NZ weather disasters to propel property pricing higher: Aon
New Zealand’s property insurance market will become “significantly harder” this year following the combined effects of the Auckland flooding and Cyclone Gabrielle, Aon says.
Pricing prior to the events was anticipated to increase by about 10%, but one major insurer announced in mid-March that for April renewals onwards and new business immediately, it would require a 20% increase, made up from a mixture of rate, sum insured increases or excess variation.
The insurer also warned that for higher risk or poorly performing risks it may require an increase of more than 20%, Aon says in an Insurance Market Insights report.
An increasing number of weather events and rising claims costs have impacted reinsurance programs worldwide.
“The increased frequency of extreme weather events, coupled with organisations increasing demand for additional capacity due to the impacts of inflation on asset values, means insurers and reinsurers are reassessing their risk appetites, pricing and capacity,” Aon says.
“There will be a continued and increasing focus on flood risk and storm damage. As well as increased pricing, insurers may seek to limit the impact of flood losses by limiting coverage and increasing deductibles.”
New Zealand market conditions remain moderate in motor, with supply chain challenges, inflationary pressures and the increasing level of technology in vehicles driving up costs.
Aon says motor insurers have also experienced increased claims resulting from the recent extreme weather events, and there continues to be a greater focus on achieving technical rating and the use of risk modelling.
“We anticipate insurers will continue to look for increases across the board, particularly when a fleet increases in size,” it says.
Some insurers are forecasting 15% base premium increases before consideration of individual claims performance.
In construction contract works, the market remains challenging, and larger projects that require capacity from overseas to complete the placement could see more punitive terms applied.
“As a result of the recent extreme weather events, it is our prediction that New Zealand markets will look to introduce separate and higher flood claim deductibles and on large projects, they could look to follow the international market trend of ‘flood’ forming part of the Natural Disaster perils definition,” Aon says.
“If this occurs then a value at risk of time of loss (VAROL) deductible would apply to flood claims as it currently does for earthquake claims.”
The report is available here.
