Despite the hardening of global reinsurance markets, the New Zealand Earthquake Commission (EQC), the state-owned residential property disaster insurance entity, has expanded its reinsurance program to a record size of $7.2 billion of protection.
A year ago, the New Zealand Earthquake Commission (EQC) said that its reinsurance tower provided almost $7 billion of coverage for the 2021/22 year.
But for the 2022 renewal, the NZ EQC says it has added $470 million, taking the tower to a record level of reinsurance of $7.2 billion.
The NZ EQC has therefore expanded its reinsurance program by roughly $1.2 billion in just two years, the organisation said today.
“We are grateful for the ongoing support of our long-standing reinsurance partners, particularly as the reinsurance markets have hardened significantly over the past few months. We are extremely pleased to be able to secure this level of reinsurance for New Zealand homeowners,” explained EQC Chief Executive Tina Mitchell.
Mitchell explained that reinsurance markets have hardened in response to the past five years of losses from catastrophic flood, storms and wildfire events, and that reinsurers are also dealing with additional global pressures through the Covid pandemic and the war in Ukraine.
“In our discussions with the reinsurance companies, it became clear that all these factors have impacted their appetite for providing property insurance for natural disasters,” Mitchell said.
“The EQC model is unique in the world and, even in those challenging conditions, it continues to be well supported by global insurers.
“Despite living in a country with a variety of natural hazards, we are really proud that our investments in world-class research and modelling gives reinsurers confidence in the risks they are insuring and what we are doing as a country to understand and manage our risks.
“Attracting this support is definitely a case of New Zealand punching above its weight on the global stage. And this financial backing is one of the key benefits the EQC scheme delivers for New Zealand homeowners – it ensures natural hazard home insurance is accessible and reasonably priced despite the hazards we live with in New Zealand.”
Mitchell further explained that while the EQC cap rises from $150,000 to $300,000 on October 1st 2022, this does not mean that its reinsurance program also had to double.
“The large majority of expected EQC claims sits within the original cap, so any increase will support the anticipated small number of homes that suffer damage above $150,000.”
The EQC will “continue to look for opportunities to grow the reinsurance programme” Mitchell said, as long as this represents good value for homeowners.
It’s anticipated that insurance-linked securities (ILS) funds will have provided a small share of the reinsurance program on a fronted basis, as they have in recent years.