What can global insurers learn from New Zealand?

New Zealand's insurance market is on the front lines of extreme natural disasters. Has this experience pushed the country's insurance professionals ahead of the curve? What can the world's insurance firms learn from how sellers and underwriters in this market handle disasters like earthquakes?

At the recent New Zealand Underwriting Agencies Council (NZUAC) Expo in Auckland, Insurance Business asked local firm leaders for their views.

Maintaining insurance support

“I think that in that broader context, New Zealand can be seen as the best in the world in other areas,” said Travis Atkinson (pictured above).

Atkinson is the general manager of Insurance Advisernet New Zealand operations. He said that despite this accumulation of volatile risks in a small country, New Zealand was “essentially” fully insured.

“So we've done some things right to manage and maintain NZ insurance support,” he said. “In the rest of the world, very few countries have full-scale accidents.”

However, he said this resilience is partly down to luck.

Since the earthquake in Christchurch more than a decade ago, he said, apart from last year's attack on Auckland, the country's cats have been relatively quiet. Meanwhile, prices have risen steadily.

“We're fully insured, so it's a big pay pool,” Atkinson said. “The Natural Hazards Commission is a big buyer of the cover cat so there's a lot of money to be made in NZ.”

Another factor in New Zealand's favor is a stable economy. However, in the event of another severe earthquake, he said, “international insurers would go elsewhere.”

“The cycles have been coming and going,” she said.

Atkinson said, at present, New Zealand is an attractive market for London and other financial providers.

Open-minded approaches

“One thing I think we do well in New Zealand is we don't get stuck in our ways,” said Ryan Clark (pictured below), senior director of Commercial for 360 Underwriting Solutions Group.

Clark said local insurance companies are often open to gathering multiple opinions before coming up with an insurance policy.

“Whether it's from US hurricanes, or European disasters – we analyze multiple data points and make our decisions, our way forward and our solutions,” he said.

Clark said this doesn't just apply to cats, but “every country.”

For example, after Cyclone Gabriel, New Zealand's susceptibility to hurricanes and floods was exposed.

“We wanted to improve our flood mapping tools,” Clark said. “I reached out all over the world and talked to a lot of different companies.”

He said the solution they chose came from a company in Australia, but the process of getting donations from around the world allowed them to “find what we need and adapt it to your area.”

“It is an example of the danger of a natural disaster”

Luke Scott (pictured below) is regional development manager for Market Lane Insurance Group New Zealand. The company trades locally as The Barn Underwriting Agency.

“It's an example, as you say, of the risk of a natural disaster,” said Scott.

He said good market returns tend to attract capital.

“I think the risks are well understood and Lloyd's syndicates can make informed decisions about what it looks like in New Zealand,” Scott said.

He said local underwriters sometimes treat nat cat risks differently from the rest of the world, including how certain deductibles and limits are applied.

“For example, we use a domain value that is drawn from earthquakes, which is to say, a flat number around the world,” Scott said.

He said that the value of the property being deducted includes an understanding of hazards such as the age of the building, construction materials and soil conditions.

“So you're dealing with an earthquake that's drawn from the actual hazard profile itself,” Scott said. “That's something we've learned from the incidents that have happened over the years.”

However, he said some aspects of nat cat cover are challenging.

“Probably the thing that we don't do very well in New Zealand is actually, we provide comprehensive coverage for all the risks that are different from, say, Japan, where there are limited earthquakes,” Scott said.

What do you think the world's insurers can learn from the way New Zealand insurers handle nat cat risk? Please tell us below