Perhaps the greatest of these factors in New Zealand is seismic activity and the damage that can cause throughout the country.
The Christchurch earthquakes of 2010 and 2011 had an immediate effect on our industry which is still being felt today. The combined events have cost private insurers more than NZ$21 billion, and the EQC has paid a further $10 billion, bringing the total insured cost of the event to more than $31 billion. In fact, the total economic losses for the entire sequence are estimated to be more than NZ$40 billion (ref ICNZ).
Wellington is located in a high risk seismic zone and has therefore been a focal point for potentially large catastrophe losses. Insurers monitor and cap their exposure should Wellington experience a significant earthquake. The cap on Wellington earthquake capacity has the effect of driving up premium rates which also impacts the ability for Insurers to manage increasing sums insured (capacity) and coverage across the Wellington seismic zone.
But seismic activity is just one factor, and with increasing numbers of claims, the steady rise of inflation and the continuing effects of climate change all means premium rates are rising. Insurers are having to ensure they are adapting to these challenges to so they can continue to provide the cover our clients require.
One key area of concern, especially for residential home owners and commercial building owners, is setting the correct sums insured. Inflation and the cost of building have been two major themes in the media over the last 12 months, and many clients are likely to be surprised at how much their key sums insured amounts will need to increase if they want to ensure they’re adequately covered.
In response to these changes and diminishing capacity, aibGROUP is actively positioning themselves to be able to offer increased capacity requirements by exploring new markets, both locally and offshore. This is done alongside ongoing arrangements with our existing insurers to support our clients.
If you’re in the situation where you think these factors have had an impact on your own insurance, here are some key ways you can mitigate your own risks:
- Understand your sums insured. Know what you’re insured for and what’s likely to be paid out by your insurer, especially for earthquake-related claims. If that sum is old it’s likely you’ll need to obtain an updated insurance valuation for your home or building to ensure you’re adequately insured.
- If you’re a commercial building owner, it’s essential you know your building’s NBS rating (National Building Standard). This rating indicates your building’s ability to withstand an earthquake, and your premiums and ability to get insurance are likely to be closely linked to your NBS, along with the age of the property and its location.
But the most important advice we can give to help mitigate your risks is to consult your broker. Your broker will be able to give you a better understanding of your risks and present you with options to ensure you’re adequately covered.
