Loss creep continues
24 May 2017
The insurance and reinsurance market loss from the 2010/11 Canterbury, New Zealand earthquakes continues to increase, with insurer Tower Group again reporting further loss creep yesterday and the industry total now estimated at $21 billion by the Insurance Council.
We’ve written a number of times about the lengthening tail on the Canterbury New Zealand earthquake loss from 2010/11, as the event continues to show that earthquakes are not always a short-tail catastrophe loss.
Tower Group reported this morning that, while it continues to progress through settling its claims, issues with the Earthquake Commission (EQC) are affecting the industry.
The insurer continues to receive new claims from the EQC, which is increasing the loss it faces and Tower has had to provision a further $9.8 million towards its Canterbury quake provisions in the half-year to 31st March. This continued creep in the insurers earthquake loss has effectively wiped out its profit, with Tower reporting an $8.2 million loss after tax.
“The legacy of the Canterbury Earthquakes continues to overshadow the momentum building in the underlying business,” Tower commented in its results today.
Tower also saw a $7.2 million impact due to the Kaikoura earthquake and $3.6 million for fires and the ‘Tasman Tempest’ storm, an event which was pegged as a $47 million industry loss by the Insurance Council.
It appears that some of Tower’s losses from the September 2010 quake may still be ceded to reinsurance capital, as the insurer has $2 million remaining from this reinsurance cover and says that it “continues to work closely with its catastrophe reinsurance partners as it works through its Canterbury claims settlement programme.”
Tower also has reinsurance available for the June 2011 event and December 2011 Canterbury quakes, which were much less severe, but has exhausted its catastrophe reinsurance for the most major quake from Feb 2011.
Additionally, Tower has called on its aggregate reinsurance cover, with the early April flooding in New Zealand expected to be covered up to $5 million.
The Canterbury earthquakes continue to demonstrate the difficulty in resolving earthquake claims and the potential for them to eat through retention and result in a hit to the reinsurance market.
The total industry loss from the accumulated Canterbury quakes borne by insurers is now put at $21 billion by the Insurance Council of New Zealand, up from $19 billion in late September 2016, with another $12 billion dealt with by the EQC, according to the Council’s data.