New Zealand P&C insurers to see weak profits in 2023
This is due to the recent catastrophic events that occurred in the country.
A study revealed that property and casualty (P&C) insurers in New Zealand are expected to experience a decline in profitability in 2023.
S&P Global Ratings’ New Zealand Insurance Outlook: Disaster-Hit P/C Diverges From Life and Health said several catastrophic events that occurred last February 2023, including storms, floods, and earthquakes, would result in substantial claims for property insurance.
The study also said that P&C insurers will face challenges such as supply chain constraints across services and materials, which may lead to secondary impacts.
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Aside from growing natural hazard claims, the report expects that rising reinsurance costs and high inflation will strain profitability margins.
Insurers must increase their premium rates and pass their higher operating costs on to their customers. But the report suggested that this is likely to be limited because affordability thresholds are down.
“Higher interest rates and a weaker economic outlook have hit customers. Insurers may adjust their reinsurance programs and increase retentions to lessen rising costs,” the report said.
On the other hand, S&P Global Ratings also expected that the P&C insurers’ earnings profile will benefit from the improved investment earnings in 2023 due to higher yields and the unwinding of unrealized losses on investment portfolios. Their capital adequacy should remain at credit strength as natural calamity claims will be absorbed through current-year earnings and reinsurance covers.