Kaikoura ranked at seventh highest
24 Jan 2017
The Kaikoura earthquakes were the seventh most costly event covered by insurers around the world last year.
Aon Benfield, in its 2016 Annual Global Climate and Catastrophe Report, puts the insured loss of the November 13 disaster at US$2.1 billion (NZ$2.9 billion).
With the total economic loss of the quakes expected to be US$3.5 billion (NZ$4.9 billion), it maintains 60% of the losses will be covered by insurance.
Put in perspective, Aon ranks the 2011 Canterbury earthquake the 10th most costly insured event since 1950.
Munich Re estimates 69%, or US$16.5 billion, of the US$24 billion of total losses suffered were covered by insurance.
The Earthquake Commission - aka taxpayers - are largely to thank for such high levels of insurance cover, which Treasury has argued should be higher if building owners properly calculated their sum insured.
The significance of an event like the Kaikoura quake being such a costly disaster for insurers, is that it yet again increases New Zealand's risk profile. It makes reinsurers nervous, so they charge insurers higher rates for cover. This gets passed on to consumers, who end up paying higher premiums.
The low interest rate environment has provided a buffer in recent years, as a lot of the excess capital it has created around the world has been invested in reinsurance. This has taken the heat off reinsurers to charge higher premiums.
The issue is interest rates around the world are starting to turn, so New Zealand insurance holders might start feeling the pinch soon.
The fact the Earthquake Commission Act is still up in the air, won't help, as it adds another layer of uncertainty when reinsurers weigh up how risky New Zealand is.