The industry and country risks faced by New Zealand insurers have remained stable over 2020 with the sector mostly unscathed from the effects of the COVID-19 pandemic.
According to reports published by S&P Global, New Zealand’s P&C and health insurance sectors are seen as having intermediate risk, which is the third-lowest risk on a scale of six. The agency also continues to view the life insurance sector as having low risk, the second-lowest risk on its scale.
Despite the challenges of COVID-19, insurers are said to be supported by the country’s stable economy which has seen domestic business restrictions lifted since June following a swift lockdown to manage the pandemic.
While international borders are likely to remain closed for some time, S&P Global expects domestic activity to support moderate top-line growth in 2020 followed by a strong rebound in 2021.
It views the effective management of the pandemic crisis and absence of any second wave to date with outbreaks observed in neighbouring Australia as beneficial for New Zealand insurers.
According to the agency, the credit quality of New Zealand insurers is supported by strong capital buffers and conservative investment policies with sound reinsurance from highly rated counterparties.
Many of the insurers also benefit from the support of strongly rated parent groups with the credit ratings firm’s insurance ratings in New Zealand ranging from ‘BBB+’ to ‘AA-‘. The greatest concentration of insurers is at the ‘A+’ level, indicating strong financial security characteristics overall.
S&P Global expects the largest impact from COVID-19 for New Zealand insurers to be through investment market losses, with asset value declines.