new zealand

The recent magnitude 7.8 earthquake that struck the Kaikoura area of New Zealand could result in a cost to the economy of up to NZ$8 billion, with insurance and reinsurance potentially paying as much as NZ$5 billion (almost US$3.6 billion) of the loss, according to the country’s Reserve Bank.

New Zealand based primary insurance firm Vero, a subsidiary of the Suncorp Group, expects its “strong reinsurance arrangements” will cover “all expected claims” from the recent earthquake that struck the Kaikoura area.

The recent magnitude 7.8 New Zealand South Island earthquake could end up costing the insurance and reinsurance industry as much as US$3.5 billion, according to risk modelling firm AIR Worldwide.

Reinsurance capital looks set to pay for some of the damage caused by this weeks earthquakes in New Zealand, with local insurers having low deductibles and the EQC likely to call on its program as well, but questions of how many events have occurred could complicate matters, as could supply chain interruption.

A magnitude 7.8 earthquake struck New Zealand on Sunday, late at night local time, causing a tsunami warning and was followed by a number of major aftershocks. The earthquake struck around 95km from Christchurch but shaking has been widely experienced including in Wellington.

IAG New Zealand has extended its reinsurance protection to help it pay for claims from the Canterbury earthquakes again, purchasing a $900m adverse development cover through in internal reinsurance transaction, with the majority of the risk retroceded to third-parties.

The longer-tail nature of some earthquake loss events continues to be demonstrated by the Canterbury, New Zealand disasters, with the Insurance Council reporting that paid insurance losses have now hit $19 billion, up $1 billion since the end of June.

The Insurance Council of New Zealand said that private insurance and reinsurance firms have now paid out more than $18 billion to settle commercial and residential claims from the Canterbury earthquakes, but ever since the quakes the magnitude of the loss has been filled with uncertainty.

Global reinsurance firm Swiss Re’s first-quarter 2016 results were impacted by weather derivative losses and further adverse development from the New Zealand earthquakes, which could signal impacts more broadly, perhaps affecting some insurance-linked securities (ILS) players.

Australian insurance group IAG has reported its results, revealing continued deterioration of its Canterbury, New Zealand earthquake claims, challenging commercial market conditions and new reinsurance arrangements with Warren Buffett’s Berkshire Hathaway.