S&P rating 'positive for industry'

Standard and Poor’s ratings services gave a low-risk insurance industry and country risk assessment to New Zealand’s life insurance sector.

It said New Zealand was a relatively high-income economy with a stable policy environment, and low industry risk with strong returns and relatively less exposure to interest rate and longevity risk than other insurance markets.

Credit analyst Michael Vine said it was comparable to markets in France, Hong Kong, the US and UK.

He said: “We consider that New Zealand's GDP expansion will support premium growth for the country's life sector, in addition to rising demand from a higher population, existing under-insurance, and increased risk awareness post-catastrophes, although affordability remains a constraint. Returns for the industry have been particularly strong at over 17% return on equity for the past five years, although they have varied significantly between individual insurers. Recent changes in taxation regulation and competition from a range of distribution channels and new entrants have moderated life insurers' profitability, but we expect returns to stay at a still strong 15% over the next few years.”