No certainty on future reinsurance cover

Insurance Council chief executive Chris Ryan File photo

Total insurance cover for natural disasters and weather events may not be provided in future, the Insurance Council has warned.

The world's major reinsurers had reassessed the risk for New Zealand and the future reinsurance outlook was uncertain, Insurance Council chief executive Chris Ryan said today.

"While it is a fact that all the major insurers in New Zealand currently have reinsurance cover for at least the next 12 months, beyond this 100 per cent reinsurance cover is not a guaranteed feature of the insurance landscape in this country," Ryan said in a statement.

However, New Zealand's major insurers were still trying to secure reinsurance cover for natural disaster events beyond the current 12-month reinsurance cover.

In the past, New Zealanders had had very reasonable reinsurance rates but this would change over the next 50 years, Ryan said.

At the heart of that was New Zealand's seismic risk and its very small percentage share of the world's earthquake and natural disaster premium market.

These were forcing the world's leading reinsurers to review their long-term reinsurance commitment to New Zealand.

"With only 0.2 per cent of the world's earthquake premium market to attract buyers here, plus the fact New Zealand is now a well-defined seismic risk, these factors represent the biggest threat to sustainable and long term reinsurance cover for this country,'' Ryan said.

The trend was also being seen in countries such as Australia, the United States and Japan.

"These jurisdictions have all suffered similar large-scale natural disaster events, earthquakes, major flooding and tsunami events. If reinsurance has returned to these markets it has been at the expense of traditionally cheaper premiums.

"What has happened in these places is a forerunner of what may happen here with reinsurance cover and ultimately dearer premiums for earthquake and natural disaster coverage,'' Ryan said.