Premiums won’t fall — consumers to carry more risk, says Suncorp CEO

Sunday, 2 November 2025

If there was another Cyclone Gabrielle tomorrow, or a Canterbury earthquake, would that trigger another huge uptick in the price of house insurance?

Suncorp NZ chief executive Jimmy Higgins hopes not, but there is a proviso.

It all depends on whether the disaster was a known risk, or came exploding out of the blue like Cyclone Gabrielle’s Auckland flooding or the Canterbury earthquakes, surprising the giant reinsurers in London, New York and Zurich that insure insurers like Suncorp, which owns Vero and majority owns the AA Insurance brands.

Higgins sat on the Independent Research Group (IRG) advising the Government on a national framework for climate adaptation in preparation for more frequent extreme weather events and rising seas. He’s confident earthquake risk is now modelled, and properly priced in insurance premiums, as is flood risk.

He seems more concerned about the US hurricane season, though, because reinsurers will reset their risk appetite for New Zealand if there’s an unplanned for US$60 billion loss or above in the US.

The industry watches tornado season play out between now and the end of the year, because “hurricanes and tornadoes are the biggest driver of losses at a global level”.

As long as they are within the modelled risk or loss, resetting of reinsurance for countries like New Zealand shouldn’t happen - but any unexpected increase in severity, or frequency, and reinsurers might react, he says.

The reinsurers are the companies that insure the likes of Suncorp and its rivals IAG (State and AMI), and Tower, ensuring our insurers have the money to pay claims after massive disasters.

But they demand a return on their investment and, in recent years, they did not feel they had been earning enough. They reset global prices, which meant insurers here lifted their premiums, sometimes dramatically.

“Historically, their returns on capital have been in the low single digits, [and some have been] negative; some are on credit-watch globally. So they've repriced their entire book,” Higgins says.

“They're now making the returns they want.”

But on top of that, Suncorp and other insurers have their own desire for a return for shareholders. The return on average shareholder equity for the whole of the entire Suncorp Group, including its vast Australian business, was 14.1% in its 2024/25 financial year, leading it to announce an A$400 million return to shareholders.

But between 2010 and 2024, its return on average shareholder equity ranged between 1.3% and 8.8%.

Higgins does not think Suncorp has raised premiums in New Zealand by more than is justified.

Aaron Ibbotson, Forsyth Barr senior equities analyst, says a range of 9% to 10% return on equity is reasonable for a large general insurer like IAG or Suncorp. However, years containing disasters will mean very low returns, so to balance that out, good years should have higher returns in the 13% to 14% range.

The impact of the reinsurance repricing can be seen through the data.

In 2011, before the Canterbury and Kaikōura earthquakes and Cyclone Gabrielle, Insurance Council of New Zealand data shows its members, which insure the lion’s share of New Zealand, charged $3.98 billion in premiums.

Of that, about $800 million was paid to reinsurers.

In 2024, ICNZ booked $10.79b in premiums (albeit on more assets, with a bigger economy and more building stock). Of that, around $3.5b was paid to reinsurers, equating to a little over 0.75% of the country’s GDP.

This cost of living in these shaky and rainy isles is going to remain, according to Higgins.

“The premiums will not go back to pre-Gabrielle,” he says.

New Zealand is poised between the past and future on how it copes with natural disasters like floods and earthquakes.

The Government has signalled the beginning of the end for post-disaster property buyouts, like those that happened in the Red Zone in Christchurch, and in Auckland after the 2023 flooding.

However, much better data must be available first so people understand the risk of the properties being bought or built.

“It's going to take many years for them to do that,” Higgins says.

“It might be five or 10 years, but it’s more likely 15 to 20 - at some stage in the future when you decide to buy a house, you’ll understand the risk associated with that house, and if it's in a higher risk area… you take that risk.”

Cabinet has said in the meantime, decisions taken on financial assistance in the presence of a disaster but in the absence of formal policy will be the “signal”.

Higgins, who has been with Sunscorp since 2008 and through many natural disasters, just hopes there won’t be a disaster to test what signal the government would choose to send.

The message from reinsurers could not be clearer, however. They want “for New Zealand to better understand [its] natural hazard risk, and … to do something about it”.

New Zealanders themselves, according to a Suncorp survey, remain in the majority supportive of both pre and post-disaster buyouts.

But there was a large portion of the population that felt those who owned properties in harm’s way should shoulder a large part of the costs - most through special rates on affected properties.

Higgins disagrees that the findings suggest people living in low-risk homes chafed at paying for the risky choices of others.

“I think it's more to do with, ‘Guys, we need to have a better solution here more broadly’,” he says. “It’s more about ‘How should we think about this as a country?’”

While it may feel like New Zealand is behind the curve on climate adaptation - including preventing more building in high-risk areas - Higgins’ recent trip to Europe to meet with reinsurers revealed little evidence of better climate adaptation policy.

“We couldn’t find any,” he says. “Even Australia hadn't done it.”