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Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including Daily Alerts, monthly regional Insights, and in-depth quarterly Country Forecast Reports.

New Zealand Insurance Report Q2 2014

Published by Business Monitor International on Feb 10, 2014 - 60 pages
PDF - Download Now with 3 Quarterly Updates format - Download Now
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As of early 2014, the outlook for both of the major segments of New Zealand's insurance sector is uninspiring. The socialisation of risk through the EQC and the ACC is a key reason why insurance has been and will remain underdeveloped by most metrics. The economic environment is not particularly favourable, at a time that the life insurers (in particular) need to do more to educate consumers about the benefits of insurance. Nevertheless, the sector has clear strengths, and coped very well in the aftermath of the second (and main) earthquake in Christchurch three years ago. Many of the leading life insurance companies are benefiting from the expansion of the KiwiSaver system - even though the KiwiSaver products do not include an insurance component.

BMI's new insurance report format provides forecasts of the life and non-life markets, including gross and net premiums, reinsurance premiums and assets. Moreover, it provides forecasts for key growth drivers such as vehicle fleet size, demographic factors and private health expenditure. The report also contains a comprehensive breakdown of the non-life insurance market, providing forecasts for motor and transport insurance, property, personal accident, health, general liability and credit insurance. Finally, the new report offers a detailed breakdown of the life and non-life competitive landscapes, covering the top companies present in each segment by premiums and market share.

By most metrics, the insurance sector in New Zealand remains underdeveloped in early 2014. This is partly because of the socialisation of risk through the Earthquake Commission (EQC) and the Accident Compensation Corporation (ACC), in the non-life (property and casualty) and life segments respectively. The EQC demonstrated its effectiveness in the wake of the main Christchurch earthquake of February 22, 2011. The Accident Compensation Corporation has been actively introducing reforms and changes to resolve its long-term funding issues.

However, there are other challenges. These include a fairly sluggish economy, a general absence of consumer confidence and the maturity of many of the main non-life lines. Non-life companies have been able to pass on costs of higher reinsurance premiums to their customers. Overall, though, non-life premiums are growing at single-digit rates. There is no obvious catalyst for this to change.

In the life segment, two main trends continue to stand out. First, premium growth, as in the non-life segment, is sluggish. This may be because of the recent compression in real incomes. A more fundamental problem, which the Financial Services Council hopes to address, is that New Zealanders tend not to see the need for life insurance products and/or begrudge having to pay premiums. Second, the assets under management (AUM) of the KiwiSaver schemes have been growing rapidly. We believe life density will still be low by the standards of developed countries at the end of the forecast period.

Key BMI Forecasts
  • Total gross premiums will rise by 1.3% to US$5.3bn in 2014.
  • In the life segment, gross premiums will increase by 2.0% to US$1.7bn.
  • In the non-life premiums will grow by 1.0% to US$3.6bn.
  • Within the non-life segment, motor insurance premiums will fall by 2.4% to US$1.1bn.
  • Property insurance premiums will expand by 6.5% to US$1.4bn.
  • General liability insurance premiums will fall by 0.8% to US$0.3bn.

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