New Zealand’s commercial insurance market is changing direction, as highlighted in Gallagher New Zealand’s latest market update. The pace of premium growth, once aggressive, is now slowing, with the January 2024 report reflecting a broader global trend toward softer market conditions.
Stabilising Costs and Market Giants
Insurance Australia Group (IAG) and Suncorp continue to lead New Zealand’s insurance market, reporting robust financial results through mid-2024. Their performance has been fuelled by premium increases and a drop in large-scale claims over the last 18 months.
However, Gallagher’s latest update points to a cooling market, driven by stabilising reinsurance costs. “While costs from catastrophic events remain high, premiums have levelled off in recent months,” it states.
Climate Risks and Global Factors
The easing of premium growth in New Zealand’s insurance market comes amid continued concerns over climate-related risks. Catastrophic events, such as the 2024 Hurricane Milton, are expected to escalate global insurance losses. In response, New Zealand insurers are adapting global strategies, diversifying their portfolios to better manage climate-related exposures.
This shift is also being mirrored by international reinsurers like Lloyd’s of London, who are expanding their reach into New Zealand’s commercial insurance market. The resulting increase in competition is expected to favour larger corporate clients with more favourable premiums.
Uneven Benefits for Policyholders
The insurance market in New Zealand is seeing a shift toward increased competition and stabilising premiums, but the relief may not be universal. Gallagher’s report points out that insurers are refining their approach to risk assessment, leading to diverse pricing strategies. “Lower-risk clients with strong claims records may see more favourable pricing adjustments,” the report explains.
On the flip side, high-risk clients or those with unfavourable claims histories may face stricter terms or higher premiums. Despite signs of easing, insurance inflation remains elevated at 12.9% year-on-year as of September 2024, well above the national inflation rate of 2.2%.
Technology and Innovation
According to Gallagher Re’s 2024 Asia Pacific Market Watch, New Zealand’s insurance market is evolving in tandem with broader regional developments. Across the Asia-Pacific, regulatory shifts, economic recovery, and technological progress are driving growth and creating new opportunities in emerging segments such as cyber insurance, electric vehicle (EV) coverage, and accident and health policies. Cyber insurance, in particular, has seen a notable rise in demand in markets like Malaysia, Singapore, Australia, and New Zealand.
Insurers are leveraging technology to boost efficiency and create innovative products tailored to these emerging risks in response to escalating digital threats.
Implications for the Industry
The transition to a softer market in New Zealand’s insurance sector brings both challenges and opportunities for insurers. Insurers are prioritising digital transformation and diversified product offerings to stay profitable amid slowing premium growth and tougher competition.
Policyholders, particularly those with solid risk profiles, can look forward to more competitive pricing, though evolving terms and tighter claims scrutiny will require attention. The country stands poised for potential long-term stability if current trends and risks are managed carefully, with New Zealand’s growing influence in the global insurance industry.