sign up log in
Want to go ad-free? Find out how, here.

New Zealand needs reinsurance. Does the reinsurance market need New Zealand?

Insurance / news
New Zealand needs reinsurance. Does the reinsurance market need New Zealand?
stormy weather ahead
Image sourced from

“New Zealand needs reinsurance. Does the reinsurance market need New Zealand?”

This was a question posed near the end of the Insurance Council of New Zealand’s conference on Thursday by Cameron Green, Australia Chair and International Head of Casualty at global insurer Gallagher Re.

Green was chairing the conference’s reinsurance panel which included members from Swiss Re, Lloyds Bank and the Reserve Bank of New Zealand (RBNZ). Reinsurance, or insurance for insurers, transfers risk to another company to reduce the likelihood of large payouts for a claim.

Andrea Dry, Swiss Re Director and Head of Client Underwriting ANZ, said the question around New Zealand being potentially less desirable in the future came down to the global reinsurer having “confidence and good understanding” of the risks on the table.

“We’ve been in this market for the last 60 years plus and we think New Zealand is a very valuable one for us on an ongoing basis,” she said.

“One of the key factors in terms of being able to continue to provide substantial risk cover is to have a good understanding of risks.”

Chris Mackinnon, Lloyd's Australia Director Asia-Pacific, Middle East and Africa, described it as New Zealand being “effectively a customer” in its own right when looking for insurance from a reinsurer.

“It's about the premium you're prepared to pay for the risk that they're going to take on from you,” he said.

“It's a very simple insurance transaction, but at the end of the day, the primary thing that you need to do in New Zealand is to ensure that you don't undersell the value of the market that you're trading in when you're talking to reinsurers.”

“If as an economy, as a country, New Zealand can continue to demonstrate to the reinsurance industry, then yes, it is a risky place, but there is a risk premium attached to that. But the risks we have here, we are managing well. We're working in collaboration, in partnership with government. We're taking care of these things internally and domestically, so you can rely on us to actually produce a reasonable return for your risk premium.”

Green said that a lot of the reinsurance industry now ran essentially across the North American summer. 

“If there is a hurricane in North America, it has a major impact on the rest of the world in terms of what we can do from a buying reinsurance perspective.”

He also touched on changes in reinsurers entry and exit points and the hikes in insurance retention due to the increase in severe weather events.

Reinsurance retention is the portion of risk an insurance company retains instead of transferring to a reinsurer.

“It sort of effectively says to any institution operating in this market, actually, suddenly now you've got to eat more of your own risk,” Green said.

Dry said reinsurers hadn’t been very good at assessing risk in this space as a lot of losses were coming from secondary perils – like floods, storms, bushfires – things that typically haven’t been as well modeled as earthquakes.

Dry said over the last five years, Swiss Re had paid out a “very significant” amount and much more than it had anticipated – and had realised that insurance companies were much better equipped to understand these risks.

“This is probably not the space we're particularly good at,” she said. 

Quite an appetite

Green wanted to know what RBNZ’s Senior Actuarial Advisor Adrian Allott thought of the state of the insurance market and if the central bank sat back “amused”.

“We certainly don't sit back amused,” Allott replied. 

“We have teams who constantly talk to insurers and try to monitor what’s going on and we also try to monitor what's going on through our data returns.”

But he added that the risk “is what the risk is” – and it was the same for the financial position of insurers.

The RBNZ could only work alongside insurers to overcome those difficulties, he said.

Green also asked Allott later in the panel how he felt about non-traditional capital alternative products.

Lloyd’s Mackinnon commented that there was “quite an appetite” for people to look outside of traditional reinsurance.

Allott described it as a “little scary” but said theoretically, the central bank was “indifferent” to how the insurer managed its risks – whether that was reinsurance or retaining the risk and holding capital against it.

Green also asked the broader panel how reinsurers viewed EQC’s involvement in the market – and if it reduced the amount of risk.

Swiss Re’s Dry said the involvement was “definitely positive”.

