9 April 25 - The official cash rate (OCR) dropped by 25 basis points to 3.50% with some commentators suggesting it should at 3% now given our weaker growth forecasts and lower inflation.

The RBNZ's Monetary Policy Committee noting that:

"Economic activity in New Zealand has evolved largely as expected. Higher-than-expected export prices and a lower exchange rate have supported primary sector incomes and overall economic growth”

Global markets remain very unsettled as the potential impact of new US tariffs (or a trade imbalance redirect) signals a new global trade order with protectionism front of mine. Dare I say it, but it appears that many US companies may need to ‘pivot’ their international supply chain and manufacturing arrangements to avoid the tariffs - time will tell of course.

It’s a massive re-adjustment if the tariffs hold.

Update on Insurance Costs – New Zealand

Inflation remains at the 2.2% mark. Our economy did contract by 0.2%, following a modest 0.1% growth in the first quarter. This downturn was primarily due to declines in sectors such as retail trade, accommodation, agriculture, forestry, fishing, and wholesale trade. Conversely, the manufacturing industry experienced growth during this period.

A significant aspect of the overall inflation picture remains non-tradable inflation, which currently stands at circa 4.5%- 4.7% (January 25). Non-tradable inflation reflects costs from our service sector including council rates. Insurance related costs are now not contributing significantly to non-tradable inflation as it once was - a good thing.

As mentioned previously we are starting to see premium rates flatten out and soften in certain segments of the NZ economy. We are expecting (assuming no large-scale insurable events/losses) this trend to continue well into this year. In general, we are seeing stable residential-domestic premium rates and certain commercial related premiums soften assuming insurance competition exists for a particular business.

Stable premium rates especially when it comes to well managed properties and businesses is welcomed. Risk based pricing models will naturally seek out those preferred risks and attract lower and competitive premiums. Please keep that in mind with any investment decision you may be looking at.

Trends in the insurance space:

• Insurance Company returns have benefited from recent reduced claim volumes against higher net premiums, they have experienced declining large-scale weather events (fingers crossed), reduced global reinsurance costs, improved capacity levels and stable inflation.
• Inflationary pressures within claim settlements and associated costs to insure are settling.
• Reinstatement values should be reviewed to ensure your sum insured reflects current and adjusted replacement costs.
• We expect Insurers to start chasing premium growth and a desire to improve risk numbers and that is a good thing triggering more competition amongst all Insurers.
• The Fire and Emergency (FENZ) levy has increased by 12.7% since 01 July 2024 – The levy adjustments for this 12-month cycle will come to close shortly, July 25.

Green Shoots continue - Positives to Acknowledge

Inflation is now back within the RBNZ target band of 1-3%

• We are expected to be in a rate cutting cycle throughout 2025.
• We may still experience an inflation spike given what we are seeing globally but that aside we still expect to see further interest rate cuts later this year.
• Construction inflation has reduced. Assuming your cover is reviewed annually your sum insured in many cases should remain stable with expected careful and considered review.
• We continue to see more insurance capacity available in NZ for commercial related risks, likely due to current pricing, and this should benefit certain commercial clients.

Our Tips for Navigating the Current Insurance Cycle and how aibGroup can help.

Talk to our advisers about your situation, assets, and needs.

• For buildings and houses, obtain an insurance valuation to help eliminate the guesswork from online tools or outdated inflation rates. Using a Valuer can also help protect you if the value is incorrect.
• Our team will present available options, such as higher excesses, and provide you with the right advice on your valuable cover. The benefits of using our services, obtaining advice, and building a relationship with your insurer and us remains crucial today. Contacting us is easy, and we always work as your advocate, aiming for a close, trustworthy relationship.

We review your cover and make recommendations and amendments as soon as possible. Our highly experienced claims team works independently from the insurer to ensure you get the full benefits from your policy when needed.

Other ways we can add value to your insurance journey include:

• Access to fast-track claims processes with some insurers, and close collaboration with insurance assessors for non-fast-track claims to ensure your claims are handled quickly and correctly. We will regularly update you on the status of your claim(s).
• Referrals to insurance valuers at discounted rates through our partnership with NZbrokers.
• Our years of experience and understanding of the local insurance market, which have delivered many positive results for clients over the years.
• A team culture focused on ongoing development, keeping our finger on the pulse.

Additionally, like many of our clients, we support local non-profit community organisations through sponsorship and volunteering, continuing to build those partnerships and connections.

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