Insurance premiums likely to rise because of quakes

Photo / Sarah Ivey

As the insurance industry eyes paying out at least $10 billion for the Canterbury earthquakes, it is warning international insurers will question how much they want to insure New Zealanders and that premiums will likely rise.

It has been widely predicted that insurance premiums will need to increase to cover massive payouts following a raft of natural disasters this year.

Global reinsurers - the companies that insure insurance companies - have borne the brunt of the multi billion dollar claims following the Queensland floods, the Japanese earthquake and tsunami, the US hurricane season and the Christchurch quakes.

One of the world's biggest insurers, QBE, and Insurance Australia Group (IAG) warned yesterday that premiums would need to increase to cover payouts from disasters, including Christchurch.

IAG, which is the largest household and motor insurer in New Zealand, told an investor briefing in Australia it was too early to say how much Monday's quakes would cost.

The Insurance Council, which represents about 95 per cent of this country's general insurance business, today warned that the continued aftershocks in Christchurch - viewed with increasing concern by reinsurers and international insurers - could have long term effects on the insurability of New Zealand.

New Zealand companies offered more affordable insurance than in many other parts of the world but the aftershocks raise the level of risk seen here and may have a significant impact on insurance and reinsurance policies in the future.

The impact may see increases in premiums and excesses, or even a questioning of the level of insurability for earthquakes that New Zealand receives, chief executive Chris Ryan said.

The insurance industry was firmly behind the people of Canterbury and was "mustering all resources to cope with the increased and additional influx of claims" following Monday's quakes, he said.

"The insurance industry is now gearing up and expects to pay at least $10 billion into the Canterbury economy and the rebuilding of Canterbury and Christchurch generally."

However, more than 100 more commercial buildings were destroyed in the latest quakes and many buildings already under repair were destroyed. That would mean a further approach by insurers through their builders to the insured parties, to ensure that buildings are repaired.

The future was now being re-assessed by reinsurers and insurers and there are likely to be long term and significant changes to insurance in New Zealand when it comes to the writing of policies and covering of risks like earthquake.

Earthquake protection would now be set internationally and this country's earthquake insurance future would be decided by reinsurers in boardrooms on the other side of the world, Mr Ryan said.

- NZPA