According to S&P Global Ratings, New Zealand's property/casualty (P/C) insurers should be able to sustain outstanding operating performance over the following two to three years (S&P).
The international credit rating agency predicts a strong 8% premium growth for calendar 2022 (following a 7% growth in 2021), which should cover claims pressure from higher natural hazard losses and claims inflation. The report is titled "COVID Contained But Symptoms Linger For New Zealand Governments, Banks, And Insurers."
The combined ratio, an industry measure of claims and expenses to premium, significantly worsened to 88.3% in the year ending September 30, 2021, from 85.1% the year before, and S&P anticipates that it will stay in this range for the following two to three years.
Over the past two years, the cost of natural hazard losses, particularly from floods, has slowly increased. In addition, S&P anticipates that COVID-19 interruptions, the Russia-Ukraine conflict, and global supply chain concerns will all contribute to continued high claims inflation by driving up the cost of repairs and replacements for anything from building materials to motor parts.
COVID
Even though the number of daily new COVID cases remains firmly in the low thousands, S&P observes that New Zealand is gradually eliminating its remaining public health restrictions. For the first time since March 2020, New Zealand fully reopened its international borders in August 2022.
Long COVID may cause an increase in longer-term claims on life and health insurance for insurers. Estimating the size and likelihood of insurance claims is challenging, although they are more likely to occur in income protection and disability-type programs that cover conditions like chronic fatigue.
The immediate effect of COVID is a delay in coming off-claim (staying on benefits longer), as prospects for rehabilitation and employment may be restricted. As patients arrive for surgery, claims for private health are progressively returning to normal, but only within the staffing and capacity limitations of the hospital system.
as interest rates rise
Additionally, rising interest rates are having a negative impact on bond values and insurer mark-to-market investment returns. However, this is largely compensated by the increase in profit brought about by smaller claims reserves for duration-matched portfolios.
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