The Insurance Council of New Zealand Te Kahua Inihua o Aotearoa has endorsed findings that NZ needs to act decisively around natural hazards risks to ensure insurance is affordable and available in the future.
The Reserve Bank has released an excerpt on insurance from its upcoming Financial Stability Report that notes that insurers, central and local government, home buyers and lenders all need to improve their understanding of natural hazards so that future insurance affordability challenges can be better managed.
“By taking proactive steps to improve our understanding of natural hazards and enhance resilience, NZ can better protect communities and ensure that insurance is affordable and accessible for all,” ICNZ chief executive Kris Faafoi said.
The report found that insurance makes an important contribution to New Zealanders’ financial and economic wellbeing and that insurance continues to be available.
NZ has a high level of cover by international standards, with the uptake of residential insurance around 96%.
“However, we know it’s challenging for New Zealanders dealing with the cost of living as insurance premium levels are increasing and that’s having an impact on their spending plans.”
Faafoi said some of the factors driving premium levels are out of insurers’ control, such as higher construction costs as well as the impact of climate changes on global reinsurance costs, which is insurance for insurers and spreads the financial risk of major local events across the global market.
Insurers are also moving toward greater risk-based pricing as understanding of natural hazards improves such as earthquake and flooding risk, which is also affecting premium levels.
“Decisions on premiums are continuously reviewed as new information comes to hand to better reflect risk. As the Reserve Bank notes, insurance continues to be available.”
Faafoi said NZ needs to take a long-term view on the risks from flooding and other natural hazards on homes, properties and businesses as it faces the prospect of more frequent and severe events due to climate change.
“Building resilient communities is a NZ-wide conversation and involves all of us, central government, councils, and others, working together to help find solutions to reduce the risks and continue to ensure insurance is affordable and accessible to help protect lives, businesses and property.”
