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WPIA. Earthquake: Implications and Complications. “Hindsight makes genuis’s out of everyone!” Quote by a person who always speaks after the event. Agenda. Overview The Insurance model & Insurance Lessons Investing & Protecting that Investment. Tokyo. Cyclone Yasi. Brisbane Floods.
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WPIA Earthquake: Implications and Complications “Hindsight makes genuis’s out of everyone!” Quote by a person who always speaks after the event
Agenda • Overview • The Insurance model & Insurance Lessons • Investing & Protecting that Investment
Asia Pacific Events Cumulative Cost (NZD): $ 34.07+ Billion Cumulative Cost (NZD): $ 19.37+ Billion Cumulative Cost (NZD): $ 13.37 Billion Cumulative Cost (NZD): $ 3.77 Billion Cumulative Cost (NZD): $ 1.25 Billion Cumulative Cost (NZD): $ 52 - 92 Billion Cumulative Cost (NZD): $ 2.45 Billion Cumulative Cost (NZD): $ 22.07+ Billion Cumulative Cost (NZD): $ 36+ Billion 2011: Tokyo , Earthquake, $16.8 - 40 Billion 2011: Queensland, Cyclone, $0.9 Billion 2011: Brisbane, Flood, $2.7 Billion 2010: Maule, Earthquake, $9.6 Billion 2010: Perth, Hail, $1.32 Billion 2010: Christchurch, Earthquake, $6+ Billion 2009: Victoria, Bushfires, $1.25 Billion 2011: Christchurch, Earthquake, $12+ Billion 2010: Melbourne, Hail, $1.2 Billion
New Zealand Events Cumulative Cost (NZD): $ 0.25 Million Cumulative Cost (NZD): $ 12.75 Million Cumulative Cost (NZD): $ 62.05 Million Cumulative Cost (NZD): $ 67.55 Million Cumulative Cost (NZD): $ 68.75 Million Cumulative Cost (NZD): $ 92.65 Million 2010: Northland/Coromandel/Eastern BOP, Flooding , $12.5 million 2011: Mid – Upper North Island, Flooding & storms, $23.9 million (Provisional) 2010: Gisborne, Flooding , $0.25 million 2010: North & South Islands, Flooding , $5.5 million 2010: Wellington, Thunderstorms, $1.2 million 2010: Southland, Storms, $49.3 million Data Source: Insurance Council of New Zealand
Reinsurance – a basic guide Insurance for Insurers • Buy cover to minimise exposure / protect balance sheet • Risk level • Catastrophe Retention (Insurer’s deductible or excess) Reinstatements (industry requirement) Cost of Reinstatements Future Reinsurance renewals • Significant price increases • Significant retention (excess) increases
An Insurers View…… The landscape has changed..... The dust is still to settle.....the earth is still moving Two major catastrophes in 6 months (most costly insurance events in our history) Size of NZ Market Dominated by Australian ownership Global Reinsurance Market (Storms, Earthquakes, Tsunami) – will dictate NZ Insurers - cautious, facing significant cost increases Earthquake Insurance traditionally underpriced (market driven v exposure) Financial pressures – rating downgrades etc Resources stretched – EQC / Private Insurers
Overview • Two events Sep 2010 and Feb 2011 and in some cases three events(Boxing Day) • Overall estimated cost $15bn • Total general insurance premium spend in N.Z $4.2bn • More than just an insurable event – involves loss of life, community and fabric of economic activity in the area. • How do brokers and insurance companies react to an event when the very people who are there to help are equally affected by the event?
Investors getting the shakes! • Commercial v’s Residential • Has domestic market changed? • Underwriters asking more questions? • Limit in capacity in Canterbury region • Staying with the same insurer
Investors getting the shakes! • With market increasing – look at higher voluntary excesses • More due diligence when purchasing • The quality of the insurer means something • The quality of your intermediary means something