Insurers' prepared for catastrophe
02 May 2017
Most New Zealand insurers assess and manage catastrophe risk appropriately, according to a report from the nation’s central bank.
Insurers with significant exposure appear to have relatively strong assessment processes and governance, and manage catastrophe risk distinctly from other forms of risk, the Reserve Bank of New Zealand report says.
In contrast, insurers with no or low exposure have simplified assessment processes and governance.
“For some of these insurers, the approach taken appears reasonable considering their circumstances,” the bank says. “For others, there appear to be some shortcomings… which weakens the management of risk.”
The report says some insurers assess their catastrophe risk in light of recent experience – which may not reflect the nature and severity of potential future events.
“A good practice is to consider a range of outcomes – extreme events (expected to occur once every 200 years), reasonably likely events (expected to occur at least once a decade) and also the potential for cumulative impacts over time (aftershocks from a major earthquake).”