Premiums to rise after record year of weather-related insurance claims

Wednesday, 6 December 2017

The Heathcote and Selwyn rivers burst their banks in Christchurch following heavy rain in winter.

Insurance premium are expected to rise after a record $242 million in weather-related claims this year due to the effects of climate change.

The record high has insurance industry experts predicting premiums 'may well go up'.

Insurance Brokers Association chief executive Gary Young said commercial premiums could rise more than residential premiums, but both may go up.

Flooding caused havoc right across the South Island with state of emergencies being declared in Otago and Canterbury in late July. Damages from the flooding cost $31.2m.

'Overall the market may well go up, but it's more likely to be seen in the commercial-type area than on homeowners I think.'

**READ MORE:

A large slip caused damage to roads and buildings in New Lynn as a result of torrential rain growing larger as the tail of Cyclone Debbie swept across New Zealand, costing insurers $91.5m.

* Insurers warn climate change will hit policy prices and make some properties uninsurable**

*** Some New Zealand climate change impacts may already be irreversible

Insurance Council chief executive Tim Grafton says the massive payout is thanks to climate change.

* Climate change could spell 'extreme poverty' in coastal NZ towns**

Insurance Council chief executive Tim Grafton said the $242m in insurance losses were a 'clear sign of the impact climate change is having on our country'.

February's Port Hills fires were the cause of $18.3m in insured losses.

'As time goes on, we expect to see more of these sorts of extreme weather events occurring.'

By comparison, last year's extreme weather cost $42.6m for insurers.

Reinsurers, companies that insure insurance companies, had their profits significantly impacted by global events this year, including hurricanes in the United States and Caribbean as well as earthquakes in Mexico.

Young said it was 'very hard to tell' how much premiums would rise but the prevalence of earthquakes and floods in New Zealand would have a bigger impact on premiums than the rise in global disasters.

'I think overall the market will reflect the increases [from reinsurers] but it could be at least a month away.

'Insurers only do their reinsurance once a year so it can take quite a while to feed through to actual policies here in New Zealand.'

But he said several insurers were negotiating with reinsurers at the moment.

Young said homeowners benefited from a more competitive marketplace than commercial policy-owners, but reinsurers were likely to raise their prices when renegotiating with New Zealand insurers.

The most expensive weather event was Cyclone Debbie, which left $91.5m of damaged property in its wake.

Floods across New Zealand also racked up a big bill.

Insurers paid out $94.6m across 11,455 claims for flood damage.

South Island flooding in late July cost $31.2m in claims.

Victoria University climate science professor James Renwick said as the atmosphere got warmer on average due to climate change, more moisture entered the air, which resulted in heavier rainfalls.

Renwick said the floods in March and April were caused by subtropical systems that came from northwest and east of New Zealand.

'Definitely if there's any part of the business sector that's keen to study the science of climate change, it's insurance.'

February's Port Hills fires were the cause of $18.3m in insured losses.

House and contents claims made up nearly 80 per cent of the claims, accounting for $154.2m of payouts.

Commercial claims were the second most expensive, totalling $71.1m.