by Rob Hosking
The non-life sector has been upgraded to “moderately low” risk, making it one of the best markets in the Asia-Pacific region.
“The improvement in New Zealand’s property and casualty insurance market follows sustained operating profitability among participants, solid premium volume increases in the past two years after a period of stagnation, and strong Australian ownership and regulation,” says S&P credit analyst Kate Thomson.
New Zealand is seen as a potentially risky country because of the potential for earthquakes and other catastrophic events, but this risk is alleviated by catastrophe reinsurance by offshore providers.
The other factor keeping the non-life sector lower risk (and smaller) is the accident compensation scheme, which limits exposure to motor vehicle and workers’ compensation liabilities.
Standard and Poor’s is much less keen on the life industry. Although its report says the “existing financial strength ratings on New Zealand life companies…remain satisfactory”, the credit quality outlook “remains negative”.
There is limited potential growth in New Zealand for life insurance. And that “inhibits many industry players generating sufficient scale and satisfactory returns.
Most of the market, however, “ is owned by strong Australian or international life insurers and major banking groups, and so, the local New Zealand life insurers benefit from strong ratings on those groups,” S&P says.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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