“So what we saw was EQC taking on a significant increase in the personal insurance cover provided. And so that meant that a lot of the peak exposure that local insurance was purchasing in the international insurance market reduced. And so effectively, probably in terms of that demand for earthquake cover reducing, I think that was a benefit,” she said.

Cameron said EQC’s involvement had a “profound” impact on the renewals that we recall with EQC taking that step. 

“It was particularly complicated to begin with and trying to explain it to the reinsurers is hard because everybody's got data, everybody's covered on a different basis. And eventually we sort of came to a landing position with most of the reinsurers that was, I think, beneficial,” he said.

He added that if it wasn't for the EQC’s involvement in New Zealand’s catastrophes, reinsurers would be having a “much more complicated discussion”.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Their problem is starkly simple, and summed up in the Mora/Heath interview last Sunday (RNZ). We are cresting the Limits to Growth curve - long predicted, and tracking as forecast (indeed, when exponential growth is graphed, it is hard to be be 'out'; the numbers get so big so fast that error becomes noise).

Insuring on the up-slope, effectively got inflated-away. Insuring on the down-track (leaving aside the obvious point that at some stage, the forward-betting ponzi collapses completely) becomes increasingly unviable. 

So expect abandonment, increased premiums, increased inabilities to pay same, governments having to bail society out repeatedly - then governments unable to do so. 

The future? Is smaller, less complex, and local. Whither insurance in that scenario?


The global warming, bushfires, flooding, storm, nonsense again. Where are they?

Must be very disappointing for the global warmers that there's been no bushfire 'emergency' in Aussie this summer. 

Any reason to increase premiums. 


Um, floods in Auckland, Bay of Plenty, Hawkes Bay and Tairawhiti last year?


Bush fires in NSW and Victoria plus floods in Queensland as well?


Pretty sure those are increasing premiums, although not paying their executive team outrageous salaries would've helped keep premiums down.


It was ya stock standard summer hurricane, they've been arriving here forever. There were no major bushfires in Aussie this summer. 

There's bushfires burning all year round in Aussie, I used to fly over it and see them, especially at night. People are soooo gullible. 


Gullibility isn't the problem. 

People who need to believe, because the truth might upset their established persona - THEY are the problem. Especially those who are far enough along in life, that they are out of time to live a different way (with all the guilt implications vis-a-vis offspring and theirs. I feel sorry for such folk, but not sorry enough not to challenge them - they are, in terms of the Limits to Growth (of which climate-forcing is merely one - inevitable, physics-wise -  aspect), entirely wrong. 

You - it goes with the territory, usually - will be in denial of any human overshoot, any problem at all. Right? 

Good luck with that...


Gullibility is a huge problem, especially in NZ.

if you want an example look at the dopey nuclear ship ban.  Hundreds are killed on the roads every year, but nuclear ships or submarines which have been plying the oceans for decades are banned.

Kiwis love a cause, there's demonstrations about trivia all the time. Global warming's just another one. 


The time has come where every house or building that requests insurance is evaluated against a whole lot of criteria, and insurance is available based on those criteria.

The first would be old retaining walls, most are unreinforced, and suffer drainage problems, not covered.

another would be any brick chimney, or consequential damage by a brick chimney is not covered by any insurance, and suddenly homeowners will do something about reducing the risk.

what about  un reinforced masonry, again no cover

flood risk, anything that has been flooded and has a floor level less than 10m above sea level, no cover

house buyers are already well advised by lawyers, and the sooner insurance companies start doing their own due diligence on every policy the better.

we are not interested is subsidising shoddy builds.



That would be a very large number of houses in NZ.

Many years ago I used to own a house in Te Atatu South. Not long after I purchased it I discovered flooding in the basement. My next move a few years later was just down the road. After heavy rain......same thing. I checked with the neighbours and found they all had the same problem, because when those houses were built in the '50's, they didn't dig drains down below the level of the foundations. 

One of the many reasons new houses are expensive to build and won't be getting any cheaper. I've built several new houses since that time and have been very careful to ensure that water ingress can't occur, and it hasn't.