Losses due to the Kaikoura, New Zealand earthquake, the magnitude 7.8 tremblor that occurred on the 14th November 2016, are seen as “well within reinsurance limits” for insurers operating in the country, according to the Reserve Bank of New Zealand.
“While there is substantial uncertainty over the claim costs, they appear to be well within reinsurance limits for all insurers,” the Reserve Bank said.
The RBNZ estimates the total cost to insurers and the government of New Zealand from the Kaikoura earthquake at between $3 billion and $6 billion, with around $2 billion likely uninsured and the rest largely being handles by insurers reinsurance providers.
Insurers in New Zealand have improved their capital positions and acquired more reinsurance since the more damaging earthquakes in 2010/11.
“Compared with the Canterbury earthquakes, the insurance sector is much better positioned to absorb these costs due to significantly higher levels of reinsurance and capital,” the RBNZ explained.
“Overall insurance claims are significantly lower than for the Canterbury earthquakes, due to the earthquake being centred on a lightly populated rural area. However, Wellington was significantly affected and information to date suggests that the bulk of the claim costs will relate to commercial claims in Wellington,” the bank continued.
As of the 31st March 2017 only $260 million of claims have been paid by insurers, which seems low considering that over a billion dollars of claims have been filed and insurers are reported to have claimed almost $700 million back from their reinsurers as of the middle of March.
New Zealand has been beset by catastrophe events, in the shape of the earthquakes, as well as more attritional loss events in the shape of the recent Port Hills fire, cyclones and rain storms.
As a result, the Reserve Bank continues to urge all insurers to ensure they are adequately protected.
The Bank stressed that losses over recent years demonstrate; “The need to have sufficient capital and reinsurance to cover a single very large catastrophe event (e.g. a major earthquake or pandemic), as well as to cover several smaller unexpected and unprovisioned losses occurring in a short period of time.”