Big insurance hikes contEmueaslossesleap INSURANCE premiums for commercial buildings and business interruption could rise another 50 per cent in June after already rising five-fold since the Christchurch earthquakes, insurance consultancy the Lion Partnership says. Lion Partnership global managing partner Ken Armstrong said the catastrophic losses from the Christchurch earthquakes were still being incurred by insurers as claims were settled. The total cost of the earthquake is now estimated at $20billion. Insurance companies and their reinsurers had suffered tens of billions of dollars in losses in a series of catastrophes around the Pacific in recent years, Armstrong said. Apart from the Canterbury quakes, they included the Japanese earthquake and tsunami, extensive flooding and cyclones in Australia, and the Chilean earthquake. In a bid to recover some of their capital positions, reinsurance premiums for building and business interruption policies increased between 200per cent and 400per cent. Premiums for infrastructure providers.rose nearly 400 per cent, for the healthcare sector about 300 per cent, foOdand beverage industry about 250per cent, charitable organisation about 225per cent and manufacturing 路about 200per cent. However, the cost of insurance for public liability such as directors' insurance, vehicles and travel were largely unchanged. As a result "we have been seeing company premiums going from $500,000to $1.2 million" across the suite of policies. Companies thought that last
Fragile state: As companies scramble to recover some of their capital positions, commercial reinsurance premiums could jump another 50 per cent. Photo:FAIRFAX NZ year's increases relating to the earthquakes would be the last. But in August and September last year the reported losses increased again as insurance companies began to understand the extent of their true losses, Armstrong said. Companies could offset much of the increases this year by benchmarking the wording and conditions of their policies and the premiums paid against other insurers. This was something that almost no New Zealand company was doing. Armstrong said Lion Partnership on average negotiated 150changes to major policies for clients, usually without the premium increasing. It would be years before premiums began to reduce, and they would only do so when new competitors entered the market and expanded the insurance capacity, he said.
"The problem for New Zealand companies and organisations is insurers don't want to allocate their capital to this part of the world," Armstrong said .. He expected new insurers could enter the market over the next three to five years attracted by the high premiums on offer. But they would cherry pick what they were prepared to cover. Buildings built before 1935would be excluded for earthquake cover, he said. Armstrong, who is a former managing director of a number of insurance companies, said some of the major insurance brokers, like Aon or Marsh, could be tempted to start a new insurance company. It was also possible that an existing insurance company could set up a new subsidiary to target lower risk business.