New Zealand Institute of Building Bounce Back Conference, Auckland 09 04 13

Risk Information now under the Microscope

John Lucas, Insurance Manager ICNZ

As Insurers we have learnt many lessons from the Canterbury earthquakes. One of the primary lessons learnt is that our industry needs to better understand the property risks it insurers. I think insurers may have lost some confidence in building performance. In Canterbury so many new buildings failed and were uneconomical to repair.

My presentation this afternoon will examine the property risk information that insurers will begin to require from their customers and the reasons why. I will provide you with a run down on what has changed in the insurance market since 2011 and what effects that has had on commercial property owners and developers.

I will also comment on the changes to residential insurance coverage going forward in 2013.

So far the private insurers are expecting to settle the Canterbury earthquake claims at around $16 billion.

The $30 billion cost overall you would have no doubt heard about is made up of EQC estimates at $12 billion, private insurers at $16 billion and the rest being self-insured assets like infrastructure and Government property.

These numbers could increase.

We still have the appeal issues with the recent High Court Judicial Review (ICNZ vs. Christchurch City Council over repairing of damaged building to 33% or is it 67% NBS)

We are staring down the barrel of significant demand surge inflation that could increase all costs by 20% or more and there may be other outstanding litigation that may push up our numbers.

Out of interest EQC are dealing with 467,000 residential claims, Insurers are managing the repairs and rebuilds of 110,112 claims, but as yet we only half way.

Commercial claims have been much quicker to settle (close to 2/3rds settled) as insurers can write a cheque and let the owner manage repairs, demolition and rebuilds. With residential in most cases our insurers have to manage the repairs and rebuilds.

The Future Needs of the Reinsurers

The international reinsurers have funded much of the insurance recovery in Canterbury. Reinsurers allow the insurance of Natural Hazards like earthquake and flood to be made possible by spreading their risks around the globe.

Surprisingly New Zealand is still an attractive place for the international reinsurers to provide earthquake capacity simply because they are now getting realistic money for New Zealand